TaxTMI 
TaxTMI 
2017 (12) TMI 298
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....h November 1996, declaring total income of Rs. 33,39,71,830. During the assessment proceedings, the Assessing Officer called upon the assessee to furnish itemwise details of valuation of closing stock of raw material after verifying the details furnished by the assessee, the Assessing Officer found that the value of raw materials under the head "Others" is shown at Rs. 1,05,00,833. From the monthly details of item- wise raw materials purchased and consumed with opening and closing stock in respect of Mumbai unit, it was found that total value of closing stock of entire raw material was shown at Rs. 2,15,72,514 out of which the value of closing stock of major items of raw materials like Maida, Vanaspati, Sugar, Glucose, Milk Power, coco vita oil was found to be Rs. 1,07,28,443=86. From the aforesaid figures of closing stock, the Assessing Officer worked out the value of raw materials of Mumbai Unit in respect of items "Others" to be Rs. 1,08,44,078. Whereas, the assessee has accounted for stock of "other" raw material at Rs. 1,05,00,833. He, therefore, held that the assessee has suppressed closing stock of raw materials "others" to the extent of Rs. 3,43,237. Accordingly, he added b....
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....e do not find any reason to interfere with the decision of the learned Commissioner (Appeals) on this issue. Ground no.1, raised by the Revenue is dismissed. 9. In ground no.2, the Revenue has challenged deletion of addition made of Rs. 24,89,077 on account of inflated purchases. 10. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the consumption of raw materials for biscuits and confectionaries for Mumbai unit was shown at 49103.146 MTs. However, from the monthly details of purchases and consumption furnished by the assessee the consumption of material worked out to Rs. 49280.481 MTs. The Assessing Officer, therefore, concluded that the assessee has inflated the purchases to the extent of Rs. 177.335 MTs Considering the fact the total consumption reported at Rs. 126826.558 MTs was valued at Rs. 17801.40 lakh, the Assessing Officer adopted average rate of Rs. 1,40,361 per MTs and multiplying that to the alleged difference in consumption of raw material at 177.335 MTs he worked out the inflation in purchases at Rs. 24,89,077 and added back to the income of the assessee. The assessee challenged the addition before the first appellate authority....
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....onal evidence is unacceptable. It is further to be noted, the Learned Departmental Representative has not been able to controvert the factual finding of the first appellate authority that the reconciliation submitted by the assessee is on the basis of books of account. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing ground no.2, raised by the Revenue. 14. In ground no.3, the Revenue has challenged deletion of addition of Rs. 23,05,600, made by the Assessing Officer alleging suppression of production resulting in unaccounted sales. 15. In the course of assessment proceedings, on the basis of information from contract manufacturing units, through notice issued under section 133(6) of the Act, the Assessing Officer found that the quantity of production shown by contract manufacturing units in their books of account is more than the quantity of production for contract manufacturing units as shown in the books of account of the assessee. As per the information obtained, the Assessing Officer found the difference in quantity produced in respect of one contract manufacturing unit at 9,217 kgs and in respect of another at 53....
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....addition. As far as the contention of the Learned Departmental Representative that learned Commissioner (Appeals) has deleted the addition on the basis of addition evidence is concerned, we are unable to accept the same. As could be seen from the impugned order of the learned Commissioner (Appeals), the documentary evidences furnished by the assessee before the first appellate authority in a paper book were sent to the Assessing Officer for his examination and comments. It also emerges from record that during the remand to the Assessing Officer, the assessee has made ground-wise submissions before the Assessing Officer by referring to the relevant supporting documents. In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised. 18. In ground no.4, the Revenue has challenged the deletion of addition of Rs. 2,29,64,845, made on account of sale of waste biscuits / biscuit powder / broken biscuit. 19. Brief facts are, from the details of other income of Rs. 228.18 lakh shown in the Profit & Loss account, the Assessing Officer found that the assessee has sold waste biscuit powder, weighing 660.500 MTs for an amount of Rs. 9,77,5....
