TaxTMI 
TaxTMI 
2014 (10) TMI 697
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....n question was well reasoned and well based, while the additional evidences brought before the Ld. CIT(A) were totally irrelevant for deciding the issue. 3. Whether in the facts and circumstances of the case, the Ld. C.I.T(Appeals) was justified in granting relief by discarding the cogent reason by the A.O. and summarily accepting arguments of the assessee without giving any reason. 4. Whether in the facts and circumstances of the case, the Ld. C.I.T. (Appeals) was justified in granting relief without appreciating the comparative figures supplied by the assessee itself of earlier years where the consumption of Power and fuel was 4.02%, and 7.92% in assessment years 2005-06 and 2006-07 respectively and 74.97% for assessment year under consideration. 5. In the facts and circumstances of the case, the order of the Ld. Commissioner of Income Tax (Appeals) may be set-aside and that of the A.O. restored." 3. Brief facts giving rise to this appeal are that the assessee filed its return through e-filing declaring an income of Rs. 13,58,626 and the case was selected for scrutiny. Consequently, a notice u/s 143(2) of the Income Tax Act, 1961 (for short the Act) and another notice....
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....ete manufacturing process as in grinding of wheat. To carry on the manufacturing process from choker to super fine choker 6 body (chakki) run round the year for which assessee company purchased two Generators of 125 KVA & 160 KVA and to run the generator of 125 KVA and 160 KVA. H S D was required 40 Ltrs per hour and 60 Ltrs per hour respectively. One boiler to produce to steam for washing of wheat was also installed on 17.01.2006 wherein diesel was the consumed separately. The consumption of HSD also increased due to interruption of Electric supply. To summarize the capacity of generators their fuel consumption in generators and boilers are as under:- Generators Capacity Consumption of HSD per hour in Ltrs Normal Days Normal working hours Normal Consumption of Diesel (Ltrs) (i) 380 KVA 105 Ltrs 300 24 756000 (ii) 160 KVA 60 Ltrs 300 24 432000 (iii)125 KVA 40 Ltrs 300 24 288000 (iv) 2 Boilers 61 Ltrs 300 24 439200 Total 1915200 As per chart indicated above total consumption of diesel work out of 1915200 Ltrs whereas tota....
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....ions and explanation of the assessee was rejected by the Assessing Officer with following observations and findings:- "The explanation furnished by the Ld. C.A. of the assessee is not digestible due to following reasons: Depreciation chart furnished by the assessee shows that following additions were made during the year: i) A mobile phone was purchased after 30.09.2006 for Rs. 17,735/-. ii) Addition in plant & machinery for Rs. 32,170/-. iii) Addition in generator for Rs. 1 ,97,500/-. Photocopy of the generators purchased has been furnished which is hand written having no complete address of the seller is placed on records. Further there is no evidence as to how much diesel may be consumed in these generator's or boilers. The theory has been generated that this year superfine bran has been produced out of the general bran and further claimed that 66,207.04 Quintals of superfine bran was sold for Rs. 6,03,38,004/- giving rate of RS.911.35/Quintal while atta has been sold at the rate of Rs. 1,106.12/Quintal, suji at the rate of Rs. 1,288.30/Quintal and maida at the rate of Rs. 1,204.30/Quintal. One can hardly believe that this choker said to be superfine bran w....
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.... consumed, this fact cannot be ignored that the above flour mill has also consumed electricity worth Rs. 14,17,7301-. Information was obtained from the electricity department who informed that the above flour mill has been sanctioned 210KVA of electricity. Because the flour mill has consumed both electricity and diesel it would be fair and just to take consumption of diesel to be 6,85,705.25Ltrs in view of the fact, that assessee has claimed, this year he has also made superfine bran to earn more profit and steam washing of the wheat was also done. The assessee has shown 19,03,045Ltrs consumption of diesel while the consumption of diesel above has been worked out to be 6,85,705.25Ltrs to be fair and just and hence 12,17,340Ltrs of excess diesel shown to have been consumed. Just one cannot digest someone saying that he has prepared one kg of pudding by using 100kgs of sugar or 100kgs of rice or 100kgs of milk, in the same way after going through the consumption of diesel and quantity of wheat crushed diesel to the extent shown to have been consumed is not believable. Therefore I hold that assessee has claimed excess consumption of diesel to the tune of 12,17,340Ltrs valuing Rs. 3,59....
