TaxTMI 
TaxTMI 
2015 (9) TMI 322
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....aces and bush. The books of account are regularly maintained and audited as per Companies Act and Income-tax Act which was claimed to be supported by bills and vouchers. The assessee's industrial activity of manufacturing of ball bearings is liable for levy under Central Excise Act. During the course of assessment proceedings, the AO was of the view that assessee's record contained some discrepancies as assessee was not maintaining quality was stock register of raw material; oil and lubricants and stock consumption; separate trading of manufacturing and job work charges was not maintained; job work payment to sister concerns were not be cross-verifiable and the reasonableness of the payments was not justified. Excise Register (ER-1), trading account, scrap generation and yield % were not verifiable. Repairs and machinery expenses were based on self made vouchers also were not verifiable. Assessee filed detailed reply contending that the assessee's method of accounting, record keeping and excise compliance was same as in earlier years. Similarly the issues about stock register of consumables and stores; separate trading and manufacturing recorded and job charges were sam....
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....e the ld AO. (iii) Monthwise details of Production of scrap vis a vis sales and remained with Job workers filed before the ld AO. (iv) Outward/Inward Challan in support of goods issued/received from Job workers were produced before the AO. (v) The statutory auditors, without any qualification have certified in their reports that the assessee is maintaining proper records of inventory. Consequently ld. AO erred in rejecting the books of accounts and resorting to estimation of GP and sales. 2.4 The detailed submissions and paper book was supported before the ld. CIT(A), based thereon ld. CIT(A) and in consideration of various case laws and the submissions, observed that:- (i) The assessee having books of account cannot be rejected on the basis of the issues like stock of oil and lubricants and consumables stores etc. (ii) Similarly, maintaining the consolidated account also cannot be a reason to reject the books of account inasmuch as the assessee has been able to segregate the figures and give break thereof. (iii) The books of account are maintained on a consistent accounting practice in earlier years and no such reje....
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....n in the rejection of books of the assessee. (ii) The AO's allegation that the job charges paid to sister concerns were in violation of Section 40A(2)(b) was not established by the AO by citing any unreasonableness or comparative cases. Similarly, non-returned of scrap was supported by customary practice. (iii) Relevant TDS was deducted from the job workers which were duly paid in the Govt. treasury and no discrepancy whatsoever was indicated in this behalf. (iv) Since the books of account were upheld, there was no question of applying the estimation of gross profit. Besides, assessee's gross profit was better than assessment year 2006-07 and 2007-08. In assessment year 2006-07, ITAT dismissing revenue appeal, in assessee's own case upheld the gross profit rate at declared GP of 14.54%. Thus the assessee gross profit is as long as 14.54%. Therefore, the current year gross profit rate at 26.07% cannot be held to be low. 2.7 Aggrieved, Revenue is before us. Ld. DR supported the order of ld. AO on the issues of discrepancies in books of accounts, scrape generation and sale figures and GP addition. 2.8 Ld. Counsel for the assessee contends t....
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....iii) Separate trading a/c of job work and manufacturing not maintained This is not a defect in maintenance in books for which books of accounts can be rejected. The assessee gets the job work done from outside parties, it common manufacturing facility for goods manufactured for trading purpose and goods received for job work. Since books of accounts are and expenditure are inseparable and common, it is not practically possible to prepare the separate trading and profit & loss a/c of job work and manufacturing goods cannot be prepared. This is a regularly and consistently accounting practice by the assessee. Assessee maintains regular register with relevant entries of goods for job work and return after job work, supported by challans; no adverse finding whatsoever in this behalf. iv) Issue about sister concerns job work The payments of job charges made to sister concerns are supported by their bills made through account payee cheques at the same rates payable to unrelated jobbers, after deducting applicable TDS. The goods are issued for job work through challans and received back also through challans. Ld. AO has not pointed out even single instance where....
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.... instance of unrecorded/concealed sales. Therefore, the finding of concealed sales is grossly wrong and based on assumption and presumption. The difference in amount of MS scrap in ER-1 shown as qty. cleared and sales of MS scrap as per books of accounts has been fully reconciled. ix) Low GP cannot be ground for rejection of books The low GP cannot be a ground for rejection of the books of account. Further, the GP of current year was better than AY 2006- 207 and AY 2007-2008. The case of assessee for AY 2006-2007 was finalized in scrutiny and the ld AO estimated GP at 20% as against declared GP rate of assessee 14.54%. The CIT(A) held the GP rate @18% and Hon'ble ITAT upheld the GP declared by the assessee in books of account. Therefore, the assessee's GP is not lower to the past history of the assessee. The past history does not mean immediate preceding year only but the AO should look into the history of the assessee in past few years. Reliance is placed on: Hon'ble Rajasthan High Court in the case of Malani Ramjivan Jagannath Vs. Assistant Commissioner Of Income Tax (2009) 316 ITR 120 has held as under:- "10. In the face of these undispu....
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....he matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribunal." It is submitted that assessee's books of accounts and trading results being completely verifiable, ld. AO wrongly rejected the books of accounts, ld CIT(A) after appreciation of all the relevant facts, record, submissions and law, has rightly upheld the books deleted the additions, his order is relied on. 2.9 We have heard the rival contentions and perused the material available on the record. Ld. CIT (A) by elaborate findings held that:- (i) The assessee's regular books of account cannot be rejected on the basis of the issues like stock of oil and lubricants and consumables stores which constitutes day to day purchases and the stock is comparatively small. Besides such items being inflammable on preponderance of probabilities also can't be stored in huge quantity. (ii) Similarly, maintaining the consolidated trading account of manufacturing and job work also cannot be a r....
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.... similar type of case, ITAT on same facts and circumstances in the revenue appeal of ACIT vs. M/s. Pushp Enterprises (ITA No. 659/JP/2012 for the assessment year 2009-10) vide its order dated 13-02-2015, upheld the order of the ld. CIT(A) deleting the additions observing as under: "8. We have heard the rival contentions of both the parties and perused the material available on the record. Apropos the first ground i.e. the addition on account of alleged sale of scrap, we find no infirmity in the order of the learned CIT(A) inasmuch as nothing has been brought on record by learned Assessing Officer that the assessee's job workers returned any scrap to assessee. Nothinghas also been brought on record to demonstrate in any way that assessee indulged in any sale of scrap outside the books of account. This is further indicated by new Cenvat Credit Rules, which holds that the scrap was not required to be returned to the assessee. The same is referred to by the judgment in the case of M/s Rocket Engineering Corporation Vs. CCE (supra). The assessee further provided evidence from M/s Noble Industries, which has done a job work of 3.56 crores and has shown the income attri....