Smt. Raj Bala vs ITO

Adarsh Kumar Goel, J.—This appeal has been preferred u/s 260A of Income Tax Act, 1961 by the Assessee against order dated 31-5-2007 of the Tribunal, Delhi Bench, passed in ITA No. 2084/Del/2005 in respect of assessment year 2001-02 and the same was admitted to consider the question whether finding recorded by the Tribunal in para 9 of the impugned order is perverse ?

The Assessee is running a brick kiln. During the assessment, assessing officer made addition on estimate basis by not accepting the books of accounts in their entirety and it was held that the production of bricks shown in books of accounts was not correct. The production of the said bricks was held to be much higher in view of the higher consumption of coal than the normal consumption.

On appeal by the Assessee, further addition was made by the Commissioner (Appeals) u/s 251(1) as follows:

... This shows that the books of account do not deserve to be accepted as they do not faithfully record the entries. Thus, on the aspect of coal purchased too, the books of account deserve to be rejected. The Appellant has further tried to compare his results with that of another BKO M/s Madan Lal BKO, who got the Samman Patra, declaring the coal consumption of 19.3 MT for production of 1 lac number bricks (refer to reply at para 13(e) 14-2-2005 of the Appellant). The same will not apply in the case of the Assessee (Appellant) as in her case the books of accounts are being rejected on all counts. Incidentally, in the case of the Appellant, the coal consumption per 1,00,000 number of bricks produced is 497.935/24.55 = 20.28 MT which is higher than the coal consumption of 19.3 MT for the above said Samman Patra awardee. In the Appellants case, the books of account are also rejected. After a careful consideration, I am of the opinion that Section 145(3) of Income Tax Act is applicable, according to which the assessment which requires to be completed, in the manner stated in Section 144, has to be made on a parameter/basis of production of 9.75 lac number bricks with consumption of 125 MT coal (allowing maximum consumption of 125 MT coal whereas such number of bricks could not be manufactured with 100 MT coal too). Having allowed the highest consumption of coal as per the above standard, all the objections raised are taken care of. The suppressed sales have been worked out by me at Rs. 14,07,000 against Rs. 25,000 added by the assessing officer on ad hoc basis. Accordingly, the income is enhanced by Rs. 13,82,400.

On appeal to the Tribunal, the plea of the Assessee was partly accepted and the addition was reduced as follows:

So far as addition on account of production and sale is concerned, we found that without any cogent material the learned Commissioner (Appeals) has just compared coal consumption with Jhajjar manufacturer and estimated sales by working out the coal consumed by the Assessee. There was nothing on record to indicate that Assessee has sold the bricks without recording the same in books of accounts. There is no dispute to the well-settled legal position that assessing officer can make addition after rejecting books of accounts, but the same should be based on some material. Just on guesswork and without any cogent material such an addition is not permissible. Furthermore, whenever addition is proposed on the comparison with other manufacturer, such other manufacturer should be of equal standing and parameters as the Assessee is in the instant case, we found that coal consumption of the Assessee per lac of bricks works out to be 18.65 MT. Such coal consumption in case of Madan Lal, a Samman Patra Awardee, works out to be 19.3 MT. However, the learned Commissioner (Appeals) at p. 8 of his appellate order worked out coal consumption at 12.83 MT on the basis of Jhajjar manufacturer who were not at all of same parameter as the Assessee. The total production of bricks in case of Assessee works out to be 24,55,000 by applying the coal consumption of 18.65 MT per lac of bricks. However, in case of Samman Patra Awardee, the brick production works out to be 23,72,720. Thus, it is clear that production of bricks of the Assessee was better than the Samman Patra Awardee, who was stated to be located in the same locality as the Assessee was. Thus, from the point of view of bricks, we do not find any justification in the action of the learned Commissioner (Appeals) for estimating the same by applying the coal consumption rate on the basis of Jhajjar manufacturer, which are not comparable and not on the same footings. If we work out the coal consumption even on the basis of Jhajjar manufacturer, the same works out to be 314.7 MT, against which the Assessee has actually consumed 457.93 MT. Therefore, if any addition is required to be made, the same should be made with .respect to the excess consumption of coal by applying the rate of 1350 per MT which works out to be Rs. 1,93,325. Keeping in view the totality of the facts and circumstances of the instant case and the comparative results with the other manufacturer being awarded by Samman Patra by the Income Tax Department itself, we direct the department to restrict the addition at the most to the extent of Rs. 1,93,325 instead of Rs. 13,82,400 retained by the learned Commissioner (Appeals). We direct accordingly.

We have heard learned Counsel for the parties.

Learned Counsel for the Assessee submitted that having held that addition on guesswork was not permissible, the Tribunal contradicted itself in sustaining the addition and, thus, finding of the Tribunal was perverse.

We are unable to accept the submission. No doubt the Tribunal has observed that addition merely on guesswork was not justified. The said observation is in the context of not sustaining the addition in its entirety, only on the basis of coal consumption rate. The Tribunal has given valid reason for sustaining part of the addition i.e., excess consumption of coal by the Assessee as against the normal coal consumption rate. Guesswork cannot be altogether excluded from assessment when books of account are found not reliable. In any case, view taken by the Tribunal being a possible view, interference by this Court is not permissible merely on the ground that different view may also be taken. The substantial question of law is answered against the Assessee.

Accordingly, the appeal is dismissed.