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....r were furnished during appellate proceedings only to explain the case more clearly. The AO examined the entire books of accounts during the assessment proceedings. The copy of expert's opinion and the Sales-tax order only further substantiate those facts emanating from the books of accounts. These do not change the facts of the case in material terms. Application of Rule 46A, therefore, loses meaning in view of the overriding powers conferred upon the CIT(A) by virtue of section 250(4) of the Income-tax Act, 1961. On a perusal of the totality of facts, certain undisputed and certain disputed points emerge which could be summarized as under: 6.7.1. Undisputed points: i. That the assessee has maintained complete book of account including bills, vouchers, stock register and log book and Wages Register and produced before the A.O. ii. That the A.O. has given proper and reasonable opportunity of being heard and A.O. has passed the order after making all the possible enquiry. iii. That as per assessment order and remand report the A.O. has not pointed out any defect in the books of account. iv. That without any doubt the assessee has made purchase of diesel from M/....
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.... say anything on this point and in the remand report also the A.O. has not made any comment on this. 5. That as per AO, expert's report and Sale-tax Order have no evidentiary value. On the other hand, the assessee strongly relies upon the expert's report and in support of his claim the assessee has filed the paper by which, the assessee has applied for increase in load which was sanctioned after two years. According to AR, the A.O. cannot ignore the expert's report and the Sales-tax Order which only substantiate with finality the state of affairs reflected by the books of accounts. 6. That the assessee has cited a number of cases in support of his claim. However, the A.O. has not made any comments on the case-laws referred to by the assessee. From the disputed facts, it is clear that the central dispute relates to the excess consumption of diesel. The main emphasis of the assessee was based upon expert's opinion to change the process which was based entirely on electricity to the process based on electricity and diesel generators sets. The assessee has maintained complete books of account, bills, voucher, stock register and log book of consumption of diesel....
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....he Sales-tax authorities, after examining the books of account were fully satisfied with the trading results including sales, purchases, manufacturing account, opening & closing stock. Therefore, results as per books of account are true and correct. Hence, A.O. cannot disturb the results of Trading and Profit & Loss A/c. The A.O. even in his assessment order as well as remand report, clearly stated that the diesel was actually consumed but in comparison to earlier year it was on higher side. Hence, he disallowed part of consumed diesel. The assessee has produced photocopy of the bills of M/s Bharat Petroleum Corp. Ltd., carrying Invoice No.1100 dated 20.07.2006. The bills clearly show that purchase of diesel undergoes supervision of various petroleum authorities and the supply is made to the assessee's tanker under the earth. Therefore, there is zero possibility to sell the diesel in the open market. The A.O. in his order and the remand report has not indicated any sale of diesel in the open market. Therefore, there is no doubt that diesel purchased by the assessee was consumed for the production of Aata, Suji & Maida. The assessee has shown log book related to consump....
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....of diesel and LDO as recorded in the books of account were wrong and false. It was wrong on the part of the Ld. CIT(A) to work out excessive consumption of diesel and LDO on the basis of the running of the generator for number of hours per day and number of the days per month on his own hypothesis disregarding the actual running and recording in the books of account. The enhancement was totally unwarranted and uncalled for. In the above view of the matter we delete the addition of Rs. 3,73,403." This case-law also fully supports the submissions of the assessee. Similarly, the assessee also relied on following I.T.A.T. Judgments: (i) CIT Vs. Girnar Construction Co. [2003] 129-Taxman-691 (Raj.) (ii) Rakesh Kumar Jayanti Lal Gupta Vs. Assistant Commissioner of Income-tax, 55-ITD-97 The AR also relied on I.T.A.T. order in ITA No. 835/Del/09 for the A.Y. 2001-02 Hon'ble I.T.AT. 'D' Bench Delhi in the case of Ankit Glass Pvt. Ltd. Vs. AC.I.T., Circle-I, Meerut, vide his order dated 15-01-2010 in which it was held as under: "We are the view that no addition on account of unexplained credit deserves to be made in the hand of the assessee because sales have bee....
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....onsumption of the diesel per day comes to 173 Ltrs/Hour X 20 = 3460 Ltrs/day. 3. The A.O. has estimated the working day only 300 days in a year and working hours of only 8 hour/day. However, assessee's working days were 357-days and working hours 18-23 hours/day. Therefore, calculation of the A.O. is erroneous. 4. The A.O. ignored the facts that the sale & purchase and stock of the business was also examined by Trade-tax Authority and stock of diesel was examined by the District Authority who put signatures and stamp on the stock register. Therefore, consumption of the diesel cannot be said to be beyond the log book. Copies of Log book and Trade-tax order of the year were produced. 5. The case-laws cited by the assessee were not considered by the A.O., which are fully applicable to the facts of the case. Considering the facts of the case, written submissions of the AR, documents filed by the assessee during the assessment proceeding, appellate proceedings and the case-laws, it is held that the A.O. was not justified in disallowing the consumption of diesel. However, it is seen that the assessee is also having a diesel car and the possibility of personal use of the same....
