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2025 (7) TMI 662
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....ase. 2. That in any view of the matter the addition of Rs. 2,32,73,571.38 as maintained by the CIT(A) by alleging suppressed production without any search material is unjustified, incorrect and illegal in the facts and circumstances of the case. 3. That in any view of the matter addition of Rs. 19,86,573.00/- maintained by the CIT(A) in respect of purchases of perfumery items from M/s Cosmo Elmek, Varanasi by alleging bogus purchase is highly unjustified and incorrect in the facts and circumstances of the case. 4. That in any view of the matter addition of Rs. 3,58,05,157/- made by the A.O. by alleging extra sales and her action as confirmed by the CIT(A) is highly unjustified and incorrect in so far as in the trading account for the period form 01.04.2009 to 27.08.2009 figure of closing stock was not correctly taken and even the A.O. also failed to consider and draw trading account in the order for the period from 28.08.2009 to 31.03.2010, hence the addition is unwarranted and liable to be deleted. 5. That in any view of the matter, entire basis adopted by the assessing officer in respect of addition of Rs. 3,58,05,157/- is incorrect and the suc....
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....s own 'Best judgment" in place of AO's 'Best judgment' which is required as per provisions of 144 of the IT Act without properly appreciating the discrepancies in accounts and non verifiable expenses. 5. That the Ld. CIT(A) has erred in law and facts in reducing the disallowance by Rs. 73,16,513/- on account of bogus purchases even though the facts brought on records by the AO have been admitted by the CIT(A). 6. That the order of the Ld. CIT (A) being erroneous in law and on facts needs to be vacated and the order of the A.O. be restored." 2. The facts of the case, in brief, are that a search operation u/s 132 of the Income Tax Act, 1961 ("the Act" for short) was carried out by Revenue on 27/08/2009. In response to notice u/s 142(1) of the Act, dated 31/01/2011, return of income was filed by the assessee showing an income of Rs. 1,66,99,236/- on 23/02/2011. Vide assessment order dated 22/12/2011 passed by the Assessing Officer u/s 143(3) of the Act, the assessee's total income was determined at Rs. 16,17,03,481/- (rounded off to Rs. 16,17,03,480/-). Aggrieved, the assessee filed appeal in the office of the learned CIT(A). Vide impugned appellat....
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....80% and 83.80%, 84.04%, 84.69% and 85.08% respectively in those five assessment years. The learned A.R. for the assessee submitted that the computation done by the Assessing Officer for making the aforesaid total addition of Rs. 7,76,72,166/- was based on even more excessive estimation of yield. He submitted that the issue regarding the yield in the case of the assessee is already settled by the aforesaid order dated 15/07/2014 of Co-ordinate Bench of the ITAT, Allahabad, which accepted the yield percentage in the range of 83.80% and 83.80%, 84.04%, 84.69% and 85.08% respectively. As the assessee's yield in this assessment year is also in the same range, the learned A.R. for the assessee submitted that the yield as disclosed by the assessee should be accepted in this assessment year also. In this regard in support of his submissions, learned A.R. for the assessee also mentioned that no incriminating materials were found in the course of aforesaid search conducted u/s 132 of the Act on 27/08/2009, and that no discrepancy was found in the stock of materials. He also mentioned that the item manufactured by the assessee is subject to Excise Act and detailed records of raw material and ....
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....mo Elmek, Varanasi 47-49 12. Photo copy of DGR register. 50-53 13. Affidavit of Shree Krishna Chandra Kesarwani 54-60 14. Written Object of the assessee dated 25.09.2009 in respect of valuation of stock taken by search party on 27.8.2009 along with chart. 61-131 15. Trading Account as prepared by the assessee as per the accepted book of accounts for the period 01.04.2009 to 27.08.2009 (Before Search) and for the period 28.08.2009 to 31.03.2010 (After Search). 132 16. Summaries Trading account as prepared by the assessee as per the accepted books of accounts for the F.Y. 2009-2010 (i.e from 1st April-2009 to 31 March-2010. 133 17. Brief of manufacturing process of Tobacco. 134-139 18. Assessee's comment on remand report furnished by the assessing officer after examination of books of accounts. 140-156 19. Photocopy of written submission filed before the Commissioner of Income Tax (Appeals). For the A.Y. 2010-2011 157-282 20 Photocopy of the Audit report for the assessment year 2010-11 283-322 21. Chart prepared in the light of Audit report of comparable cases. 323 22. Photocopy of ....
