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2014 (10) TMI 697 - AT - Income TaxAddition of excess consumption of diesel - Whether the CIT(Appeals) has erred in not considering the deletion of addition of ₹ 3,58,15,876/- on account of excess consumption of Diesel without appreciating the facts brought on record by the A.O. and only upholding the addition of ₹ 1,20,000/-on account of personal use of diesel in the diesel car owned by the assessee – Held that:- As per AO, the consumption of diesel was excessively high in comparison to the earlier years - CIT(A) allowed the claim of the assessee by deleting whole addition except ₹ 1,20,000 on the ground of personal use of diesel in the car owned by the assessee - the AO has made disallowance presuming that the consumption of raw material was 1,07,049.45 quintals which was of wheat only - The AO ignored a very important fact that the assessee was not doing only processing of wheat for manufacturing of atta, suji and maida upto AY 2006-07 but during the year under consideration i.e. AY 2007-08, the assessee also started the processing of choker for producing superfine choker/bran which had been sold for ₹ 6,03,38,004/- during the year - the assessee has processed 1,86,207.04 quintals of choker for production of superfine choker/bran which process also uses diesel - The AO has not considered the consumption of diesel for the purpose of manufacturing of superfine choker/bran by processing of 1.86 lakh quintals of choker - as per expert advice for production of better quality of choker etc., the assessee needed load of 625 KVA against existing load of 385 KVA but despite application and efforts by the assessee, load was not increased during the year - the assessee got connection of 625 KVA on 26.05.2009 beyond the period of financial year under consideration. The assessee maintains proper records to show the purchase and consumption of diesel for its business purpose which justifies the increase of consumption of diesel during the year – the AO has formed opinion for disallowance on incorrect and incomplete facts and also by ignoring and not considering other important evidence submitted by the assessee to support its claim - CIT(A) has granted relief for the assessee but the findings are not based on cogent and justified reasons - the AO should have considered some substantial and cogent evidence submitted by the assessee to verify its claim pertaining to the diesel consumption - The AO ignored verification of diesel consumption log book, purchase of generators, boilers and six body chakki installed during the year for production of better quality products - The AO also ignored a very important fact that besides production of atta, suji and maida, the assessee also started production of high quality choker/bran during the year for which the assessee required increased load of electricity and power which the assessee could not get during the year and maximum use of power was based on generators - The AO 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 – thus, the matter is to be remitted back to the AO for verification of correctness of claim – Decided in favour of revenue.
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