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TMI Blog2017 (2) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... acts are taken and considered from the cross appeals of M/s Modi Oil & General Mills. ITA 149/2016: (Departmental Appeal) ITA 112/2016: (Assessee's Appeal) Assessment Year: 2010-11 4. Both the cross appeals are directed against the order of ld. CIT(Appeals) Patiala dated 30.12.2015 for assessment year 2010-11. The assessee filed return of income declaring an income of Rs. 1,60,23,090/- and the same was processed. 5. The brief facts are that the appellant company is iron and steel rolling mill. The A.O. has observed that in this case, electricity consumed is directly related to production of finished goods. The process of production of finished goods involves heating of raw material i.e. ingots, billets, slabs etc. and, thereafter, passing the same through various rollers for getting desired finished goods i.e. rounds, squares and bars. Thinner sections entail higher consumption of electricity as these have to pass through a higher number of rollers. In order to corelate the consumption of electricity vis-a-vis the production shown, the A.O. gathered information regarding consumption of electricity from the Electricity Board. The A.O. analyzed the data and reproduced the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 days various types and sizes of finished goods would have been produced. The lowest value, from this chart is 37.53 units pmt. pertaining to the period from 25.01.2010 to 15.03.2010. On this basis, the A.O. estimated the unaccounted production. The A.O. computed the quantum of actual finished goods produced and, thereafter, ascertained the unaccounted production for each month after deducting the finished goods produced during the months as shown in the books of accounts. Thereafter, on the basis of average sales rate total unaccounted production was estimated in monetary terms and then adopting the gross profit rate shown by the appellant, the unaccounted profit out of the unaccounted production was worked out. Secondly, the peak unaccounted production for the relevant month was determined and by multiplying with the average sales rate of finished goods, the unaccounted investment was worked out. 5(iii) The Assessing Officer passed the assessment order dated 15.02.2013 and made the addition of Rs. 1,90,01,568/- and computed the total income of the assessee at Rs. 3,50,24,654/-. The additions were made on account of unaccounted investment in unaccounted production and unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Committee to verify normal variation in consumption of electricity for manufacturing each metric ton of finished goods and the Committee has given a report on 25.05.2016, therefore, ld. Pr. Commissioner of Income Tax issued some internal guidelines regarding acceptability of variation upto 15% and no additions have been made on similar issue in subsequent years by the Assessing Officer in some cases of assessee on similar issues in favour of the assessee. 8(i) The ld. DR sought time to verify the stand of the Department with regard to cases decided subsequently by the Department on the basis of the internal guidelines issued after constituting a Committee. On the date of hearing, ld. DR filed copies of the Minutes of the Committee and report of Addl. CIT, Range - Mandi Gobindgarh dated 25.05.2016 and letter addressed to CIT-DR by the office of Pr. Commissioner of Income Tax, Patiala dated 30.01.2017 for explaining the stand of the Department. The aforesaid letter dated 30.01.2007 is reproduced as under : OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX AAYKAR BHAWAN. PATIALA Ph:0175-2214883/Fax: 0175-2219416 F.No.Pr. CIT/PTA/Tech/Consp. Of Elect/90/16-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing mills and furnaces. The committee by visiting various units found that variation in consumption of electric units of different sizes of finished goods produced are there. Therefore, the committee only in those cases where there was wide variation considered their cases for the purposes of rejection of books of accounts. Further, on the basis of finding given by visiting various units, it was decided that upto 15% variation in the consumption of electricity units per MT of finished goods produced are justifiable and reasonable having regard to the facts and circumstances of each case in the Iron & Steel Industry because zero variation cannot be visualized or achieved by any level of technology given the different nature of raw material, machinery and finished goods. However, in the earlier years only the cycle involving minimum number of consumption of electricity unit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department as the AOs have adopted the quantum of electricity consumed per MT on the basis of minimum value of average electricity consumed per MT for a continuous period of 30 days assuming that within a period of 30 various types and sizes of finished goods would have been produced. The department is already in appeal before the ITAT on the decision of the CIT(Appeals). Further, the AOs examined the issues having regard to the facts & circumstances of each case as against applying any uniform criteria. All the issues involved therein were examined by the respective AOs on case to case basis. Yours faithfully, Sd/- ( Baldev Singh ) Income Tax Officer Hq.)(Tech.),Patiala" 8(ii). The copy of the aforesaid letter is provided to counsels for various assessees appearing at the time of hearing of the cross-appeals. Ld. Counsels for assessees have argued that since the Department has considered the grievances by constituting a Committee by ld. Pr. Commissioner of Income Tax, Patiala and Committee has given certain guidelines as to how the assessment shall have to be framed and in subsequent years, on the basis of the same guidelines, the Assessing Officer did not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on the same, Revenue Department has constituted the Committee to consider the grievances of the assessees/tax payers and ld. Pr. Commissioner of Income Tax issued the above guidelines by modifying the basis of estimation of unaccounted production and same guidelines have been adopted in subsequent years by the respective Assessing Officers, therefore, in our considered view, entire matter requires re-consideration at the level of the Assessing Officer. In this view of the matter, we set aside the orders of authorities below and restore the entire issue to the file of Assessing Officer i.e. rejection of the books of account under section 145(3)/144, unaccounted production of finished goods, unaccounted profit and unaccounted investment out of unaccounted production with reference to consumption of electricity units per metric ton production of finished goods with direction to re-decide the entire issue in accordance with law in the light of the internal guidelines issued by the ld. Pr. Commissioner of Income Tax, Patiala. The Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee and assessee shall be at liberty to raise any contention befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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