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....e broken biscuits are reusable in the manufacturing process burnt biscuits are of no use. He submitted, biscuit powder is only sold as cattle feed at Rs. 1 per kg. He submitted, though, the rate of Excise duty is same on broken biscuit, burnt and powder biscuits, however they are shown as separate items in RG-1 Register. He submitted, all these facts were brought to the notice of the Assessing Officer through detail submissions made during the remand proceedings. 23. We have heard rival contentions and perused the material available on record. As could be seen, other income shown by the assessee is from sale of broken biscuits, and powder biscuits. While burnt biscuits are of no use, broken biscuits are re-usable in manufacturing process and they have been sold at Rs. 26 per kg. Whereas, biscuit powder is not fit for human consumption, hence, sold at Rs. 1.48 per kg. These facts have been demonstrated through documentary evidence including Central Excise registers before the first appellate authority. Notably, the learned Commissioner (Appeals) after verifying the production records, Excise records, has found that the uniform rate cannot be applied to regular biscuit and burnt / b....
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.... the Assessing Officer found that the foreign travel expenses related to foreign trips made by the directors of the company and executives. The Assessing Officer observed, except the Board Resolution the assessee did not file any correspondence entered with foreign party to indicate the purpose of oversea visits. Though, the assessee explained that the foreign visits were to explore markets and to find new business venues and to have discussion with foreign parties for joint venture in those countries, however, in the absence of supporting evidence, the Assessing Officer refused to accept the claim of the assessee and disallowed 50% out of expenses claimed. The assessee challenged the disallowance before the learned Commissioner (Appeals). The learned Commissioner (Appeals) though found that in the preceding assessment year, 50% disallowance out of such expenses was upheld by his predecessor, however, following the order of the Tribunal for earlier assessment years he deleted the addition. 29. Learned Departmental Representative submitted in assessee's own case for assessment year 1995-96, the Tribunal has upheld disallowance of 50% out of total expenditure claimed. 30. Learned A....
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....t has given yield of 94.82% for confectionary item. According to him, if the raw material under the head "Others" is accounted for, the percentage of yield would come down to 91.5%. Whereas, the contract manufacturing unit has shown yield of confectionary items ranging from 86.80% to 102.67%. Accordingly, he worked out the average yield of contract manufacturing units at 100.24%. Though, the assessee submitted before the Assessing Officer that Mumbai unit manufactures various items of confectionary, the Assessing Officer did not accept the claim of the assessee. Finding some discrepancy in the consumption of raw materials by the contract manufacturing units as per their books and as per assessee's book, the Assessing Officer proceeded to make ad-hoc disallowance of Rs. 10 lakh after rejecting the book result. Assessee challenged the addition before the learned Commissioner (Appeals). 38. The learned Commissioner (Appeals) after considering the submissions of the assessee vis-a-vis the facts and material on record though, agreed that major discrepancy found by the Assessing Officer is on account of maida, which is not a raw material for confectionary, however, he upheld disallowanc....
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....ssessee is at liberty to get it reimbursed from the manufacturer. Accordingly, he sustained the disallowance @ 5% out of the deduction claimed on account of mouthwash and toothbrush amounting to Rs. 14.04 lakh which resulted in disallowance of Rs. 70,200. 44. Having heard rival contentions, we do not find any infirmity in the order of the learned Commissioner (Appeals). We are of the opinion that assessee's claim of deduction on account of spoilt and damaged goods insofar as it relates to biscuits and confectionaries is allowable, since, assessee itself manufactures such items. However, as far as mouthwash and toothbrush are concerned, the assessee has not manufactured such products, therefore, the assessee could have returned such damaged goods to the manufacturer and claimed reimbursement. In view of the aforesaid, accepting the reasoning of the first appellate authority we dismiss the grounds raised by the Department as well as by the assessee. 45. Ground no.8 raised by the Revenue corresponding to ground no.5 raised by the assessee are on the issue of addition made with regard to suppressed production resulting in suppressed sales of biscuits. 46. Brief facts are, during the....
