SOUTHERN ISPAT LIMITED Vs. STATE OF KERALA

JUDGEMENT

(1.) THE State is before us challenging the order of the Tribunal rejecting the estimation of turnover made by the assessing officer based on the electricity consumption and modifying the addition made for "probable omissions and suppressions"; as being unjustified and perverse. The assessee, a manufacturer of M.S. Ingots and C.I. Moulds, was issued with notice alleging the books of accounts to be not correct and complete and intimating rejection of the same for various reasons. Inter alia one of the reasons pointed out was that the electricity consumption for the year 2004 -05 was "high" (sic.). After considering the objections, the assessing officer, as seen from Annexure -A order, adopted the electricity consumed for the years 2003 -04 and 2002 -03 as the basis for utilisation of electricity and estimated the turnover. The electricity consumption for the respective years or the turnover conceded by the assessee are not discernible from the assessment order. However, going by the addition made for omissions and suppressions, we can only infer that the production for the subject year was estimated on the basis of the electricity consumption, taking the ratio of the previous years as the index. We also notice that the assessing officer also has made an addition of turnover suppression detected on shop inspection.

(2.) BEFORE the first appellate authority, the assessee contended that there were various factors for the lesser production, in the subject year, being the vagaries due to wear and tear of the machinery, frequent power failure, the quality and mix of raw materials, installation of auxiliary machineries and so on and so forth. The first appellate authority having found that estimation on the basis of electricity consumption is permissible in law, however, held that the assessing officer has not considered the mitigating circumstances put forth by the assessee. The first appellate authority, hence, directed the assessing authority to recompute the production on the basis of the average electricity consumption for the years 2002 -03 and 2004 -05. Again we are unable to comprehend as to what difference this would make, since the assessing authority also has said that he has adopted the "electricity consumed during the year 2003 -04 and that based on 2002 -03 (sic.)". From the order of the Tribunal, we should understand that this made a difference of about Rupees Two Crores in the addition. We cannot but say that the fact finding authorities, especially the original authority, should be more explicit and a little more comprehensive with respect to the basis on which best judgment assessment are made and the estimations are adopted. Reverting to the issue in the above case, the assessee was before the Tribunal on second appeal, where again, the Tribunal, though sustained the basis of the addition, confined the addition to a lump sum addition of Rs. 15 lakhs plus 60% addition under Section 5A of the Kerala General Sales Tax Act. The Tribunal in allowing the said reduction and modification, has said so in paragraph 6: