2011 (8) TMI 976

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....th regard to raw material consumption for the assessment year 2007-08 is justified, against law and is erroneous. 2. That the order of the learned Commissioner of Income-tax (Appeals) in upholding disallowances of other direct expenses of Rs.73,362 for the assessment year 2007-08 is unjustified, against law and is erroneous." The brief facts of the case are that the assessee is engaged in the manufacturing of glass syringes. During the year under consideration the assessee had shown sales of Rs. 35,23,760 and the gross profit of Rs. 53,120 declaring the gross profit rate of 1.5 per cent. In the preceding years, the assessee had shown sales of Rs. 1,08,09,353 on which the gross profit of Rs.39,67,408 was shown declaring the gross profi....

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....ect expenses. Before the Commissioner of Income-tax (Appeals), the assessee explained that at the close of the year, the raw material stock was "nil" and the closing stock consisted of only the finished products and small quantity of work-in-progress. The claim of the assessee was that the reason for raw material consumption being disproportionate to the sale was explained by the stock available at the end of the year. The said stock of finished product could not be sold and hence the raw material consumption appeared higher as compared to the sales during the year but when the entire finished goods were considered, there would not be any disproportionate consumption of raw material. The direct expenses incurred were also claimed to be r....

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....imed the consumption of raw material of Rs. 10,10,630 during the year as against Rs. 18,70,340 shown during the preceding year. The other direct expenditure was shown at Rs. 3,63,015 as against Rs. 8,88,400 claimed during the preceding year. The explanation of the assessee in this regard was that the expenditure booked on account of direct expenditure was on account of the packing material as the balance stock available with the assessee was packed in proper packing material, looking at the nature of the stock. The assessee, admittedly has consumed its entire raw material during the year under consideration and had declared sales of Rs. 35.23 lakhs and balance stocks of Rs. 26.83 lakhs. The balance finished goods available with the asses....