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Income Tax Officer, Ward-2, Gobindgarh Versus Suresh Kumar HUF, C/o M/s Radhika Steel Industries

2018 (2) TMI 967 - ITAT CHANDIGARH

Rejection of books of accounts - additions made on account of unaccounted investment and unaccounted profits - variation of consumption of electricity was more than 15% - CIT-A deleted the addition - Held that:- We find, in group of cases with the lead case being Singla Concast Pvt. Ltd. (2017 (4) TMI 1310 - ITAT CHANDIGARH) has accepted that in view of norms outlined by the committee, there was no reason to reject the book results shown by the assessee who have reflected variation in the produc .....

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additions made on account of unaccounted profits/unaccounted investment. - The contention of the ld. DR that the assessee having shown variation of more than 15% on the lower side of the average,we find, merits no consideration, since we agree with the ld. CIT(A) that lower consumption of electricity for the same quantum of production should be viewed positively and not adversely. Therefore, we agree with the Ld.CIT(A) that this cannot be the basis for rejecting the books of account of the .....

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ed 12.06.2017. 2. The brief facts of the case are that the assessee firm is a re-rolling mill, wherein iron and steel products are manufactured. During assessment proceedings, the Assessing Officer noted that the amount of electricity consumed was directly related to the production of finished goods. In order to co-relate the consumption of electricity viz-a-viz, the production shown, the Assessing Officer gathered information regarding consumption of electricity from the electricity board. The .....

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ys when there was high consumption of electricity but no production of finished goods. It was also observed that there was days on which electricity consumed PMT of finished goods was low but the production of finished goods was very high. When confronted with this aspect the assessee explained that the consumption of electricity was dependent on various factors namely, delay or time lag in the recording of production in books, difference in type and quality of raw material used, power cuts, gri .....

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ed PMT on the basis of minimum average value for the period of 30 days. Accordingly, he took the lowest average value at 133.56 units PMT and computed the quantum of actual goods produced and thereafter, ascertained the unaccounted production of each month after deducting the finished goods produced during the months shown in the books of account. Further, on the basis of average sales rate,the total unaccounted production was estimated in monetary terms and then adopting the gross profit rate s .....

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ing addition on account of total unaccounted income of ₹ 68,44,358/-. 4. Being aggrieved with the above order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). During appellate proceedings before the ld. CIT(A), the assessee filed detailed submissions. It was also brought to the knowledge of the CIT(A) that subsequent to the passing of the above stated assessment order,a detailed study was carried out at the instance of the Principal CIT,Patiala, with a view to .....

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sessee submitted that on the basis of the report of the committee, it was decided that if the variation in the consumption of electricity is within the range of 15% of the average consumption of power, the book results should be accepted. The assessee pointed out that following the said recommendation, book results of other firms in similar trade had been accepted for the assessment year 2013-14 in similar cases. It was therefore contended that the book result of the assessee should also be acce .....

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considered within 15% of the annual average consumption PMT of production and considering the recommendation of the committee,accordingly held that the book results shown by the assessee company for the year under consideration needed to be accepted. Therefore, the Ld.CIT(A), set aside the action of the Assessing Officer in rejecting the books of account of the assessee and deleted the additions made by the Assessing Officer on account of unaccounted investment and unaccounted profits. 5. Aggrie .....

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is uncalled for being contrary to the observations of different courts that every year is an independent assessment year. 2. It is prayed that the order of the ld. CIT(A) be set aside and that of the Assessing Officer restored. 6. At the outset, ld. Counsel for the assessee brought to our notice that identical issue, wherein addition made by the Assessing Officer on estimate basis as discussed above was deleted by the ld. CIT(A) following the report of the committee constituted by the PCIT, Pati .....

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unted profits/unaccounted investment. The ld. Counsel for the assessee drew our attention to the relevant finding of I.T.A.T. at Paras 8 to 10 of the order as under: 8. At the outset, the Ld. Counsel for the assessee has brought to our knowledge that on identical issues, wherein the additions made by the Assessing officer on estimation basis as discussed above were upheld by the concerned CIT(A), the assessees preferred appeals before this Tribunal and this Tribunal vide its common order dated 1 .....

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matter to the Assessing officer with a direction to decide the issue afresh in accordance with law in the light of the internal guidelines issued by the Principal, Commissioner of Income Tax, Patiala. 9. The Ld. counsel has stated that this matter need not to be restored in the present appeals as the Ld. CIT(A) while deciding the above appeals infavour of the assessee has already followed the internal guidelines of the committee constituted by the Principal Commissioner of Income Tax, Patiala. T .....

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as already been followed by the Assessing officer in subsequent assessment year. Considering the above facts and circumstances, we do not find any infirmity in the order of the CIT(A) while directing the Assessing officer to accept the books results shown by the assessee and to delete the additions made by the Assessing officer on account of unaccounted profits / unaccounted investment made on estimation basis as discussed above. The order of the CIT(A) is, therefore, upheld. 10. Since the facts .....

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ssessee would not apply to the present case and that for this reason the books of accounts of the assessee had been correctly rejected by the Assessing Officer. The ld. DR, therefore, contended that the order of the Assessing Officer was to be upheld. 7. We have heard the contention of both the parties. Undisputedly the addition in the present case has been made on account of profits earned on unaccounted production and on account of investment made for the purpose of unaccounted production, for .....

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