Books of account of Assessee can be rejected on account of higher consumption of electricity: HC

High court in matter of M/S Shree Gorakhnath Food (P) Ltd. vs The Commissioner, Commercial Taxes, U.P. Lucknow held that the books of account of Assessee can be rejected on account of higher consumption of electricity.

Revision was admitted on the question “whether on account of higher consumption of electricity during the Assessment Year 2008-09, the books of account of Assessee-revisionist could be rejected?”

The Court retreated order of the Apex Court in matter of Melton India (supra), where it was said that on the case of excessive consumption of electricity, when compared to production, found that when electricity consumption goes up, a reasonable inference can be drawn that production have gone up. If the electricity consumption is going up, but the production is seen to be going down, a reasonable inference can, prima facie, be drawn that there was suppression of production and consequently suppression of sales in order to avoid sales tax.

The Assessee before this Court had established a factory for manufacturing of Flour, Maida and Sooji. The matter relates to Assessment Year 2007-08 for the period 01.01.2008 to 31.03.2008, and Assessment Year 2008-09. The Assessee had disclosed total purchase of Rs.99,80,498/- and sale of Rs.1,20,78,303/- for the period 01.01.2008 to 31.03.2008. During the assessment period of 2007-08, a show cause notice was issued to the Assessee and the same was replied on 28.04.2010. The Assessing Authority rejected the books of accounts vide order dated 15.06.2010 and enhanced the turn over on the ground of excessive consumption of electricity. Aggrieved by the order, a first appeal was preferred before the Additional Commissioner, Grade-II (Appeals), Commercial Tax, Gorakhpur. The appeal was allowed vide order dated 15.11.2010 and the quantum of tax was reduced. Against the order dated 15.11.2010, the Department filed Second Appeal No.38 of 2011. The Tribunal allowed the appeal of the Department while rejected the appeal of the Assessee. During the assessment proceedings for the year 2008-09, the Assessing Authority found that there was consumption of 26.351 units of electricity for production of 1 quintal of flour against the disclosed consumption of 8.840 unit of electricity by the Assessee. The first Appellate Authority reduced the tax liability imposed by the Assessing Authority in the first appeal relying upon the consumption of electricity for the earlier year 2007-08 at 20.887 units per quintal. Against the order of first Appellate Authority, one appeal was filed by the Assessee being Second Appeal No.104 of 2011 and the other appeal filed by the Revenue being Second Appeal No.47 of 2011. Hence the present revisions.

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