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Judgment
K. Vinod Chandran, J.—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.
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 u/s 5A of the Kerala General Sales Tax Act. The Tribunal in allowing the said reduction and modification, has said so in paragraph 6:
Considering the nature of defects pointed by the assessing officer and facts of the case, we are of the view that the addition sustained by the first appellate authority is highly excessive and have no rational nexus. Though variation in electricity consumption can be taken as one of the methods for estimating the turnover, the lower authorities have not considered the production achieved during the current year and the previous years. Similarly, whether other adverse factors which have contributed to the variation in consumption of electricity have not been considered. Moreover, the total suppression detected at the time of inspection is Rs. 2,68,775/- whereas the total turnover conceded by the assessee comes to Rs. 19,91,69,504/-. The assessing officer should have compared the quantum of suppression detected with the stock available at the time of inspection. this is not done. From the records available, we are of the view that the lower authorities have made excessive addition which have no rational nexus to the defects pointed out by the assessing officer".
The findings of the Tribunal would show that the basis adopted is thoroughly incomprehensible from the records available. Both the appellate authorities have held that the adoption of electricity consumption as the basis for estimation of turnover is permissible in law. The Hon''ble Supreme Court has declared this position in Melton India Vs. The Commissioner Trade Tax, U.P., . The question of law hence remaining is only regarding the deviation of the Tribunal in rejecting the estimation on the basis of electricity consumption and confining it to a lump sum addition as also the perversity of such modification. It is also trite that rejection of books of accounts cannot be for the sole reason of disparity between consumption of power and recorded production. As noticed above, the Tribunal in the instant case only accepted the position that estimation can be made on the basis of electricity consumption, but refused to sustain it in the above case purely because nothing was discernible from the records as to how the assessing officer made addition without reference to the stock available, the production figures, etc. We further notice that the assessing authority has also made an addition for the suppression detected. If the estimation of turnover was done on the basis of the electricity consumption, we fail to understand how a further addition can be made; because the estimation made on the basis of the power consumption would necessarily be the entire production turnover of the assessee. The rejection of the basis of adoption being on facts and the perversity also being not evident from the facts, we are unable to find any question of law arising from the order of the Tribunal. Though a question has been raised by the Revenue regarding the denial of exemption, we find that the denial was only on the basis of non-availability of certificate, which, the Tribunal finds, has been obtained and produced before it by the assessee.
In the above circumstances, we do not find any question of law arising from the above revision and the same is rejected in limine. We direct the Registry to communicate a copy of this order to the Commissioner, Commercial Taxes for issuing necessary directions on what we have stated in paragraph three.