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....e difference in consumption, the assessee submitted that the difference in consumption of coco vita oil was on account of clerical mistake and the actual consumption was 1860 MTs. Thus, on the basis of difference found in the percentage of yield as per tax audit report and the statements filed by the assessee as well as the information obtained from the contract manufacturing units regarding percentage of yield, the Assessing Officer called upon the assessee to submit further details and also the standard formula applicable for consumption and production. In response, the assessee submitted, itemwise details of consumption and production cannot be filed as it was manufacturing various items and the details submitted before the Assessing Officer were as per books of account. The assessee also submitted, quantity of itemwise ingredients for various items of confectionary was taken as a whole and no separate records were available. To explain reason for difference in percentage of yield between its manufacturing unit at Mumbai and the contract manufacturing units assessee submitted, its unit at Mumbai was manufacturing various items of biscuits and confectionary for many years while t....
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....was submitted, the difference in coco vita oil was on account of typographical error. It was submitted, the quantity of other raw material though specifically not mentioned in the printed account but the value was shown. Reiterating the stand taken before the Assessing Officer, it was submitted that contract manufacturing units were manufacturing less number of brands as compared to Mumbai unit. It was submitted, the standard formula of manufacturing cannot be applied due to various factors including wastage in the manufacturing process. In this context, the assessee submitted the different variety of biscuits and confectionary manufactured by contract manufacturing units. The assessee furnishing a statement of reconciliation of sales submitted that the Assessing Officer did not consider the sales from depots and the outstandings available at different units and depots. In this context, the assessee specifically pointed out all discrepancies in figures taken by the Assessing Officer. The assessee also furnished copies of excise record to substantiate the production as recorded in the books of account. It was submitted, since, the assessment year 1992-93 the percentage of yield show....
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....8% which leaves a gap of 2% which is unexplained. The learned Commissioner (Appeals) observed, taking into account consumption of raw materials at 37,498 MTs, the production @ 2% shall work out to 750 MTs which valued at Rs. 36,205 per MT will work out to Rs. 2,71,53,750. Therefore, he sustained the addition to the extent of Rs. 3 crore while deleting the balance addition of Rs. 9,10,44,000. 49. Learned Departmental Representative extensively referring to the observations of the Assessing Officer in the assessment order submitted that the assessee was supplying all the raw materials to the contract manufacturing units. He submitted, as per the tax audit report yield of the Mumbai unit of the assessee worked out to 92.55%. Whereas, as per the statements filed before the Assessing Officer by the assessee, percentage of yield worked out to 84.50%. He submitted, in the reconciliation statement also, discrepancy was found which was again revised by the assessee. He submitted, as per the reconciliation statement, the discrepancy was found in consumption of vanaspati, sugar, maida, coco vita oil. He submitted, as per the information obtained from contract manufacturing units, percentage ....
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....ubsequently corrected in the revised statement. He submitted, the raw materials shown as "Others" since was not a principal item was not shown in the tax audit report. Learned Authorised Representative submitted, if at all there is any mistake / discrepancy it is in the statement furnished and not in the audit report or books of account. He submitted, books of account can be rejected if conditions of section 145(3) of the Act are fulfilled. Learned Authorised Representative submitted, only if the conditions of sub-section 3 of section 145 are satisfied, the Assessing Officer can make a best judgment assessment. He submitted, the Assessing Officer has not pointed out a single instance of sales outside the books. The purchases made by the assessee have not been doubted. The production of biscuit and confectionary are fully supported by and as per Central Excise records. He submitted, all excise registers were produced before the Assessing Officer and nothing adverse was found. Reiterating the stand taken before the Departmental Authorities, learned Authorised Representative submitted, the reason for low yield is due to the factors explained before the Departmental Authorities. He sub....
