Appellate Tribunal allows assessee's appeal, directs verification of material cost for tax calculations.

The Appellate Tribunal allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. The Tribunal directed the Assessing Officer to verify if the material worth &8377;33,25,027/- was used at zero cost and profits from sales were taxed. It emphasized that if raw material was used at zero cost and corresponding profits were taxed, no further additions should be made.

---

---

Issues:
Cross appeals by Revenue and Assessee against the order dated 07.03.2011 of CIT(A) for assessment year 1997-98.

Analysis:
1. Facts and Background: The case involved a 100% export oriented unit manufacturing Switch Mode Power Supplies. The assessee imported raw materials worth &8377; 9,09,79,393/- against an export order, which was later cancelled. The assessee requested the suppliers to take back the unused raw materials, but as they did not, the assessee reshipped some goods and destroyed the rest under supervision of Customs Authorities.

2. AO's Decision: The Assessing Officer treated the unused raw materials as stock in trade and taxed it under Section 28(iv) of the Act.

3. Appeal before CIT(A): The assessee contended that the destroyed material should not be considered as stock and that the material used in production at zero cost had already been taxed through corresponding sales profits.

4. CIT(A) Decision: CIT(A) confirmed the addition of &8377; 33,25,027/- for the material used in production but deleted the remaining additions. He observed that the destroyed material did not warrant addition and that the material used at zero cost had been offered for taxation.

5. Appellate Tribunal's Decision: The Tribunal found that the assessee consistently maintained that the material used was at zero cost and corresponding sales profits were taxed. It directed the AO to verify if the material worth &8377; 33,25,027/- was used at zero cost and profits from sales were taxed. It upheld the deletion of remaining additions made by CIT(A).

6. Conclusion: The Tribunal allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. The decision emphasized that if the raw material was used at zero cost and corresponding profits were taxed, no further additions should be made. The Tribunal directed the AO to verify this aspect.

This detailed analysis highlights the key facts, decisions, and arguments presented in the legal judgment involving cross appeals by the Revenue and the Assessee related to the treatment of unused raw materials and subsequent production activities for assessment year 1997-98.

---