AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (1) TMI 242
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....ns with regard to the appellant's business transactions and books of account: "a. The gross profit ratio of the appellant was as follows: AY Ratio 2004-05 7.26% 2005-06 3.49% 2006-07 Loss b. The purchases included a sum of Rs. 24,32,22,003 for 17,278.57 metric tonnes as a bulk purchase from Rastriya Ispat Nigam Ltd (RINL). This purchase was transferred to 12 parties at the purchase value on which no profit was derived. The appellant explained that it had entered into a cartel purchase from RINL which enabled the appellant to purchase goods at a rate lower than market rate. The Assessing Officer observed that these goods had been physically delivered directly to the other parties, that the payment for these goods had also been made by the other parties directly to RINL, that in the process the appellant's administrative expenses had been increased, that it was not known why the appellant became the leader of cartel and went out of its way to accommodate the other parties to enable them to earn profit while itself making a loss. The Assessing Officer also observed that in receipt of the purchase bills from RINL, the appellant recorded the quantity in its stoc....
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....s. 2,25,00,000 was transferred to the Tijori account on the same day. The credit entry of Rs. 2,30,00,000 had been made at the end of the year in a different handwritinq. As and when there was a cash shortfall, the amount was transferred from the Tijori account which was squared up at the end of the year. Though the sum of Rs. 2,30,00,000 had been voluntarily offered by the appellant as credit balances written off, this accommodative entry was made at the end of the year as the opening and closing cash balances were not worked out on a daily basis and the appellant realised at the end of the financial year that it had negative cash balance on that day. k. The appellant had not maintained any separate trading account and manufacturing account. The appellant had booked huge losses in its manufacturing activity for which it had submitted general explanations like increase in purchase cost of raw materials, increase in power consumption etc. The sale price per unit of quantity sold was Rs. 12,959.60 whereas the cost of production was Rs. 14,179.66. l. The appellant had claimed a shortage of 2,529.655 mt. This was 20% of the total consumption and extremely high". 3. AO relied on....
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....t of lower price on account of lifting of big quantity of stocks. The payment for the purchase was made directly by the 12 consignees. Delivery was also made directly to them. The observation of the Assessing Officer that the appellant had recorded the entire purchase in its stock register was factually incorrect. f. No profit was made on cartel sales since sale invoices were raised merely as a balancing accounting entry to offset the purchases as per the invoices. g. The observations of the Assessing Officer that in the process of making the cartel purchase, the appellant had boosted its administrative expenses, was factually incorrect since no additional administrative expenses were incurred for it. Even otherwise the additional expenses would have been compensated by the lower purchase price. h. The Assessing Officer had observed that the appellant had sold goods at a price lower than the purchase price on a particular day. Market conditions in the trade fluctuated not only on a daily basis but on an hourly basis and in any case, no part of the sales had been made to any relative parties. The mere fact that the sales had been made at a lower rate does not lead to a conc....
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....ifference in handwriting in the ledger account of Lakhani Steel Corporation came about due to the fact that while preparing the trial balance, it was found that the entry made on 28.09.1995 had not been posted in the ledger and therefore the entry was made at the end of the year. The payment had been made for purchases and no cash outflow or inflow resulted due to this entry. o. The appellant had credited a sum of Rs. 2,30,00,000 to its cash book on 20.04.2005 and transferred a sum of Rs. 2,25,OO,000 to the Tijory account on the same day. The Tijory account was nothing but cash kept at residence of the partners since it was not safe to keep the entire cash at the business premises. As and when required, the requisite amount were credited to Tijory account and used for the business. This did not lead to a conclusion that there was a negative cash balance. p. There was no requirement in law for maintenance of separate trading account and manufacturing account. q. All purchases and sales were recorded in the excise register which was subject to audit and on which excise was paid and Cenvat credit claimed. The observation of the Assessing Officer that the appellant had suppres....
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.... do not contained printed serial numbers. As pointed out by the AR, there is no mandatory requirement for the bill numbers to be printed on the bills. There is no provision to state that handwritten bill numbers are not acceptable. What is relevant is that the purchases were duly entered in the stock and excise registers of the appellant. 5.11 The second such set of transactions relates to Koganti Steels Pvt. Ltd while the third relates to purchases where the suppliers booked a very high margin of profit. Neither of these parties were related to the appellant and therefore these are not cases of collusive transactions with sister concerns. In the absence of any evidence that the appellant had entered into fraudulent or manipulative transactions with these parties, the mere fact that the suppliers had booked high profit or had traded only with the appellant cannot be held against the appellant, particularly when the entire purchases were duly recorded in the stock and excise registers. 5.12 The appellant had failed no doubt to produce the transportation bills. The AR has claimed that the purchases were FOB and hence there was no transportation cost. In the absence of the books....