Case Law Details
Amin Badruddin Keshwani Vs CIT (ITAT Mumbai)
ITAT Mumbai held that reopening of assessment without valid reason or intangible material, merely on the basis of information from Electricity Authroity, is not sustainable in the eye of law.
Facts-
Assessee is engaged in manufacturing of steel wool. On the basis of information received from Electricity Authorities vide letter V&S/ENF/874 dated 18.03.2006 that the assessee had consumed 37.3 units of electricity per hour in his factory out of which steel wool making machine consumed 29.84 units electricity per hour i.e. 80% of the total consumption of 37.3 units per hour.
On the basis of information “reason for reopening” was recorded and proceedings u/s. 147/148 of the Act were initiated. Vide notice issued u/s. 142(1) of the Act necessary detail was called which the assessee has filed. Rejecting the contentions raised by the assessee in its submissions AO proceeded to estimate the turnover and profit ratio thereon to the tune of 8.11% on the ground that assessee’s total consumption of electricity for the year under assessment was 61147 units out of which 80% units is towards manufacturing process as per letter issued by electricity authorities (supra), which comes to 48,918 units. Taking the production @ 2.5 Kg per unit of electricity consumption is 122295 Kg, sales @ 55 per Kg works out to Rs.67,26,225/-. AO thereby applied the profit ratio of 8.11% which comes to Rs.5,45,497/- as against the net profit shown by the assessee at Rs.1,46,242/- and thereby the AO made the addition of Rs.3,99,255/- to the total income of the assessee.
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