Case Law Details
Brief of the Case
ITAT Pune held In the case of ACIT vs. M/s. Nilesh Steel & Alloys Pvt. Ltd. that the consumption of the electricity for the manufacture of mild steel ingots/billets depends on various factors like quality of raw material which is the major input, voltage of the supply, power interruptions, mechanical and electrical breakdowns and the chemical composition of the liquid metal which has to be finally cast into ingots/billets. The AO failed to appreciate these facts and did not attempt to establish a direct nexus between the production and electricity consumed for the manufacture of round/TMT bars and arrived at a conclusion that there is an excess consumption of electricity resulting in suppressed production and alleging that the assessee company has indulged in unaccounted production.
Facts of the Case
The assessee is a Private Limited Company and is engaged in the manufacture of MS ingots / billets. The assessee had furnished return of income declaring total income of Rs.32,14,410/- on 24.09.2009. The case was selected for scrutiny and notice under section 143(2) was issued to the assessee. Further, the case was referred seeking directions under section 144A and in response to which, the JCIT issued specific written directions. The Assessing Officer received information from the office of the Commissioner of Central Excise and Customs, that the assessee had indulged in suppression of production and clandestine removal of finished products without payment of Excise duty. The adjudication order of CCE quantifying the value of suppressed production was also available with the Assessing Officer. In view thereof, the assessee was show caused as to why the amount of income escaping assessment should not be added in the hands of the assessee.
The Assessing Officer considered the manufacturing process of the assessee in detail and noted that the electricity was one of the major cost input in the manufacture of ingots / billets and also accounts for major share of expenses. As per the Assessing Officer, there was deviation in electricity unit consumption per MT i.e. 287 units which was unreasonable and unacceptable. Because of the huge deviation in the electricity consumption, the presumption of the Assessing Officer was that the production disclosed in the books was substantially suppressed. The Assessing Officer accordingly, computed the addition in the hands of the assessee on account of suppressed production at Rs.4,64,65,600/- and added the same to the total income of the assessee. Further, addition of Rs.58,12,720/- was made on account of working capital required for the unrecorded production.
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