TaxTMI 
TaxTMI 
2012 (9) TMI 1146
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....her and disposed of by way of this common order. 2. The assessee is a Private Limited Company and is engaged in the manufacture of rubber components. We first take up the appeal for AY 2003- 04. 3. The assessee filed return of income on 01/12/2003 declaring a loss of ₹ 19,51,626/-. The AO passed an order u/s.143(3) and made additions on account of suppressed sales, gross profit rate and lease rent. 4. On appeal, the Fist Appellate Authority deleted the same. Aggrieved the revenue is in appeal before us on the following grounds:- "1. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred on facts and in law in deleting the addition of ₹ 7,77,213/- made by the Assessing Officer on account of production and....
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....t the AO did not consider the lease money received and this resulted in distortion. 7. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and material placed on record, we hold as follows:- The AO has estimated production and sales based on consumption of raw material. The assessee rightly pointed out that there is a fallacy in the conclusions drawn by the AO. Raw material consumed was compared to number of pieces produced. In the F.Y. 2001-02, 5,33,837 pieces were produced out of 37,705 kgs of raw material and whereas for the current FY 2002-03 12,875 pieces were produced out of raw material consumed of 18,171 kgs. In view of the above analysis the AO assumed that the sale is suppressed. The ass....
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....ortionally higher but the argument of the assessee that staff cannot be retrenched over night also carries force. The staff cost is a sort of fixed expenditure and may not vary in proportion to the sales/turnover. Moreover, the comparison of receipts by taking number of pieces of the products without looking into the composition of various products cannot be held to be a judicious exercise of power. The addition made by drawing adverse inference based on such comparison is bound to lead to misleading conclusions. Further, there is no basis for the estimation of sales at the figure of ₹ 35,00,000/-. Even the rejection of books of account under Section 145 has no valid basis. In any case, estimation of turnover at the sum of ₹ 35,....
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.... addition of ₹ 7,77,213/- made by the Assessing Officer on account of personal expenses even though the assessee had failed to establish the genuineness of expenses claimed under this head." 12. After hearing rival contentions we find that the assessee who was in business for the last many years i.e. manufacturing rubber components, has almost closed down its manufacturing activity. During the year the assessee leased out some of his plant and machinery along with some of its man power to M/s. Bony Polymer Pvt. Ltd. for an aggregate lease rental of ₹ 18,00,000/-. The wages paid to workers, who were leased out, amounted to ₹ 15,68,170/- which was found allowable by the AO, out of total personal expenses of ₹ 36,50,60....