TMI Blog1995 (2) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... Controller, Govt. of India. The producers and suppliers of Aluminium Rods include Hindustan Aluminium Corporation Ltd., Renukoot (HACL), Bharat Aluminium Co. Ltd., Korba (BACL), Indian Aluminium Co. Ltd. (IACL), Madras Aluminium Co. Ltd. (MACL), which are Govt. or Semi Govt. Undertakings. The buyers are State Electricity Boards. The finished goods is subject to re-winding process before sales and is an Excisable item. 4. The raw material required for manufacture of cables in the Rolling Division are Aluminium Steel/Iron. This Division has 300 Bobins on which wire is wrapped for strandering purposes. The wrapping process on all the 300 Bobins require 7 days time. Strandering is done in different sizes. It takes 3 to 4 hours for making 4-5 kilometre of wires. The manufacturing process involves drawing of the melted material into wire and strandering on the Bobbins. Drawing and Strandering process are done simultaneously. The manufacture of cables is also done on job basis. The manufacturing process in both the Divisions require electric energy which is supplied by the Electricity Board and is also produced by generators. 5. For both the Divisions the assessee has a common Metre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, inferior quality of raw material, repeated process of reheating and re-winding, etc., had contributed to the variation. The AO examined assessee's production Manager, Shri S.K. Jain, and formed the opinion that 10% of the variation may be attributed to electricity failure and other reasons. He, therefore, concluded that the assessee had made purchases of raw material worth Rs. 10 lacs and effected sales worth Rs. 6 lacs out of the books. He made additions accordingly. 8. In appeal the learned CIT(A) examined the month-wise consumption of units vis-a-vis production obtained and agreed with the learned AO that there were vast variations in IInd IVth quarters between consumption of units and production. He further agreed with him that the alleged supervision of production by the Officer of the Excise Department and inspection by the Officers of the Electricity Board were not reliable. Further, the ld. CIT(A), took into consideration the subsequent conduct of the assessee in purchasing raw material from open market and, in such attempt, having been caught at the check post in September 1988 and visited with penalty. He further took note of the search conducted by the Sales-tax D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil Mills v. CST [1987] 67 STO 450 and in the case of Baijnath Prasad v. CST [1987] 67 STC 346. 12. Supporting the order of the learned CIT(A) the ld. Departmental Representative submitted that acceptance of past or subsequent results creates no presumption of correctness of assessee's accounts in the current year. He further urged that the abnormal variance between consumption vis-a-vis production in IInd IVth quarters as compared to other quarters was such as could not have been ignored and which afforded good basis for making the addition in question. The ld. Departmental Representative further submitted that the issue of blank gate passes was indication of the callous performance of their duties by the Excise Department Officers and that the inspecting officers of the Electricity Boards did not make physical verification of the finished goods. It was also submitted that the subsequent conduct of the assessee in trying to make purchases outside the books and being penalised for effecting sales outside books were relevant factors. The ld. D.R., thus, submitted that there were good reasons for making the addition in question which needs no interference. 13. After having hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o create variance between consumption of energy and production. The quality of the raw material, the constant or irregular supply of energy, the manufacturing process involving consumption of energy without giving any production, the skill and expertise of the person and similar other factors may affect the ratio between consumption of energy and production of goods. It is, therefore, difficult to maintain the same or uniform ratio between consumption of energy and production of goods. That being so, though consumption of energy is a relevant factor for knowing the quantity of the goods produced yet, for the reasons recorded above, this fact alone can hardly be a good basis for making a trading addition on the ground that where there is more consumption of energy there should be more production. 16. In the case before the Kerala High Court such a situation, as is before us, was considered and the Hon'ble High Court observed that :--- "The mere fact that there was wide disparity in the consumption of electricity would not justify the rejection of the accounts without any other supporting circumstance, because such variation could be due to various factors outside the control of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case it is an established fact that the production of goods was being supervised by Officers from Excise Deptt. and consumption of electric energy being checked, though occasionally, by the officers of the Electricity Boards. Unless the contrary is proved, official acts are to be presumed to have been done according to the relevant rules. There is no material on record to assume or presume that the officers of these departments had in any way colluded with the assessee. There is no evidence to indicate dereliction in the discharge of their duties. Such being the position of evidence, no adverse inference can be made against their conduct in the discharge of their official duties. The explanation offered by the assessee-company thus becomes reasonable as it fits in the nature of the manufacturing activities being carried on by it and is also not negatived by any positive evidence to the contrary. 20. The other reason adopted by the learned CIT(A) for rejecting the explanation of the assessee was that sometimes in September 1988 the assessee was caught at Police Check Post while attempting transportation of unaccounted purchases and was fined by the officers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found. Lastly it is not disputed that action taken and penalties imposed for the alleged subsequent conduct of the assessee finally ended in favour of the assessee. The evidence of the subsequent conduct of the assessee, therefore, affords no good basis for making the addition in question. 23. To sum up, we conclude that there is no reliable material on record to hold that the assessee had made, out of books production, so as to make profit of Rs. 6,00,000. The very fact that the learned CIT(A) himself found no case of making any additional investment by the assessee in purchases which could have enabled the assessee to make excess production also and the ratio in the decisions of the cases relied upon by Mr. Jhanwar supports our conclusions to some extent. We, accordingly, delete the addition of Rs. 5 lacs. 24. (2) Disallowance u/s 43B Deduction of a sum of Rs. 5,586 claimed on account of P.F. and F.P.F. liabilities has been refused under section 43B on the ground that the liability remained outstanding at the end of the accounting period of the assessee. 25. The learned Departmental Representative undoubtedly supported the order of the ld. CIT(A) on the point with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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