COMMISSIONER OF INCOME TAX Vs. RAM STEEL INDUSTRIES

JUDGEMENT

(1.) THIS appeal has been filed by the Revenue under section 260A of the Income -tax Act, 1961 (in short "the Act"), against the order dated August 20, 2013 (annexure A -3), passed by the Income -tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh (hereinafter referred to as "the Tribunal"), in I.T.A. No. 707/Chd/2012 for the assessment year 2005 -06, claiming the following substantial questions of law:

(2.) LEARNED counsel for the Revenue submitted that the Assessing Officer on the basis of consumption of electricity relying upon the decision of the apex court in Melton India v. Commissioner of Trade Tax, U.P. (Appeal (Civil) No. 373 of 2007, decided on January 31, 2007) : [2007] 5 VST 613 (SC), had rightly made the addition. The Commissioner of Income -tax (Appeals) as well as the Tribunal have erred in reversing the order of the Assessing Officer and wrongly applied the gross profit rate of 23 per cent on the total turnover of Rs. 93,26,096.

(3.) NO doubt, the power consumption is one of the factors of production where there can be large variance and in the given facts and circumstances, the basis of power consumption can be taken to be a factor for determining the income of the assessee. However, in the absence of any corroborative evidence to support that, it cannot conclusively be taken to form the basis for assessing the income as the consumption of power necessarily may not be in respect of production process only. In the present case, the sample of electricity consumption which was taken was for one hour and was of very small dimension. It was not carried out during the period relating to the assessment year in question whereas it was in respect of subsequent period for assessment year 2007 -08. The Commissioner of Income -tax (Appeals), after considering the facts and circumstances and rejecting the books of account and taking into consideration the production results of comparable business turnover and specific circumstances of the assessee, adopted gross profit rate of 23 per cent and sustained the addition to that extent.