TaxTMI 
TaxTMI 
2019 (2) TMI 1701
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....ng the addition of Rs.1,60,23,176/- made on account of suppressed production. 3. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of Rs.3,52,600/- in respect of low GP. 4. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of Rs.1,07,220/- for undervaluation of closing stock. 5. The Ld.Commissioner of Income tax(A) has erred in law and on facts of the case in directing the AO to verify the contention fo assessee and to modify the assessment order, in contravention of Sec.251 of the I.T.Act, in respect of the following issues: 1) Addition of Rs.99,800/- being suppressed sales of injections. 2) Addition of Rs.28,67,000/- being suppressed sales of ointment. 3) Addition of Rs.7,67,028/- being suppressed closing stock. 4) Addition of Rs.1,81,133/- being freight reimbursement expenses. 5) Addition of Rs.13,55,474/- being disallowance u/s.40(a)(ia). 3. The 1st issue raised by the Revenue is that the Ld.CIT (A) erred in deleting the addition made by the AO for Rs. 1,90,23,678/- on account of the difference in the job work. 4. Br....
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....s made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. The appellant is a manufacturer of pharmaceutical products. Besides own manufacture, it undertakes manufacture of pharmaceutical products by way of job-work from loan-licensees. The Central Excise Return filed by it shows total value of the products cleared at Rs. 10,20,31,117/-. Out of this Rs. 3,89,96,579/- was the value of own products, and the value of products of loan-licensees is Rs. 6,30,34,358/-. On being asked during the course of appellate proceedings [within the terms of Rule 46A(4)], certificate dated 02-11-2010 from M/s. C. Patel & Co. C.As (who audited the appellant's books of accounts u/s. 44AB) was filed affirming the said state of affairs. Appellant's sales during the year were to the tune of Rs. 2,29,65,518/-. Job work income of Rs. 29,70,886/- was admitted by, the appellant. Appellant's books of accounts are audited u/s. 44AB of the Act. 6.2.1. A.O. proposed to adopt the assessable value of products cleared (including the assessable value of products of loan-licensees) as sales of the appellant. As seen from the relevant paras of the as....
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....ion. In fact the Excise returns filed by the appellant in E.R.-1 (the very basis on which the addition came to be made) show that the appellant is (beside being a manufacturer) engaged in doing job-work of loan-licensees. 6.2.4. In the light of the above discussion, I hold that the addition of Rs. 1,90,23,378/- is entirely unwarranted. It is deleted. This ground of appeal is allowed." 7. Being aggrieved by the order of the Ld.CIT (A), Revenue is in appeal before us. The Ld. DR before us vehemently supported the order of the AO. 8. On the other hand, the Ld. AR before us filed a paper book running from pages 1 to 330 and reiterated the submissions as made before the authorities below. 9. We have heard the rival contentions and perused the materials available on record. In the instant case, the AO noticed the difference between the turnover shown by the assessee in the financial statements and turnover shown in the excise records amounting to Rs. 7,60,94,713/- which was treated as undisclosed job work carried out by the assessee. Accordingly, the AO worked out the element of profit in such job work at Rs. 1,90,23,678/- being @ 25% of Rs. 7,60,95,713/- and added to t....
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.... As such there was no production of the goods which was not recorded in the books of accounts. 13. The Ld. CIT(A) after considering the submission of the assessee deleted the addition made by him by observing as under: "7.2. I have considered the submissions made by the A.R. of the appellant and the observations of the assessing officer in the assessment order. 7.2.1. As seen from relevant paras of the assessment order reproduced above, once again the A.O. turned a blind eye and deaf ear to the facts and to the explanation given by the appellant. He treated the production of Tablets and Capsules of loan-licensees to be the production of appellant. Having made the addition on the total assessable value of products cleared, A.O. further compounded the error by making this addition on quantitative basis of Tablets and Capsules. In view of my finding at paras 6.2. to 6.2.4 above, I hold that this addition of Rs. 1,60,23,176/- is extremely unwarranted. It is deleted. This ground of appeal is allowed." 14. Being aggrieved by the order of the Ld.CIT (A), Revenue is in appeal before us. The Ld. DR before us vehemently supported the order of the AO. 15. On the oth....
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....e of 25% without adducing any reason thereon. In our considered view if the AO was not satisfied with the gross profit ratio shown by the assessee, then he should have referred the gross profit declared in the earlier and subsequent assessment year. We find that the assessee in earlier years has shown the GP less than 25% of the turnover. The necessary details of the GP ratios are placed on page 130 of the paper book. But the AO has not made any reference to the GP ratio declared by the assessee in earlier assessment years. Therefore we are of the view that the GP ratio taken by the AO is based on his surmise and conjecture. Thus we do not find any reason to disturb the finding of the Ld.CIT (A). Hence the ground of appeal of the Revenue is dismissed. 22. The 4th issue raised by the Revenue is that the Ld.CIT(A) erred in deleting the addition made by the AO for Rs. 1,07,220/- on account of undervaluation of closing stock. 23. The AO during the assessment year found that the assessee has shown its opening stock at the rate of Rs. 0.34 per tablet amounting to Rs. 6,34,312/-only. The AO further observed that the assessee had shown closing stock at Rs. 0.26 per tablet amounting t....