TaxTMI 
TaxTMI 
2018 (9) TMI 1684
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....tain deficiencies in assessee's books. 2. The appeal had earlier been heard in October,2017 and thereafter since the order could not be passed due to infrastructural shortcomings, the appeal was released for a fresh hearing. 3. The ld. Sr.DR at the time of hearing referring to the grounds raised invited attention to the findings recorded by the AO in the scrutiny proceedings. Relying on the same, it was submitted that the assessee's GP/NP rate for the last three years was considered by the AO who after tabulating the same at page 2 para 3 of his order noticed that GP of the assessee over the years was consistently declining. In the year under consideration, it was noted that the GP rate was only 13.97% whereas in 2010-11 and 2009-10 assessment year it had been 14.59% and 18.49% respectively. Accordingly, the AO required the assessee to explain and justify the same. The AO, it was submitted, sought information regarding consumption of electricity units from PSPCL Ltd. in order to ascertain the correctness of the gross profit shown. Keeping in view the per day consumption of electricity production Chart of electricity consumption per metric ton was prepared. Referring t....
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....account maintained should not be rejected by applying GP rate of 18.49% which had been shown by the assessee in 2009-10. Referring to pages 5 to 9 of the assessment order, it was submitted, the assessee's submissions have been brought out and considered by the AO. On going through the same, the AO has held them to be not tenable in view of the specific reasoning referred to in page 10, 11 and 12 of the assessment order. The said conclusions were heavily relied upon by the Department. For the sake of completeness, these are reproduced hereunder : "The reply field by the assessee has carefully been considered which is not tenable owing to following reasons:- (i) The assessee has no evidence on record relating to sizes and quality of finished goods (i.e. paper) produced on day to day. This means that assessee had no proof or evidence to support its contention/reasons for variation in electric units consumed per MT of finished goods produced. (ii) With regard to consumption of electric units consumed (chart as per show cause notice i.e. Part-A/Electricity units consumed less than 200 units for consumption of 1 metric tone of raw material and Part-B- Elect....
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....bly applied the average G.P. rate of 2009- 10 and 2010-11 assessment year of the assessee itself which came to 16.54% leading to the addition of Rs. 81,11,115/-.The said addition, it was submitted, has been deleted by the CIT(A) without addressing the specific objections taken into consideration by the AO and also ignoring the decision of the Hon'ble Apex Court in the case of Melton India V Commissioner of Trade Tax, U.P.[Appeals (Civil)] No. 373 of 2007 dated January 31, 2007 (2007) 5 VST 613 (S.C.) 6. Inviting attention to the said judgement dated 31/01/2007 filed in the Court it was admitted that a perusal of the said decision would show that the Tribunal therein had rejected the books of accounts of the assessee on the ground of electricity consumption which had increased which fact had been taken into consideration in holding that it can be reasonably inferred that assessee's production must have also increased. Referring to the said decision, it was submitted that on behalf the assessee it had been argued that a higher consumption of electricity is not a good ground for rejection of the books of accounts. The Apex Court considering the facts upheld the stand of the....
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....reased and in the facts of the present case, it is not that there is higher consumption of electricity and low production, facts are to the contrary. No doubt the nature of assessee's work, it was submitted, is peculiar as for the production of different qualities of paper etc. and the frequent tripping of power in these areas does necessitate waste of power, however the assessee's efficiency has increased as with less power consumption, the assessee is able to produce more. Apart from that, the chart and detail relied upon by the Revenue is a meaningless exercise as its correctness is not sacrosanct as on certain dates, the number of units consumed is 'zero' whereas the production is there. Material relied upon and confronted, infact is not accurate. Consequently, without paying attention to the nature of paper being produced etc. and the nature of work at the relevant point of time, the exercise is a meaningless exercise. Heavy reliance was placed upon the impugned order. It was also his submission that Paper Book running into 63 pages, what has been argued before AO and CIT(A) on facts and case law Paper Book of 49 pages on record has not been assailed. 9. We have hea....
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....ntributing to the disparity in the consumption of electricity per ton production of finished goods or consumption of per ton raw material. Detailed stage wise manufacturing process was explained to the AO. All this shows that various factors contribute in varying degrees in consumption of electricity vis-a viz per metric ton production of finished goods or per metric ton consumption of raw material. This alone does not become the basis for drawing an outright adverse inference. Finally, it is fallacious to conclude that the checks exercised by the Excise Department and the records maintained under the excise law are not relevant for income tax purpose. On fact, there are complementary to it, as these testify to the production aspect with regard to the manufacturing quality, sizes, quantum of finished goods, raw material and other consumables on day to day basis. It is seen that the appellant has maintained complete quantitative information in connection with purchases, production and sales. The AO has not pointed out any specific defect with evidence in the audited books of account and has not recorded any finding to the effect that the appellant had inflated the ....
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....was assailed not only before the CIT(A) but the arguments have also been raised before the assessing officer also. We also take note that the arguments that there were multiple reasons for variations, even for the variations in electricity consumption by the assessee was also not taken up for the first time before the CIT(A). The record shows that in the reply extracted at pages 5 to 9 of the assessment order, the assessee has submitted that variation in consumption of power could be due to multiple reasons such as interruptions in regular supply of power, quality of power, tripping in power supply, quality of raw material and finished product, efficiency of the machine operator and the workers, breakdown of the machinery etc. Similarly the assertion that the power consumption in the year under consideration has infact gone down vis-a-vis the earlier years is also evident from the very same reply recorded at specific page 6 of the assessment order. A perusal of the same shows that on behalf of the assessee as per the written reply extracted in the order it has been stated that "we have already submitted that during the year our power consumption has gone down per MT of production a....
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....ffirmed the conclusion drawn by the Hon'ble High Court that excessive power consumption prima facie establishes the assessee's intention to suppress the production and the turnover. In the facts of the present case, the electricity consumption on an annual basis has gone down over a period of time and production has increased. In the facts of the said decision we also note that the assessee had not produced the relevant books despite several opportunities which had been taken note of by the AO, the CIT(A), Tribunal as well as the High Court which is not the position in the present case as books have been produced and seen alongwith vouchers etc. wherein no defect has been pointed out. Apart from that, it is seen that in the facts of the said case the Hon'ble Apex Court also took note of the fact that the ITAT is the last fact finding authority and it had noted that there was no verification of the raw materials used in the work done on job work basis which remain unverified. The rejection of books of accounts it was noticed by the Hon'ble Apex Court was on various grounds and thus in the face of the findings of facts, the Apex Court held that the High Court could on....
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.... cases) and May 24, 2013 (in one case) without pointing out the specific reason for applying these different rates in similar case even though the AO has applied a common yardstick in all these four cases for estimating production and income ?. (emphasis supplied) 9.4 In the facts of the said decision the original assessment order of the assessing officer was set aside by the CIT(A) exercising his powers under Section 263. The assessee's appeal against the said Revisionary order was dismissed by the ITAT. In the assessment proceedings pursuant to the order of the CIT's Revisionary Order, addition on account of suppressed production on the basis of consumption of electricity was made in the hands of the assessee. The issue was carried in appeal by the assessee before the CIT(A) who granted substantial relief by reducing the addition from Rs. 54,82,489/- to Rs. 13,25,728/- directing the assessing officer to apply the GP rate of 23%. The said order of the CIT(A) was upheld by the ITAT. The correctness of the said decision was challenged. The issue of maintainability of G.P. addition was never challenged by the assessee. For the sake of greater clarity, it may be approp....