TaxTMI 
TaxTMI 
2014 (12) TMI 1353
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....f suppressed sales. 2. Whether in law and on facts & circumstances of the case, the CIT(A) was justified in deleting the addition of Rs. 3, 55, 999/- made by the AO u/s. 40A(2)(b) of the IT Act, 1961. 3. The order of the ld. CIT(A) is erroneous both in law and on facts. Assessee, engaged in the business of manufacturing & commission business of re-rolled steel products and M. S. ingots, filed its return of income on 29. 10. 2007 declaring nil income. The AO finalised the assessment u/s. 14(3)of the Act, on 29. 12. 2009. 2. First ground deals with addition of Rs. 7,27,874/- made by the AO presuming the same to be GP on the suppressed sales. According to the AO, the assessee's turnover during the relevant previous year was Rs. 36. 5....
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....95 units per ton and 1139 units per ton respectively and even if assessee's reply was considered and 8 to 10% variation in the power consumption was accepted as normal, then also, the AO noted variation of around 18. 13%. The variation was treated as suppression of production and this resulted in addition of Rs. 7, 27, 874/-. 2. 1. Against the above, in proceedings before the First Appellate Authority(FAA), the assessee reiterated the same submissions made before the AO, as enumerated above and submitted that the audited book results having not been rejected the impugned presumptive addition were made on hypothetical calculations and were unsubstantiated. After considering the submissions of the assessee and the assessment order the FAA h....
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....out bringing corroborative evidence on record and were unsustainable on facts and in law. He deleted the addition made by the AO. 2. 2. During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO and stated that as per two earlier years, there was variation in consumption of power, that the assessee had not explained the reason behind the higher power consumption and lower production noticed by the AO in the year under consideration. The Authorised Representative (AR) stated that the production of finished goods depended on various factors, that no universal formula could be adopted for production, that the finished goods were subject to scrutiny of Central Excise authorities. The AR relied u....
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...., only on the basis of power consumption, no addition could be made or sustained. It is a known fact that several factors affect the consumption of electricity-like loss of heat, poor quality of raw material inputs, poor workmanship/supervisory skills, presence of moisture, contents and fluctuation in the electricity supply. Most of the above factors are beyond management's control and explanation cannot be pinpointed to any single reason. It is also a fact that the assessee was not manufacturing one item. Therefore, arithmetical formula should not have been applied for arriving at a conclusion. In our opinion, the FAA was fully justified in holding that the assessee had explained the variation in power consumption citing cogent reasons. Th....
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....n 40A(2)(b) of the Act, he made an addition of Rs. 3. 55 lakhs. 3. 1. In the appellate proceeding the assessee submitted that it had purchased the entire raw material from its sister concern, that the sister concern was only the supply of the raw material to the assessee. that purchases from the sister concern were made on credit, that the cash sales were certainly at cheaper rate than the credit sales and the credit sales made to the assessee by the sister concern were at the prevailing market rate of credit sales and since the questioned transactions were genuine, provisions of section 40A(2)(b) had no application to the transactions which were not proved as bogus and were not proved as accommodation entries. After considering the facts....
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....he AR referred to page No. 103 of the paper book. He argued that the assessee had credit purchase from the sister concern, that the credit purchases were always costlier than the cash purchases, that the AO has not considered the rate for all the 12 months, that there was fluctuation in the market rate that in the steel market, rate of material depend on quantity, quality, payment terms etc. , that assessee had purchased the goods from sister concern at lower rate as compared to outside parties during some of the months of the year under consideration. He relied upon following cases : (i). CIT vs. Jain Cables (P) Ltd. (168 CTR (Raj. ) 471 (ii). CIT vs. Padmini Packaging (P) Ltd. , (155 Taxman 268(Del). (iii). CIT vs. Northern India....