TaxTMI 
TaxTMI 
2019 (11) TMI 514
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....and the overall ratio with the finished products has been reduced as compared to that of the preceding year. The Assessing Officer found that on electricity consumption charges of Rs. 1,00,000/-, the production to the tune of 19.5 MT has been made whereas on the same unit of electricity consumption, the production was to the tune of 24.45 MT in the preceding assessment year 2011-12. The Assessing Officer analysed the over all calculation and observed that production to the extent of 25.38% has been reduced. Further on over all comparison of manufacturing expenses per unit production and consumption of electricity per unit production, the assessee has incurred excess expenses in the two heads at 25.3% and 11.6%, respectively. The Assessing Officer noted that the assessee has not brought any evidence in support of its claim that production has not been suppressed by the assessee. The assessee has debited total expenditure on account of manufacturing at Rs. 16,66,66,434/- and total production has been shown at 10520. Thus, the cost of production per MT shown by the assessee at Rs. 15,842.82 per MT. Accordingly, the Assessing Officer calculated the suppressed production at 1163 MT and....
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....ent year 2012-13, the Assessing Officer wrote that "Thus, it is found that the assessee has not brought any evidence in support of its claim that production has not been suppressed by the assessee". Ld A.R. vehemently pointed out that the assessee cannot be asked to prove a negative thing and when the totality of the facts and circumstances for the assessment year 2011-12, the CIT(A) after considering the allegation of the AO and submission alongwith explanation of the assessee, has found that the addition is made entirely on the basis of suspicion and surmises and the Assessing Officer has built an entire castle in the air which has no foundation. Ld counsel for the assessee submitted that it is not justified and reasonable to tax unaccounted production based entire on consumption of electricity and on account of machinery suppressed production keeping aside the acceptance of production report/return reported by the assessee by the Central Excise Department and State Excise Department. Ld counsel drew our attention towards para 2.2 of the impugned order and submitted that the CIT(A) has deleted the addition keeping in view the findings of the Assessing Officer and written submissi....
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....ng stocks as disclosed in the books by the assessee. The AO has also not found out any defects in the accounts of the assessee to reject the book result. In fact, the book result has not been rejected by the AO. In the circumstances, therefore, it is too farfetched to tax the unaccounted production based entirely on consumption of electricity or by comparing manufacturing expenses. The AO has not made any enquiry with the Central Excise Deptt. and Commercial Tax Deptt. to find out whether they have any information about suppression of production or making of unaccounted sales by the assessee. It has been submitted by the assessee that the Central Excise Deptt. has accepted the production reports/returns as filed by the assessee, and the Sales Tax Deptt. has never detected any unaccounted sales by the assessee. The assessee in its written submission has rightly pointed out so many reasons which go to show that the AO could not have made the addition that he made on account of imaginary suppressed production in the case of the assessee. The accounts of the assessee are audited not only as per Companies Act but also as per Income Tax Act and Central Excise Act, and the AO has not poin....
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....bserved that there was huge variation between the production shown by the assessee and the units of electricity consumed in each month during the year held that the books of accounts are not reliable and rejected the same by invoking section 145 of the Income Tax Act, 1961. He thereafter, observed that in the month of May 2004, the assessee has shown production of 133MT against consumption of 82847 units of power. Thus, he held that for 1 MT of production, 622.9 units of power consumption has been declared by the assessee. He noted that 14,15,899 units of power was consumed by the assessee in the entire year and by taking the production rate as 1 MT against consumption of 622.9 units of power arrived at total production of 2329.264 MT. as against 1736.535 MT. and by adopting the average sale price of 22436.88 MT. shown by the assessee arrived at the value of suppressed production of 592.729 MT. at Rs. 1,33,04,916/-. After allowing rebate for all adverse eventualities in the production process with reference to the consumption of power unit and also considering contention of the assessee that production cannot be compared with consumption of power only estimated 70% of Rs. 1,33,04,9....
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.... Bench of the Tribunal in the case of Pondy Metal and Rolling Mills P. Ltd. (Supra) has held that where assessee is maintaining regular books of accounts and all the purchase and sales are duly vouched and supported by raw material register, production register and finished good register which are subject to check by excise authorities no addition can be made on account of alleged suppression of production simply on the basis of consumption of electricity. We also find that the contention of the assessee that the variation in consumption of electricity may be caused due to various reasons such as break down of machinery, quality of raw materials, thickness of finished goods and frequency of power failure, etc. could not be controverted by the Learned Assessing Officer. Rather it is observed that the above argument of the assessee was accepted by the Learned Assessing Officer to the extent of 30% for which no basis could be cited. No material was brought on record to show that it was scientific to arrive at the quantity of production merely on the basis of consumption of units of electricity. Therefore, in our considered opinion merely on the basis of units of electricity consumptio....
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.... clear that in the present case, apart from estimating production on the basis of excessive consumption of electricity, determined on comparison with the consumption figures of a large public sector undertaking, the Assessing Officer has not been able to bring on record any other evidence to support his conclusion regarding unaccounted production. Following the decisions of the Hon'ble ITAT cited above and also the appellate orders passed by the CIT(A), Guntur and CIT(A)-I, Hyderabad on identical facts and circumstances in the appellant's own case for Asst. years 2001-02 to 2007-08 and Asst.year 2008-09, it is held that there is no justifiable basis for the addition on account of suppressed income of Rs. 35,97,380/- in the Asst.year 2000-01, and the said addition is deleted and the ground raised on this issue is decided in favour of the appellant". It is seen that in several other decisions, different judicial forums are unanimous on the point that no valid addition can be made on account of suppressed production merely on the basis of excessive electricity consumption or claim of excess manufacturing expenses when compared with the earlier years. It may be mentioned he....
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.... of facts and figures pertaining to assessment year 2011-12, which were considered by the CIT(A) while granting relief to the assessment for the earlier assessment year 2011-12, which reveals that there was non application of mind on the part of the Assessing Officer while making the addition on account of suppressed production for the present assessment year 2012-13. We also observe that the Assessing Officer picked up manufacturing cost per unit metric tonne of production shown in financial year 2010-2011 pertaining to assessment year 2011-12 and by applying the same ratio to the total manufacturing expenses claimed for financial year 2011-12 pertaining to present assessment year 2012-13, recorded the allegation of suppressed production and made the addition. We are in agreement with the conclusion drawn by the CIT(A) that this method itself is highly defective being based on wrong postulates and cannot be approved. 11. From a careful reading of relevant part of the assessment order, we clearly observe that the Assessing officer has proceeded to make addition on the basis of suspicion and noticing the factum of higher consumption of electricity and lower production which could ....