TaxTMI 
TaxTMI 
2015 (5) TMI 721
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....leting the total addition of Rs. 3,98,16,047/- on account of excess scrap allegedly generated by the assessee beyond 41.17% as fixed by the Excise authorities, but treated as sales outside the books of accounts by the Assessing Officer, by ignoring the facts and earlier financial results of the assessee, particularly in view of scrap percentage and gross profit declared by the assesee in the earlier years wherein the assessee has claimed and received back Refund of Excise-duty. iii. The appellant craves leave to amend or alter all or any of the aforesaid grounds of appeal and amend, alter or add any other ground of appeal. 2. The assessee has raised the following cross objections: i. On the facts and circumstances of the case, the learned Commissioner of Income Tax(Appeals) [CIT(A)] has erred, both on facts in law, in confirming addition of Rs. 99,54,630/- and further enhancing addition by Rs. 23,67,470/- in respect of valuation of the closing stock of the finished goods. ii. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in taking gross profits rate at the rate of 4.63% while valuing the cost of the finished goods ig....
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....ng Officer should be confirmed, inasmuch as they are in conformity with the norms prescribed by the Central Excise Authorities. 5. On the other hand, the learned Authorized Representative has quoted and relied upon the order of the CIT(A) insofar as it relates to addition on account of generation of scrap and also on the decision of this Tribunal in the assessee's own case for the preceding assessment year i.e. 2008-09. 6. We have heard the rival parties and perused the material on record. The first ground of appeal relates to the rejection of book results. We observe from the assessment order that it is not the case of the Assessing Officer that the respondent assessee failed to produce the information called for, nor is it the case that the books of account are defective. The Assessing Officer failed to give any specific reason for rejection of book results. It appears that the sole basis for rejection of book results is the assessment order of the immediate preceding year i.e. 2008-09 in which the books of account have been rejected by the Assessing Officer. This Tribunal in the assessee's own case in ITA No. 1454/Del/2012, vide order dated 29.10.2014 passed for the assess....
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....e items and is lower in case of 3 of the items. It is seen that the Assessee makes more than 50 items, and though analysing the production and Scrap generation in the case of 5 items on a sample basis cannot be rejected as such, but this sample of 5 items does not give any clear evidence that the Assessee is inflating the claimed Scrap generation. It is seen that out of the 5 items, the Departmental figures for Scrap generation are much lower than the claim of the Assessee for 3 items, but for 2 of the items, i.e. 'Knife' and 'Pasta/Noodle-SM', mentioned at S. No. 4 and 5 of the chart made by the Assessing Officer, it is seen that the Departmental figures for Scrap generation were much higher as compared to the figures shown for the Assessee. If in case of 2 of the 5 items analysed, the Scrap generated as per the Department is much higher than that stated to be claimed by the Assessee, then it cannot at all be said, merely on this basis that the Assessee has inflated the claim of Scrap. If the Assessee was inflating the claim of Scrap, then either the Scrap generated as per the Department would have been lower in all the 5 cases, or in case the Appellant was resorti....
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....etween the Inspector's Report and the claim of the Assessee but no definite conclusion of inflation or suppression can be suppression can be drawn when for 3 items a different trend is seen and for the other 2 items a different trend is seen. 8.14 It is further seen that the Appellant in his written Submissions dated 22.01.2013 in Para 19.2 has claimed that the basis on which the percentage as per the Inspector's Report was computed has not be specified, and also that the Inspector's Report was never confronted to the Assessee. If the Inspector's Report was being used against the Assessee, then the Assessee should have been confronted with the Report and the explanation if any offered by the Assessee on the Report should have been discussed, and in case no explanation was offered then that fact should also have been mentioned in the Assessment Order. However, it is seen that the Assessment Order is silent on this aspect, as to whether the Inspector's Report was confronted to the Appellant or not and what was his response, if any. In the absence of any such mention in the Assessment Order of the Inspector's Report being confronted to the Assessee, the Assessee....
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.... Assessing Officer made the addition in respect of closing stock by deducting the G.P. from the sale price, works out to Rs. 226/- per kg. Whereas on appeal, the learned CIT(A) finally held vide paras 9.8, 9.9, 9.10 and 9.11, apart from confirming the addition made further enhancement of Rs. 23,67,470/-, which are reproduced below: 9.8 After examining the entire facts of the case and relevant documents it was found that there was a very heavy undervaluation of the Closing Stock of Finished Goods and though the Ld. Assessing Officer had made an addition towards the undervaluation of Finished Goods but that addition was inadequate to cover the entire undervaluation of the Closing Stock of Finished Goods. It was seen that not only the packing cost which had been claimed by the Appellant at Rs. 19/- was worked out to Rs. 16.74 per kg., but also that the Ld. Assessing Officer had taken the Gross Profit Rate at 14.93% which was allowed as a reduction from the average sale price to work out the cost of the Finished Goods in the Closing Stock, but actually the Gross Profit ....
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....etailed valuation for each specific item of Finished Goods included in Closing Stock was not given. In such a situation, a reasonable and logical estimate has to be made for which reverse calculation or any type of calculation can be used provided it is reasonable and logical. Accordingly it is held that the Appellant could not explain why the enhancement in the Valuation of Closing Stock of Finished Goods should not be made. 9.10 There is no dispute regarding the average Sale Price being Rs. 266/- per kg. The Gross Profit rate of 4.63% which was proposed to be used for valuation of the Closing Stock of Finished Goods was taken from the Audited Form No. 3 CD for A.Y. 2009-10, a copy of which was filed by the Appellant in the Paper Book submitted by him alongwith written submissions dated 22.02.13. Further, the packing cost of Rs. 16.74 per kg. was admitted by the Appellant and is obvious from the calculation given in Para 9.6 above, whose details were given by the Appellant himself. In such a situation there is no dispute regarding the figures involved and the calculation of the rate to be adopted for the valuation of the....