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TMI Blog2021 (7) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... ned are directed to be deleted. - ITA No. 248/CHD/2019 - - - Dated:- 5-7-2021 - Diva Singh, Member (J) For the Appellant : Tej Mohan Singh For the Respondents : Meenakshi Vohra, Addl. CIT ORDER The present appeal has been filed by the assessee wherein the correctness of the order dated 17.12.2018 of CIT(A)-I Patiala pertaining to 2011-12 assessment year is assailed on the following grounds: 1. That the order of the ld. CIT(A) is against the facts of the case and is bad in law. 2. That on the facts circumstances of the case, the ld. CIT(A) has erred in upholding the rejection of books of accounts solely on the basis of variation in electric consumption. 3. That on the facts circumstances of the case the Ld. CIT(A) has erred in drawing adverse inference from slightly higher variation in electric consumption in two cycles only than the arbitrarily considered benchmark of 15%. 4. That on the facts circumstances of the case the Ld. CIT(A) has erred in confirming the addition of ₹ 9,75,098/- on account of gross Profit on the alleged unaccounted sales and ₹ 72,42,835/- on account of investment in alleged unaccounted production, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's submissions to the said extent has been extracted by the AO himself. 4.2. Attention was also invited to a similar prayer made before the CIT(A) and the submissions have been extracted in para 4.6 at page 7 and 8. 4.3. Arguments have been advanced that the decision of the Apex Court in the case of Melton India Vs CIT (Civil Appeal No. 372 of 2007) is not applicable to facts has also been argued before the CIT(A) and the argument is extracted at page 11. Various other decisions of the ITAT addressing similar issue had been referred to. 4.4. Reliance had also been placed on a latest decision of the Apex Court in the case of CIT Vs M/s. R.A. Castings Pvt. Ltd. 2011(269) E.L.T. 337 (All.) and in the decision cited at page 16 of the impugned order i.e. ITO V. Arora Alloys Ltd., Ludhiana in ITA No. 78/CHD/2012 of the CHD Bench) [17 ITR AT Section 133-424), reference has been made to similar legal position of relying on information sought at the back of the assessee without affording an opportunity to cross examine stands addressed. The action has been deprecated. 4.5. Accordingly, it was been his prayer that the issue is covered in his favour. 5. The ld. AR ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered by the Co-ordinate Bench in para 7 page 14 of its order. The detailed reasoning for the sake of completeness is extracted hereunder: 7. After giving thoughtful consideration to the above stated rival arguments, we find no merit in the Revenue's stand that the Assessing Officer's three folded action inter alia in rejecting the assessee's books of account followed by gross profit element on alleged unaccounted production of ₹ 13,04,677/- as well as unaccounted investment in stock of ₹ 1,62,54,188.78. Case records indicate that this issue of rejection of books of account based on difference in power consumption of the relevant previous year turning act to be excessive than the so called tolerable limit of 15% is no more res-integra. This Tribunal's coordinate bench decision ITO Vs M/s. Baba Balak Nath Steels Pvt. Ltd. in ITA No. 44/Chd/2019 dated 06/08/2019 has rejected Revenue's identical stand as follows: 3. The brief facts relating to the issue under consideration are that the assessee company is engaged in manufacturing of Steel products. During the assessment proceedings, the Assessing officer asked the assessee to furnish det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act') and proceeded to frame the assessment in the manner as provided u/s. 144 of the Act. He thereafter worked out the unaccounted income of the assessee on account of unaccounted production and added the same to the income of the assessee. 4. Being aggrieved from the above order of the Assessing officer the assessee preferred appeal before the CIT(A). 5. Before id. CIT(A), the assessee filed detailed submissions. It was also brought into the knowledge of the CIT(A) that subsequent to the passing of the above stated impugned assessment order, a detailed study was carried out by a Committee headed by the Additional Commissioner of Income Tax, Range, Mandi Gobindgarh having all the Assessing officers of the Range as its members. The committee was assisted by the experts from the NISST (National Institute of the Secondary Steel Technology) and also the industry representatives. On the basis of the report of the committee, it was decided that if the variation in the consumption of the electricity is within the range of 15% of the yearly average consumption of power, the book results should be accepted. That pursuant to the report of the Committee, the Assessing Officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Mills and eight other assessees pertaining to 2011-12, 2012-13 assessment years was relied upon. In the facts of the present case also, referring to para 5.2 of the impugned order, attention was invited to the reference made to the Committee constituted by Pr. CIT, Patiala which, it was noted, had been directed to verify the normal variation in consumption of electricity for manufacturing each metric ton of finished goods. The orders, it was submitted have been passed adhering to the said directions in both the appeals. 