TaxTMI 
TaxTMI 
2014 (1) TMI 845
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....to the assessee. Aggrieved by the aforesaid order of CIT(A) the Revenue is now in appeal before us and has raised the following two effective grounds:- 1. The CIT(A) has erred in law and on facts in deleting the disallowance made on account of restriction of claim of waste/scrap & loss amounting to Rs. 8,18,12,227/-. 2. The CIT(A) has erred in law and on facts in not appreciating the fact that there is no melting process involved in the manufacturing process adopted by the assessee. Hence the level of loss claimed by the assessee is unjustifiably high. 4. Since ground no. 1 and 2 are interconnected both are considered together. 5. During the course of assessment proceedings, Assessing Officer noticed that Assessee has claimed scrap at 15.56% and process loss at 5.95%. Assessing Officer was of the view that the manufacturing process does not involve any melting process considering the item manufactured and the process of manufacturing. He was of the view that the loss claimed by the Assessee was quite excessive. Assessing Officer therefore directed the Assessee to produce the persons to whom it had sold the scrap along with their books of accoun....
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....of accounts were submitted to A.O on 15-12-2008 and the A.R. also informed the A.O to make enquiry with the parties which the A.O has not carried out as the assessment was getting time barred. Before me, the A.R. also submitted the confirmations of the parties to whom scrap was sold with their PAN No. and the said confirmations were forwarded to the A.O for necessary enquiry and verification in terms of Rule 46A of the IT Rules. However, the A.O has not given any comment on the same in his Remand report. The confirmations of the parties submitted by the appellant are tallied with the books of accounts of the appellant. Hence, no adverse view can be taken with regard to such sale of scrap by the appellant. 4.15 The A.O has rejected the book results of the appellant company on the findings that the appellant company has not produced the prescribed cost records such as Raw Material consumption register / report, production report, report on stoppage of machines with reasons, idle time report with reasons, Machine utilization report, work-in-progress and finished goods, process stock register-cost centre wise and product wise, finished goods stock registerproduct wise, ....
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....is not falling in the category of Steel Plant. The A.O without appreciating the provisions in this regard jumped to the conclusion that the appellant has not maintained proper records,in the present case, the appellant has maintained all records as per Cost Accounting Records (Steel Tubes & Pipes) Rules, 1984 as applicable to it as per Schedule - I & Schedule - II and produced before the A.O for verification in the assessment. The appellant has provided to the A.O monthwise summary of generation and disposal of scrap duly reconciled with the monthly excise return filed by the appellant in Form ER-1 as per Exhibit - III as well as cost sheet as per Cost Accounting Records (Steel Tubes & Pipes) 1984 in the assessment proceedings [Page No. 137 of Paper Book]. The statutory auditor has also certified in their Audit Report that proper records as required u/s. 209(1)(d) of the Act have been maintained by the appellant. However, the A.O has referred the GSR of Steel Plant which is not applicable in the case of appellant company. It has also been noticed from the submission made by the appellant that the requirement of Cost Audit is governed by Provisions of Section 233B(1) of the Companie....
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....monthly returns which are submitted before the Excise Authorities wherein the details of production, generation and sales of scrap which was submitted before the Excise Authorities are tallied with the records of generation and sales of scrap and process loss. All such records were also produced before the A.O and the A.O had admitted this fact in the assessment order that the appellant produced before him the excise records and production records for verification. The auditor has also certified that it has maintained the relevant cost records u/s. 209(1)(d) of the Companies Act, 1956. 4.18 It is clear from the discussion in the foregoing paras that the A.O without pinpointing any specific defects in the books of accounts of the appellant for the relevant period invoked the provisions of sec. 145(3) of the Act. It is a well settled position of law that the books of accounts of an assessee can be rejected only when specific defects have been found therein. Further, the A.O has not doubted the purchases and sales made by the appellant during the relevant period. The A.O was provided an opportunity during the proceedings for Remand Report to substantiate the findings w....
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.... of the Revenue had failed to point out any specific defect in books of accounts. The books of accounts of the assessee were subject to audit under s. 44AB as well as under the Companies Act. Under both the Acts, auditor is to certify whether books of accounts which were audited had shown true and fair view or not. The lower authorities of Revenue have failed to put any material against the observations of auditor and directors. Mere low yield and excess expenditure on electricity do not warrant an addition in the trading account. When reasons for low G.P. and excess expenditure on electricity have been satisfactorily explained by the assessee, the electricity consumption alone is not an aspect by which a person can earn taxable income or profit. There is no material on record to justify the conclusion reached upon by the A.O. for rejection of books of accounts when the assessee maintained complete books of accounts in accordance with the provisions of IT Act, further same were audited by auditor and no adverse observations were pointed out by the auditor. In these circumstances, the lower authorities of Revenue were not justified in making/confirming the addition of Rs. 41,27,406/....
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....sumption, production was furnished by the Assessee for previous two assessment years also. He pointed to paragraph 2 of the assessment order in support of his claim that the details were submitted before Assessing Officer. He also pointed out to the covering letter dated 08.12.2008 wherein the various details like manufacturing process along with the justification of generation of scrap and process loss at each stage of process, quantitative details of consumption and production for last three years was submitted before the Assessing Officer. He placed on record at page 68 of the paper book the copy of the letter. The learned A.R. submitted that the Assessee had provided the details the names and addresses of the parties to whom the scrap was sold with quantity and value of scrap, PAN number, bill wise details, copy ledger account to the Assessing Officer. He further submitted that since the matter was getting time barred, it was not possible for the assessee to produce all the parties before Assessing Officer and therefore the Assessing Officer was requested to verify the details by conducting enquiry with the parties and their examination. He further submitted that the Assessing ....
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....l the necessary details for generation of scrap and parties to whom the scrap was sold with the copies of account and the Assessee had also requested the Assessing Officer to make the independent enquiries with the parties but no such enquiry was carried out by the Assessing Officer. From the covering letter addressed to the Assessing Officer by the Assessee it is seen that the Assessee had furnished the details called for by the Assessing Officer. Further CIT(A) has also noted that all the relevant records in respect of scrap generation and burning loss, daily production records, Excise record along with month wise summary of consumption, production data was furnished before Assessing Officer but the Assessing Officer could not find any discrepancy in the details submitted by the Assessee. CIT(A) also noted that on comparison of the GP and NP ratio, there is no material variation. Even the scrap percentage and process loss percentage are comparable with the earlier years. CIT(A) has also noted that the Assessee had produced excise record and production record for verification before Assessing Officer and before him. He has further noted that Assessing Officer has not pinpointed an....