TMI Blog2010 (6) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of M. S and CTD Bars. The Learned Assessing Officer observed that assessee had shown total production of 1736.535 MT. To Verify the same, the assessee was required to produce RG-1 Register and also to give month wise consumption of power in units vis- -vis production. On verification of the details filed showing month wise production and electricity consumption, with those of RG-1 register. The Learned Assessing Officer observed that there was large variation in the electricity consumed for month and the correspondence produced in the month. He noticed that assessee has shown production of 133 MT against consumption of 82,847 units of electricity i.e. the assessee has shown production of 1 MT against the consumption of power of 622.9 units in the month of May 2004. Considering the fact that during the year, assessee has shown total consumption of power of 14,50,899 units and taking average production of 1 MT with 622.9 units of power as declared in the month of May 2004. The Learned Assessing Officer calculated the total production with the consumption of 14,50,899 units at 2329.264 MT as against 1736.535 MT shown by the assessee. Thus, the Learned Assessing Officer held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the assessee that the production cannot be compared with consumption of power in toto. The suppressed production is estimated at 414.910 (i.e. 70% of 592.729 MT worked out in the show cause notice.) From the above, it is clear that the assessee has not cogent or documents to explain the discrepancies discussed. Therefore, the provisions of section 145(3) are invoked and the books of account are rejected. 6. Thereafter, the Learned Assessing Officer determined the value of suppressed production of 414.910MT. considering the average sale price of 12 months of ₹ 22389 at ₹ 92,89,426/- and made addition to the income of the assessee. 7. On appeal before the Learned Commissioner of Income Tax(Appeals), the assessee submitted that the learned A.O. has no basis for the rejection of books of accounts. As per Section 145(3) the books of accounts of on assessee can be rejected if: Where the Assessing Officer is not satisfied about correctness or completeness of the accounts of the assesses, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the consumption of power units are for broken months as the meter reading is taken during the month so the power consumption is shown upto that date only. It was further submitted that similar variation existed in preceding years also but no adverse inference was drawn in those years. The assessee has maintained regular books of accounts and all the sales and purchases were fully vouched, recorded end supported by raw material consumption register and production register and finished goods register. None of the purchase and sales were from any persons specified U/s 40A(2)(b) of Income Tax Act. The appellant has maintained quantity details of raw material and finished goods. There also no discrepancy is found. These records have been duly checked and verified by the excise authority. The excise authorities did not find any discrepancy during their audit and they have given a clean audit report. It is further submitted that mere variation in consumption of electricity can not be regarded as a ground to disregard declared version of the appellant. 9. It was further submitted that the ITAT Delhi on an identical facts in case of Pondy Metal Rolling Mills (P) Ltd. v/s DY.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption of electricity is not legally sustainable. 10. The Learned Commissioner of Income Tax(Appeals) after considering the submissions of the assessee observed that the assessee has maintained books of account, purchase and sales register, Bank account etc. as per the provisions of the Income Tax Act. The books of accounts are audited under Companies act as well as under the provisions of Income Tax Act under section 44AB. While rejecting the books of account, the Learned Assessing Officer has not brought on record any material evidence to show that the same are not maintained as per the provisions of the Income Tax Act. Accordingly, he held that in his view, the Learned Assessing Officer is not justified in rejecting the assessee's books of account under section 145 of the Act. 11. Further, the Learned Commissioner of Income Tax(Appeals) observed that the Learned Assessing Officer has made the above disallowance from the ground of rejection of books of account under section 145 as well as variation in consumption of electricity. However, while making the huge addition, the assessing officer has not brought on record any material evidences to indicate tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppressed production of 592.729 MT. at ₹ 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 ₹ 1,33,04,916/- as suppressed production of the assessee which worked out to ₹ 92,,89,426/- and made addition to the income of the assessee. In appeal, the Learned Commissioner of Income Tax(Appeals) held that rejection of book result was not justified by the Learned Assessing Officer for the reason that the assessee maintained books of account which were audited under the companies act and also under section 44AB of the Income Tax Act and the Learned Assessing Officer has brought no material to show that they are not maintained as per provisions of the Income Tax Act, 1961. Further, the Learned Commissioner of Income Tax(Appeals) observed that the Learned Assessing Officer has not brought on record any material evidences which indicates that the assessee was indulging in unaccounted manufacturing and sales and made unaccounted purchases of raw materials to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consumption, it cannot be concluded that the assessee's books of account were not reliable or the assessee is engaged in producing finished goods outside the goods of account. Keeping in view the above facts and circumstances of the case, we do not find any good reason to interfere with the order of the Learned Commissioner of Income Tax(Appeals). It is confirmed and the ground of appeal of the revenue is dismissed. 14. Ground No.3 of the appeal reads as under:- 3. The Ld. Commissioner of Income Tax (A)-XI, Ahmedabad has erred in law and on facts in deleting the addition made of ₹ 55,000/- on account of disallowance of interest expenses. 15. The learned A.O. has disallowed ₹ 55,000/- out of interest expenses on the ground that internet free loan of ₹ 5,00,000/- is given to one party. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above finding of the Learned Commissioner of Income-tax (Appeals) by bringing cogent and relevant material on record to show that the assessee had advanced ₹ 5,00,000/- in question out of the interest bearing borrowed funds or to show that assessee could not have advance ₹ 5,00,000/- out of the interest free funds available with it. In absence of any such evidence being brought on record, we do not find any good reason to interfere with the order of the Learned Commissioner of Income Tax(Appeals). We therefore, confirm the order of the Learned Commissioner of Income Tax(Appeals) and dismiss the ground of appeal of the revenue. 19. Ground No.4 of the appeal of the assessee reads as under:- 4. The Ld. Commissioner of Income Tax (A)-XI, Ahmedabad has erred in law and on facts in deleting the addition made of ₹ 33,000/- on account of disallowance of interest on cash balance. 20. The assessing officer observed that the assessee was keeping cash in hand of ₹ 3,00,000/- and inspite of this was withdrawing money from bank for its business purposes. Therefore, he disallowed of interest @ 11% on ₹ 3,00,000/- and made addition to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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