TMI Blog2019 (11) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of break downs, quality of labour/supervisory staff, diligence of management etc and thus, it was held that the action of the AO estimating the production of assessee on the basis of alleged excessive consumption of electricity is erroneous and fallacious. - Decided against revenue - ITA No.245/CTK/2017 - - - Dated:- 4-11-2019 - Shri Chandra Mohan Garg, Judicial Member And Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri D.K.Sheth, AR For the Revenue : Shri Subhendu Dutta, DR ORDER PER C.M.GARG,JM This is an appeal filed by the revenue against the order of the CIT(A),1, Bhubaneswar dated 30.3.2017 for the assessment year 2012- 2013. 2. The sole issue raised by the revenue in this appeal is that the CIT(A) is not justified in law as well as on facts in deleting addition of ₹ 1,84,25,409/- on account of suppression of production. 3. The facts in brief are that the assessee is a company engaged in the manufacturing and sale of M.S.Rods, M.S Structural, M.S.Ingots, M.S.Wire and M.S.Scraps. During the course of assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee was using power since many years and it was noticed by the Assessing Officer that the trading expenses shows a marked increase by way of increase in consumption oil and fuel and no plausible explanation was filed by the assessee explaining the higher consumption of electricity, manufacturing cost and consumption of oil and fuel, etc. Ld D.R. pointed out that it was noticed from the assessee s own production unit, the production was compared with the last year wherein, the input and the expenditure used is more or less same and the assessee has not brought any evidence in support of its claim that the production has not been suppressed by the assessee. Therefore, the addition made by the Assessing Officer should have been confirmed. Ld D.R. strenuously contended that the CIT(A) has granted relief to the assessee without any basis merely by following its own order dated 6.1.2017 in first appeal no.266/15-16 for the assessment year2011-12 in assessee s own case, which cannot be a basis for granting relief to the assessee. Ld D.R. lastly submitted that keeping in view the sustainability and correctness of the assessment order, the order of the CIT(A) may kindly be set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submission, first of all, from the order of the CIT(A) dated 6.1.2017 for assessment year 2011-12, we observe that similar issue was decided by the CIT(A) in favour of the assessee and the same has been followed by the CIT(A) for granting relief to the assessee for the assessment year 2012-2013 on the identical facts and circumstances of the case. We find it appropriate and necessary to reproduce the relevant operating part of the findings of the CIT(A) for assessment year 2012-13, which are as under: 4, I have carefully considered the facts of the case and the reasons given by the AO for making the addition. The addition is made entirely on the basis of suspicion and surmises as has been rightly pointed out by the assessee in its written submission. The AO has built an entire castle in the air which has no foundation. The higher consumption of electricity with lower production may be the cause of a strong suspicion that something might be wrong somewhere, and for making further enquiries about the actual state of affairs. But on the basis of suspicion only, no sustainable addition can be made in assessment. The AO has not br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on the basis of high consumption of electricity. High consumption of electricity by itself not a ground to infer suppression of production - Electricity consumption cannot be the only factor for determination of liability especially when Commissioner is required to prescribe norms first as per rules - Evidences not produced on receipt and non-accountal of raw materials, manufacture along with overheads, transportation and payments and receipts for alleged suppression of production - Clandestine removal not sustainable merely based on technical opinion Though the aforesaid decision has been rendered by the Central Excise Tribunal with reference to Central Excise Act, it equally applies to the case of the assessee since production is a matter of consideration under the Central Excise Act. In the case of Rutvi Steel Alloys (P) Ltd. (ITA NO.3870/AHD/2007)dt.10.6.2010 for the AY 2005-06, Hon'ble ITAT, Ahmadabad Bench was confronted with similar situation where the AO had made addition for suppressed production on account of high electricity consumption. The Id. CIT(A), in that case had deleted the addition on account of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that the assessee was indulging in unaccounted manufacturing and sales and made unaccounted purchases of raw materials to manufacture unaccounted products. The Learned Commissioner of Income Tax(Appeals) has also observed that the excise authorities have verified the production records of the assessee and has found no discrepancies in them. He also observed that in the similar facts and circumstances, the Delhi Bench of the Tribunal in the case of Pondy Metal and Rolling Mills P. Ltd. (Supra) deleted the addition made on account of suppressed production and deleted the addition of ₹ 92,82,426/-made in the instant case of the assessee. The Learned Departmental Representative has merely relied upon the order of the Learned Assessing Officer. He could not point out any error in the above finding of the Learned Commissioner of Income Tax(Appeals). The Learned Departmental Representative could not bring any material on record to show that the assessee has purchased raw materials outside the books of account for making unaccounted production. Further, the assessee has maintained books of account, purchase and sale register and no defects could be pointed out in the same by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.3 On a consideration of the facts of the case for the asst. year 2000-01, it is seen that in the instant case, the estimation on suppressed income is based only on the working done by the Assessing Officer, after considering the power consumed for production, which led him to the conclusion that such power consumption must have been made for higher production, which was not disclosed by the appellant. However, even if the power consumption was on a higher side, it is seen that the Hon'ble Supreme Court in their judgement dated 3U-1-2011, in the case of Commissioner of Central Excise, Meerut Vs. R.A. Casting (P) Ltd have opined that electricity consumption cannot be taken to be a reliable basis for estimating the production of a particular unit. Citing the said decision, the Hon'ble Chandigarh Bench of the ITAT in the case of Arora Alloys Ltd Vs. ITO (271 NO.78jCSDj2012 dated 1-3- 2012) have opined that the reason for the above view is that consumption for electricity depends upon various factors like type and quality of scrap used, number of break downs, quality of labour/supervisory staff, diligence of management etc, Accordingly, in the said case, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed production for the AY 2012-13. The AO has not followed the same method for finding out the suppressed production as was followed for the AY 2011-12. What the AO has done for this year is to compare the manufacturing expenses per unit/MT of production shown in the previous year 2010-11 and apply the same ratio to the total manufacturing expenses claimed for the previous year 2011-12 to arrive at the suppressed production. This method itself is highly defective being based on wrong postulates and cannot be approved of. Keeping the above discussions I in view, the addition of ₹ 1,84,25,409/- is directed to be deleted. 10. From a careful reading of the relevant part of the assessment order, we observe that the Assessing Officer has merely proceeded to make allegation of suppression of production on the basis of excess consumption of manufacturing cost and electricity consumption. In the top part at page 5 of the assessment order, the Assessing Officer has noted that Thus, it is proved that the assessee has not brought any evidence in support of its claim that production has not been suppressed by the assessee meaning thereby the Assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at clandestine removal and clearance was a serious charge against the manufacturer which was required to be discharged by the revenue by production of sufficient and tangible evidence. Standard of proof in such cases had to be on the basis of absolute proof and not on the basis of the preponderance of probabilities. The Delhi Bench of Central Excise Tribunal in the case of R.A.Casting Ltd (supra), held that high consumption of electricity by itself is not a ground to infer suppression of production. 13. In the totality of facts and circumstances of the present case, we are inclined to hold that the CIT(A) was right in deleting the addition by following his own order for the preceding assessment year 2011-12, which was self-explanatory and justified and reasonable. We also find that there is allegation of the Assessing Officer regarding suppressed production, which were sold in the market. In our considered opinion, the ld CIT(A) was also quite correct in taking the cognizance of proposition rendered by ITAT Hyderabad Bench in the case of Balaji Steel Rolling Mills (P) ltd (supra), wherein, the Co-ordinate Bench of the Tribunal referring to the order of ITAT Chandi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