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....sed statement showing consumption of different raw material and manufacture furnished by the assessee, the yield works out to 84%. He has also referred to the information obtained from contract manufacturing units to conclude that the average yield of contract manufacturing units work out to 91.55%. In this context, the Assessing Officer has also referred to the standard formula applicable and the physical enquiry conducted by him at the factory premises, wherein, it was found that the manufacturing of products at Mumbai unit is through sophisticated machinery. In the course of assessment proceedings, the assessee has explained comparative lesser yield qua contract manufacturing units due to the following reasons:- i) Variety of biscuits manufactured at Mumbai unit compared to few variety of biscuits manufactured in contract manufacturing units; ii) In case of contract manufacturing units, due to similar size of production and type of machinery used biscuit fall on the belt and tray which are manually picked up and sorted and identified for re-use or waste. Whereas, in case of Mumbai unit production being faster it is difficult to have such control and also costs for employing ....
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.... of 1059 MTs shown in the original statement was due to a mistake is believable. As far as the allegation of the Assessing Officer that the raw material "others" were not shown in the audit report, we are of the view that non-mentioning of the said item in the Annexure to the audit report may be for the reason that as per Form no.3CD, only primary raw materials are required to be shown. Therefore, non-mentioning of raw material "others" in the Annexure to the audit report cannot be considered to be very serious lapse so as to infer suppression of sales and unreliability of books of account. It is a matter of record that the goods produced by the assessee are excisable goods and subject to scrutiny and regulatory measures of Central Excise authorities. It is also a fact on record that the assessee has maintained all Central Excise registers with regard to consumption of raw materials, production of biscuits and confectionary which have been verified by the Central Excise authorities periodically and the authenticity of the entries made in the said registers have not been questioned by them. It is also a fact on record that the Central Excise registers were produced before the Assess....
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....er:- A.Y. Percentage 1992-93 83.11% 1993-94 83.32% 1994-95 82.27% 1995-96 81.65% 54. Thus, compared to the yield of Mumbai unit in the preceding assessment years as noted above, the assessee has shown a higher yield for the Mumbai unit in the impugned assessment year. Therefore, on over all consideration of facts and circumstances of the case, we are of the considered opinion that rejection of books of account and addition made on estimate basis alleging suppression of sale is not in accordance with law. Therefore, even a part of addition made by the Assessing Officer cannot be sustained. Accordingly, we delete the addition made by the Assessing Officer fully. Ground no.8 of the Department is dismissed and grounds no.4 & 5 raised by the assessee are allowed. 55. In the result, Department's appeal is partly allowed. ITA no.3806/Mum./2002 Assessee's Appeal 56. In ground no.1, assessee has challenged disallowance of deduction claimed under section 80I and 80IA of the Act. 57. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticing that the assessee had claimed deduction under section 80I and 80IA of the Act called upon the assessee to....
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....ary details. He found that the assessee had shown addition to the plant and machinery for an amount of Rs. 1,13,48,325 on which depreciation of Rs. 14,18,541 was claimed. From the details submitted, he found that the particular machine was actually imported by Parle Biscuits Ltd., a subsidiary of assessee in January 1991, since, it wanted to go into manufacturing of chocolate and other permitted items. However, as Parle Biscuits Ltd., could not finalise the idea of manufacturing of chocolate the machine was not used and lying idle until they were sold to Parle Products Ltd. on 26th February 1996. To verify the authenticity of assessee's claim, the Assessing Officer made a physical enquiry by visiting the factory premises of the assessee on 15th March 1999. In the course of physical enquiry, when the assessee was called upon to produce the documentary evidence in respect of installation of machinery in the factory premises and its use, as alleged by the Assessing Officer, no documentary evidence was produced to substantiate the claim that such machineries were directly brought into the factory premises from the Dock in January 1991. He further observed, the assessee could not substa....