2019 (1) TMI 940

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....x Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-18, Mumbai is against law and facts on the file in as much he was not justified to uphold action of the Ld. Assessing Officer in making arbitrary addition of Rs.19,55,63,259/- on account of alleged differences in quantitative details without giving any reasoning/justification. 2. That the Ld.CIT(A) gravely erred in not appreciating the import of detailed submissions made by the appellant and summarily accepted the observations of the Ld. Assessing Officer while upholding the impugned addition of Rs. 19,55,63,259/-." 3. Briefly stated facts are that, the assessee is engaged in the business of distribution of household products viz., Dettol soap fresh and other variants, Dettol Liquid Soap and Dettol Antiseptic Liquid etc, manufactured by Reckitt Benckiser (India) Ltd since 1997. Assessee filed its return of income for the AY 2000-01 on 30-11-2000. The assessment was taken up for scrutiny after issuance of notice u/s. 142(1) of the Act. Originally, the assessment was completed u/s 143(3) of the Act vide order dated 31-03-2003 by the DCIT, Range-7(2) Mumbai. During the original assessment proceedings, AO iss....

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....cial Leave Petition (being SLP) C No 25005 of 2012 before the Hon'ble Supreme Court and the Hon'ble Supreme Court vide its order dated 03-09-2012 restored the matter back to the file of the Tribunal. For easy reference, the order is extracted below: "This matter pertains to re-opening under section 263 of the Income Tax Act, 1961, for the Assessment Year 2000-2001. Vide Order dated 30th July, 2012, this Court raised following specific queries to the Appellant: "Whether the actual conversion factor which the Appellant had applied in the matter of conversion of number of cakes into weight was communicated to the Assessing Officer? and whether the said conversion factor stood applied by the Appellant for the last three years? A detailed affidavit has been filed by the Appellant wherein it is contended that the actual conversion factor was 75 gms Per cake for Dettol Soap Fresh. By mistake, in the Assessment Year 2000-2001, the Appellant applied the conversion factor of 250 gms. Per cake, which was wrongly taken from liquid soap and applied it as a conversion factor for Dettol Soar Fresh. In our view, this question needs to be re-examined. Lea....

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....e. But according to the AO, there is no supporting evidence or there is no basis for the claim of assessee that there is application of erroneous multiplier sans documentary evidence. The AO finally concluded that the claim of assessee regarding the error is on two folds i.e., - i) the conversion factor is claimed to be erroneous and ii) the quantity of boxes is also claimed to have been adopted is erroneous in numbers and there is estimation of brokerage. According to the AO, error is totally without any basis and perplexing. He stated that there is no supporting documentary evidence to prove a bonafide claim of the error and hence he added the differential amount of Rs.19,55,63,259/- to the returned income of assessee. Aggrieved, assessee preferred an appeal before the CIT(A). The CIT(A) also confirmed the action of Assessing Officer. Aggrieved, assessee is in second appeal before the Tribunal. 5. During the relevant AY 2000-01 the assessee was an All India distributor of Dettol Soap Fresh, Dettol liquid soap, Dettol antiseptic liquid, Dettol shaving cream etc., Dettol Soap Fresh is marketed in bars weighing 75 gms and 150 gms and Dettol liquid soap is marketed in 250 ml bottl....

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....41 metric tons leading to difference in closing stock, thereby showing a negative stock to the extent of 1800 metric tons. The error in conversion of Dettol soap for the relevant Assessment Year is clear from the following; No Particulars Erroneous wt. Filed earlier Correct wt. Filed subsequently 1. Total no. of boxes 52,404.49 49,681.29 2. Multiplier 48,000 (as per Table B above) 14,000 (as per Table A above) 3. Total wt. in gms 251,54,15,520 71,54,10,576 4. Total wt. in tons 2515.415520 715.410576 The assessee had filed a summary of the entire working in Excel sheet as Annexure H before the AO (at Page 333to 338 of the Appeal Paper Book). From the above, it is clear that the addition of 1737.46 MT (identified as 1737.45 MT in the CIT Order), is due to three factors i.e. (a) error in conversion factor (b) total no. of boxes taken as 52,404 instead of 49,681 and (c) breakages. To elaborate, due to the wrong multiplier factor of 48,000 adopted instead of 14,000 (on account of taking the weight of Dettol Fresh Soap as 250 gms. instead of 75 gms), while the opening stock of Dettol Fresh Soap was 72.25 MT and the purchases ....

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....unting, in line with global practice of its parent i.e. Reckitt Benckiser Pic.t UK. Therefore, the computation of stock and its conversion was prepared for calendar year, instead of financial year and the same have been filed before the AO, in respect of previous three assessment years; however, the same were discarded by the AO. We are of the view that, in this context, the only issue in the present appeal is to consider the conversion factor in respect of Dettol soap applied by the assessee, in terms of the specific directions of the Hon'ble Supreme Court. In this light, the assessee was directed to produce the conversion factor applied for previous three years, to ascertain whether correct conversion factor was applied. Other than that the conversion factor applied, has no relevance to the present Appeal. In addition to the documents filed along with the Appeal, the assessee filed the sample documents, reflecting the details of VAT calculation for a specific period (as per Annexure-I). The assessee has also filed the summary of various items dealt with by the assessee. A perusal of the clearly demonstrate that the difference in stock was entirely due to the erroneous convers....