4. I have heard submissions and perused the material available on record. It is seen that the Co-ordinate Bench in the aforesaid order of the IT AT had an occasion to consider the facts as under: '4. The brief facts relating to the issue under consideration are that the assessee company run a furnace Unit and is engaged in the production of Ingots. During the assessment proceedings, the Assessing officer asked the assessee to furnish details of daily production of finished goods as well as the details of the manufacturing process involved. The Assessing officer further observed that the amount of electricity consumed was directly related to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort 'the Act') and proceeded to frame the assessment in the manner as provided u/s. 144 of the Act. He, thereafter estimated the income of the assessee on the basis of minimum valuation of average of electric unit consumed per metric ton of finished goods produced for over the period of 10 days. He took the lower average value of electric units consumed per metric ton of average finished goods over a period of 10 days and on this basis, and calculated the actual month wise production of the assessee. He compared the same with that shown in the books of account of the assessee and estimated the unaccounted production for each month. Thereafter, on the basis of average sales rate, the value of total unaccounted production was estimated. Then adopting the gross profit rate shown by the assessee, 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 the average sale rate of finished goods, the unaccounted investment was worked out. The Assessing officer in this way worked out the total unaccounted income of the assessee out of the unaccounted production at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ak unaccounted production for the relevant month was determined and by multiplying with the average purchase rate of finished goods the unaccounted investment was worked out This finally resulted into additions on the basis unaccounted investment and unaccounted profit at ₹ 57,93,183/-. The appellant company has now contended that recently, a detailed study was carried out by a Committee headed by the Additional Commissioner of Income Tax, Range, Mandi Gobindgarh having all the AO's of the Range as its members. The committee was assisted by the experts from the NISST [National Institute of the Secondary Steel Technology] and also the industry representatives. On the basis of the report of the Committee, it was decided that if the variation in the consumption of electricity is within the range of 15% of the yearly average consumption of power, the book results should be accepted. Accordingly, its book results were accepted for the A.Y. 2013-14. Therefore, its book results for the A.Y. 2012-13 should also be accepted and consequently, the additions should be deleted. The contention of the appellant company has been verified from the AO and as quoted above, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning, thereby that 15% variation in the number of electricity units consumed per metric ton of finished goods as compared to the average consumption of electricity units per metric ton of finished goods is the industrial norm warranting no adverse cognizance. Hence, because of that reason alone, books of account should not be rejected. Indeed, as stated above, pursuant to the report of the Committee, the AO's have followed this norm while making assessments in similar cases and in similar set of circumstances and accepted the book results shown by the assessees which includes the appellant as well. In view of this and also placing reliance on the decision of the Hon'ble jurisdictional Punjab and Haryana High Court in the case of a CIT vs. Rieta Biscuits Co. (P) Ltd. (2009) 309 ITR 154, I am of the view that the book results shown by the appellant company for the year under consideration need to be accepted as well. Consequently, the action of the AO in respect of rejection of books of account by resorting to Sec. 145(3) of the IT. Act is not upheld. The AO is directed to accept the book results shown by the appellant. The twin additions made by the AO on account of unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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