TaxTMI 
TaxTMI 
2016 (2) TMI 394
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....The Assessing Officer also estimated Gross Profit @ 20% on sales per meter of Finished Cloths. Since the Assessing Officer has wrongly calculated the cost of closing stock and also assessed the value estimated Gross Profit @ 20% of sales of per meter of Finished Cloths. Therefore, the appeal was filed before learned CIT(A) and learned CIT(A) has accepted the appeal of the assessee and deleted the said additions. Aggrieved by the said order of learned CIT(A) in question, the Revenue has filed the present appeal. 3. The revenue has raised the following three issues however, the other issues are general in nature therefore, the same are not liable to describe and discussed. "i) The Learned CIT (A) has erred on facts and in law in deleting the addition of Rs. 90,60,853/- on account of valuation of closing stock, without properly appreciating the factual and legal matrix as clearly brought out by the Assessing Officer. ii) The Learned CIT(A) has erred on facts and in law in deleting the addition of Rs. 90,60,853/- on account of valuation of closing stock, without appreciating the fact that the valuation of stock shown by the assessee is even less than the purchase c....
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....nbsp; Yarn KGS AMOUNT A V G OS 67,494 87,40,473 129.5 PURCHASES 33,31,994 38,44,54,355 115.38267 CONSUMPTION 24,01,076 SALES 0 CLOSING STOCK 998412 121174321 121.36705 SHORTAGE 1.68% 1 How justified? Give industry comparison from published data 2 It gives production of only 2.25 mts of grey per kgs of yarn (5399530/2401076) 3 How justified? Give industry comparison from published data 4 It gives yarn cost of Rs. 51.3 per mts of grey (115.38./2.25) Tax Audit report mentions kgs should be metres Mts AMOUNT AVG Grey OS 105284 5843262 55.5 PURCHASES 30902 1665340 53.89101 PRODUCTION 5398530 CONSUMPTION 442462 SALES 192880 10140313 52,57,317 CLOSING STOCK 820312 393779....
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.... respect of above discrepancies. The assessee has not given any justification or industry norms regarding shortage claimed though specifically asked for, assessee has shown production of 2.25 mtrs. Of grey per kg. of yam which is very low and no industry compression given by the assessee. The assessee has admitted mistake in the closing stock quantity of grey and has stated that it is typing mistake. The assessee has shown GP is 5.93% however the GP worked out from average per meter rate is 24.33% for finished goods and 8.7% for grey as mentioned in the cart in para '5' supra. From the above it is clear that the books result of the assessee are not correct and hence rejected as per the provisions of section 145(3) of the IT Act 1961. The estimated GP rate is taken at 20% by considering the per meter GP rate mention in the similar industry like 'The Ruby Mills Ltd. (PAN AAACT0220G) where GP is shown by 33% for A. Y. 07-08 on turnover of 108,68,01,077/-. In view of the above. GP is estimated @ 20%. Net profit is computed as under: GP Estimated @20% 96335656 Less: Expenses Administrative expenses 10402....
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....base of the A.O. was not correct for working out further deficiency in appellant's production account. In the said working the A.O. has concluded that consumption of per k.g. of yarn has given production of 2.25 mts. of grey. In the said working the A.O. further concluded that in per meter of grey produced, yarn consumed was costing Rs. 51.3. While concluding so the A. O. has taken the figures of average cost of purchases of the whole year at Rs. 115.38. However, it has been explained that this figure was incorrect and the correct figure of average rate of purchase that remain in closing stock was Rs. 95.95 on the basis of last 3 months purchases. Thus this mistake was consequential effect of adopting incorrect figures at first stage itself. In the above working the A.O. adopted average rate of Rs. 53.89 of purchases of grey on the basis of total meters of grey purchased during the year divided by amount of purchase. On the basis of this average rate of Rs. 53.89 of purchases during the year of grey cloth, the A.O. has workout the value of closing stock of grey at Rs. 48,39,840/-. However, the appellant has explained that the purchase of grey from the market d....
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....e considering of the last 3 months only being FIFO method adopted by appellant. The rates of different goods were fluctuating from day to day and hour to hour and therefore a uniform average rate was not possible to be adopted. Further, at some places the A.O. has not considered the weaving and processing charges in working out the closing stock rate. The average rate of grey could not have been worked out, in view of the fact that different thickness of grey produced required different kinds/thickness of yarn. Consequently, the dying process was also different on different varieties wherein the process charges varied from Rs. 3 to 12 per meter. In the process of manufacturing, the wastage on account of shrinking, cutting, sampling etc. could not be ruled out resulting in reduction of quantity manufactured. Considering the entirety of facts and circumstances, the working made by A. O. could not have conclusively proved any under statement of yarn, grey and finished products of the appellant. Apart from the using various figures for reaching to a conclusion, the A.O. has not noticed any defect in appellant's books of account. Therefore, there was no base with the AO for rejectin....
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....eal with the value of closing stock in the assessment. The learned Departmental Representative nowhere highlighted any ground which requires to be interfere with the findings of the learned CIT(A) under appeal. Therefore, finding no plausible and convincing reasons to interfere with the order passed by learned CIT(A). We are of the view that learned CIT(A) has passed the order on the specific issue judiciously and correctly which does not need to interfere at this stage accordingly this issue is decide in favour of the assessee and against the revenue. ISSUE NO. 3:- 6. According to this issue the Revenue has took the plea that the learned CIT(A) has erred in deleting the addition made by estimating the Gross Profit @ 20% on sales per meter of finished cloth. The assessee has shown the Gross Profit @ 5.93%. The Assessing Officer worked out the Gross Profit from the average per meter rate @ 24.33% for finished goods and @ 8.7% for grey. On seeing the book result and closing stock assessed, the Assessing Officer arrived at this conclusion that the book result is not correct therefore estimated Gross Profit rate should be @ 20% by considering rate of similar industry "The Ruby Mi....