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....mption of diesel was wholly and exclusively for the purpose of business and at least major part of diesel consumption has been held to be not for the business purpose and use. The DR submitted that there was no corresponding increase in the purchase or consumption of raw material, wages and labour charges to support assessee's claim that the mill was run on extra shift and the evidence pertaining to purchase of generator was also not reliable. Therefore, impugned order deserves to be set aside and disallowance made by the Assessing Officer may be confirmed. 12. Replying to the above, the assessee's ld. counsel submitted that the assessee explained excessive consumption of diesel with cogent and reliable explanation. The counsel of the assessee further submitted that the assessee was facing problems in electricity supply and assessee also wanted to improve the quality of its production, therefore, the assessee was compelled to install two generators and two boilers during the year under consideration. The counsel has also drawn our attention that the assessee used excessive quantity of diesel to improve the quality of its products and for manufacturing of super fine choker from o....
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....0 lakh and the Assessing Officer has not made any dispute about the sale, purchase, opening stock and closing stock shown by the assessee and assessee also produced high or superfine quality of choker during the year; v) the assessee made application to enhance the electricity load from 380 KVA to 625 KVA as per expert's opinion and the Assessing Officer has not given any negative remarks on the expert's report and assessee could not get higher 625 KVA connection during the year; and vi) the Assessing Officer has not made any remark or comment on the log book of consumption of diesel submitted by the assessee and which was also checked by District Authority. 15. As per submissions and contentions of the DR, the Commissioner of Income Tax(A) granted relief to the assessee by ignoring and not considering some material facts. On the other hand, the main contention of the assessee is that the Assessing Officer has ignored this very fact that there was a substantial increase in the GP rate of the assessee during the year under consideration in comparison to the immediate preceding year. Ld. counsel of the assessee submitted comparative chart of five years from AY 2004-05 to 200....
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....n quintals). The Assessing Officer has held that the consumption of diesel was quite high during the year under consideration. The Assessing Officer has calculated the average consumption of three years as 640.55 Ltrs per quintal of raw material consumed and held the same to be cogent and reasonable. On the basis of this analogy, the Assessing Officer calculated the total allowable consumption at 6,85,705.25 Ltrs and remaining balance of 12,17,340 Ltrs of claimed consumption of diesel had been held as excess diesel consumed. The Assessing Officer, therefore, took the cost of diesel at Rs. 29.52 per Ltr and, hence, Rs. 3,59,35,876 has been disallowed out of diesel expenses claimed by the assessee amounting to Rs. 5,65,53,895/-. 18. As per impugned order, the Commissioner of Income Tax(A) allowed the claim of the assessee by deleting whole addition except Rs. 1,20,000 on the ground of personal use of diesel in the car owned by the assessee. From the assessment order, we clearly observe that the AO has made disallowance presuming that the consumption of raw material was 1,07,049.45 quintals which was of wheat only. The Assessing Officer ignored a very important fact that the assess....
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....lso purchased boiler for steaming process, for improving the quality of product which also consume substantial quantity of diesel and which also contributed to increase in consumption of diesel. From the facts and figures submitted before us on record, we also observe that the quantity and outcome of the sales were better during the year in comparison to immediately preceding year which resulted in improvement in the GP rate of the assessee in comparison to the immediately preceding years. Besides the above factual matrix, we also observe that the purchase of diesel has been shown from IOC and BPCL which was supported by proper purchase invoices issued by IOC and BPCL and the Assessing Officer has not disputed the amount of purchase and invoices/bills raised by the seller petroleum companies. Obviously, the purchase of bills is always regulated under supervision of various petroleum authorities and district supply officers and supply of diesel was made to the assessee's tanker kept under the earth and supply of the diesel was made through tankers of the seller petroleum companies up to underground tankers of the assessee company. The Assessing Officer has not brought any material o....
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....ssing Officer also ignored another important fact that there was load shedding during the year and on the other hand, the assessee was compelled to install generators, boilers and other equipments to meet the decreased supply of electricity and increased use of power during the year. 22. As we have mentioned hereinabove, the assessee has furnished certain documentary evidence and comparative chart pertaining to the consumption of raw material such as wheat and choker with regard to consumption of electricity, power and use of generator which is a substantial evidence to support the claim of the assessee pertaining to excessive consumption of diesel. During the arguments, both the parties have not disputed this legal proposition that any evidence which has not been verified at the end of the Assessing Officer, the same should be verified at the end of the Assessing Officer for proper and just adjudication of the issue. 23. In view of above discussion, we are of the considered opinion that the Assessing Officer made disallowance and addition by ignoring substantial facts and, on the other hand, the Commissioner of Income Tax(A) granted relief to the assessee by taking a theoret....