Higher consumption of electricity by itself no ground of suppression of production  

Higher consumption of electricity by itself is not a ground to infer suppression of production by the assessee

ABCAUS Case Law Citation
ABCAUS 3603 (2022) (06) ITAT

Important case law relied referred:
Prinik Steels Private Limited
ITO vs. Satyanarayan Pareek
CIT vs. Gajalaxmi Steel Pvt. Ltd.
CIT vs.  Khambhatta Family Trust

In the instant case, the Revenue had challenged the order passed by the CIT(A) in deleting the addition of “undisclosed income” made by the Assessing Officer (AO) on the basis of electricity consumption to estimate production and corresponding purchases.

The Assessing officer had made addition on account of electricity consumption after examining the production and corresponding purchase of raw materials. 

The AO took average consumption of electricity for immediately preceding two assessment years and since there was no power failure during the relevant period, the assessee could not substantiate any other reason to explain the higher consumption of electricity.

The case of the assessee was that the AO had not brought on record any  material evidences substantiating the allegations made.

The AO had referred to project report of TERI, New Delhi through internet and had found that the estimate for 100 Kg. of Paddy approximately 7.2 units of electricity is consumed. The AO in his order had categorically specified that in absence of verifiable details it was presumed that the average units of electricity consumed for milling 100 Kg. of paddy during the Financial Year was 7.71 Units (i.e. average of past two years).

The ttt opined that the CIT(A) after considering the factual matrix of the case observed that the AO had proceeded to make addition on the basis of   suspicion and noticing the factum of higher consumption of electricity and lower production which could be a case of strong suspicion but it is also settled law that suspicion, however strong, cannot take the place of evidence against the assessee for making a sustainable addition. 

From the CIT(A) order,  the ITAT observed that the CIT(A) had accepted  the  explanation  of  the  assessee  towards  higher  electricity consumption  in the relevant assessment year which was frequent breakdown and longer load of electricity that had then to be used to restart the milling machinery, which consumes higher electricity. 

The CIT(A) had also observed that the Assessing Officer (AO) calculated the undisclosed amount of paddy milled by the  assessee  and  enhanced  his income accordingly without bringing any evidence on record to suggest a suppression of the stock of paddy by the assessee  and  the  books  of  accounts  have  not  been  rejected  by  the  AO u/s 145(3) of the Act, which implied an acceptance of the results therein by the AO. 

The ITAT opined that the AO merely relied on the figures of electricity consumption available in the internet without verifying the facts and circumstances of the case of the assessee and he rightly held that this was not a plausible approach of the AO.   

The Tribunal concluded that the CIT (A) was right in deleting the addition made by the AO on the basis of on suspicion, conjectures and surmises without bringing any adverse material and positive evidence against the assessee on record to show that the assessee had claimed higher electricity consumption to avoid tax payment. 

As a result, ground of appeal was rejected.

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