TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 322
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....udited 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 same as in earlier years. Ld. AO however rejected the books of accoun....
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....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 rejection has been made. The books of account were upheld. (iv) AO rejected the books of account in AY 2006-2007 also. But the Hon'ble ITAT ....
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.... 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 that: (i) Stock details of oils & lubricants and consumables stores cannot be maintained as desired by ld. AO as practically it is not possible to maintain them. These are purchased in limite....
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....ading 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 the payment to sister concern is found to be comparably unreasonable. v) Apropos scrap remaining with the Job workers, this trade practice is accepted by the department in previous assessments (Scrutiny assessment for AY 2005-06 and AY 2006-07 & AY 2012-13. Therefore there is no justification in AO a....
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....t 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 undisputed facts and circumstances, the Tribunal in our opinion could not have interfered with the order of CIT(A). In doing so, it had ignored all admitted facts noticed by us above, in the face of which there was no occasion for the AO to have resorted to estimate method. The GP is primarily result of excess of sales over purchases, opening stock, closing stock, the unsold stock....
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....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 reason to reject the books of account inasmuch as they are interconnected. Assessee deals in manufacturing and job working for self and others. (iii) The books of account are maintained on consistent accounting practices in earlier years and no such rejection has been made. The books of account were upheld in earlier years. (iv) AO rejected the books of account in AY 2006-2007 ITAT found....
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.... 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 attributable to sales of scrape of Rs. 747109/-, in its books. These facts and observations demonstrate that the assessee did not receive any scrap back from job workers. There being no evidence whatsoever suggesting any unaccounted sales by the assessee, the order of learned CIT(A) on these issues is upheld. This ground of revenue's appeal is dismissed. 8.1 Apropos the second ground, which includes the additi....