TaxTMI 
TaxTMI 
2018 (9) TMI 1684
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.... 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 to the findings in the assessment order, it was submitted, that the AO required the assessee to expla....
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....erred 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- Electricity units consumed more than 750 units for consumption of 1 Metric tone, of raw material) the assessee has given no corroborative evidence /justification for such discrepancies. It means that the assessee has nothing to prove in this regard. This clearly proves that assessee has not recorded its production properly in the books of account/production register maintained for the year und....
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....sioner 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 assessing officer which had been upheld consistently by the CIT (Appeals) as well as the ITAT and the High Court and held that if the electricity consumption is going up and the production is seen to be going down, a reasonable inference can be drawn that there was suppression of production and consequently suppression of sales in order to avoid sales-tax and the view taken by the Hon'ble High Cour....
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....creased 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 heard the rival submissions and perused the material available on record. Before we address the specific arguments raised by the parties before the Bench, we deem it appropriate to first extract the relevant finding of the CIT(A) which is under challenge by the Revenue in the present proceedings : 5.2 I have perused and considered the submissions made by the appellant and the facts of the case. The assessing o....
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....ng 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 cost of raw material or cost of manufacturing or suppressed sale prices or that it has made purchase of raw material or sale of finished goods outside the books. Moreover, the quantum of production and turnover has been accepted by the AO as declared by the appellant. Thus, the reason cited by the AO fall short of the requirement for invoking Sec. 145(3) for rejecting books of account. Similarly, a slight fall in GP rate (as in this case by 0.62% i.e les....
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....on 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 as compared to earlier years i.e. 372 unit PMT as compared to 414 units during AY 2010 -11, 501 units during AY 2009-10 and 579 unit during AY 2008-09". We find that the said consistent claim on record has not been upset by the AO or the Sr.DR. We further take note of the crucial and relevant findings arrived at by the CIT(A) in the peculiar facts and circumstances of the present case where books of accounts and stock registers, vouchers were produced and examined ....
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....ich 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 only interfere if there were any errors of law or perversity in facts. Consequently, it was held that the appeal of the assessee had to be dismissed. We find that the facts of the present case are entirely distinguishable as have been adverted to at length in the earlier part of this order. 9.3 Referring to the decision in the case of CIT versus Ram Steel Industry which is stated to be the decision of the jurisdictional High Court also referred to by the Ld. Sr DR. W....
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....r 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 appropriate to extract the specific reasoning of the CIT(A) in para 4.3 extracted in para 6 by their Lordships to bring out the peculiar facts : "6. The Commissioner of Income-tax (Appeals), while partly accepting the plea of the assessee, had noticed as under: "4.3 Considering the totality of facts and circumstances of the case.............. (a) .................................................. (b) .................................................. (c) ...................................