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....er contents and then packed in gunny bags. The tobacco at this stage is called coloured tobacco. In such process there is some gain in weight of tobacco which depends on several factors. The coloured tobacco is mixed with compound of chemicals, perfumery substances and menthol and then is stored in drums for 2-3 days for absorption of odour, flavor and taste. Thereafter it is spread on plastic sheet for drying. After this process, 'silver vark' in addition to the above mixture is mixed in the final product 'Zarda'. The Zarda is manually filled in unit containers and pouches which are then packed and sealed. 8.1 The A.O. has produced Annexure D & E of form 3CD i.e. audit report for the financial year ending as on 31.03.2004. The same is reproduced as under :- TOBACCO Particulars Opening Stock (Kgs) Purchase (Kgs) Total (Kgs) Closing Stock (Kgs Storage Loss (Kgs) Consumption (Kgs) TOBACCO LEAF 431627.500 920852.000 1352479.500 433285.500 0.000 919194.000 WHOLE LEAF 34474.000 32441.000 66915.000 6288.000 0.000 60627.000 TOBACCO DUST 0.000 0.000 0.000 0.000 0.000 0.000 Tot....
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....d that approximately 200 gm of Kimam is produced in one Kg of whole leaf consumed. It was told to the A.O. that the product of raw Kimam is taken out after gap of 15 to 20 days. The A.O. has examined the difference of production (based on production register of Kimam) for F.Y. 2007-08 and found that there is no certain ratio of production of Kimam visà- vis the consumption. The assessee has not shown opening and closing stock of Kimam in all the assessment years under consideration. In another observation the A.O. remarked that in addition to its own production the assessee purchased Kimam from other parties namely Gupta Traders, Sultanpur, Prop. Smt. Shakun Devi, the sister concern of assessee. The husband of the proprietor is also partner of the assessee firm. The assessee has not maintained stock details of consumption of purchased Kimam. The assessee has also not maintained the details in respect of goods handed over to Karigars for mixture of tobacco and Kimam. During the course of discussion, the A.O. came to know that masala consists of several items, viz. Gond, Kateela, Kulanjan, Peepar, Kapoor, Kuchari, Hauber, Musali (Satawar), Muskdana, Dal Chini, Pipramool, Mulet....
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....n the custody of partners / managements and the same were released as and when required. There was no need to maintain stock register for the 'silver vark'. With regard to the consumption of 'silver vark' the A.O. asked the assessee to produce some Kamgars for examination but as stated by the A.O. Kamgars were not produced nor were their addresses furnished. There are no details of percentage of evaporation of aroma from ingredients and perfume items. To the issue that details of packing materials were also not maintained, the assessee submitted before the A.O. that it is not practically possible to maintain the consumption of containers, boxes, pouches, cotton, gunny bags etc. on day to day basis. In the assessment order the A.O. has mentioned that the details of all the ingredients in terms of quantity have not been maintained. All the items other than tobacco have been clubbed together under the name 'other materials'. Percentage of material consumed and finished goods varied substantively year after year. 8.4 The A.O. further proceeded to discuss the facts and findings related to subsequent years as according to her the issues are common for all the assessment years in....
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....pancy in the cheque numbers in the ledger account of assessee in the books of Sarita Industries for the F.Y.2006-07 on the comparison of the entries in the bank statements of the assessee firm. In a post search inquiry conducted by investigation unit, it was discovered that the goods as per invoice no.173 and 176 dated 23.11.2006 and 22.12.2006 were sent through Car No. UP 78B - 6780 which is 1992 model. The weight of the goods was 350 Kg and 100 Kg respectively. The A.O. noticed that the vehicle is LMV tracker through which goods were allegedly sent from Kanpur to Sahson, Allahabad. In a further inquiry the A.O. found that perfumes from M/s Cosmo Elemek, Varanasi, M/s S.P. Upadhyaya Fragrance Pvt. Ltd., Varanasi, M/s Deepak & Co., Varanasi, M/s Sanjay & Co., Varanasi were transported by LMVs. The A.O. collected the details of the vehicles allegedly used for transportation from the RTO office, Varanasi. As per the details obtained from RTO office, Varanasi, the vehicles were Maruti Wagon-R, Tata Sumo and Maruti Swift. The ADIT (Inv.) recorded the statement of the owner of the vehicle No. UP 65Y - 3901 u/s 131(1A). The owner Sri Chandra Shekhar Tripathi categorically denied the use ....
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....ncluded in the consumption figures, which is manufactured from whole leaf as stated by the assessee and 200 gms of kimam is extracted out of 1 kg of whole leaf. The whole leaf is used only in manufacturing of kimam. After manufacturing of Kimam the waste of whole leaf is not used further. During the year under consideration, the consumption of whole leaf was 60, 627 kg. for manufacturing of Kiman. The production of kimam as per books was 13,643 kg. The assessee also purchased kimam from Gupta Traders, Sultanpur. As per the submission, the total consumption of kimam during the year under consideration was stated to be 36,091 kg. On the basis of WIP, kimam and consumption, the A.O. worked out the percentage of consumption as under :- Items Quantity of consumption in Kg. Quantity of finished goods in Kg. % age of consumption Raw tobacco leaf after considering CB of WIP 749922.950 890193.600 84.24 Chemicals and perfumes 84911.450 9.54 Silver and silver-vark 3353.246 0.38 Masala 107228.300 12.05 Kimam 36091.000 4.05 WIP 88819.550 9.97 8.8 By making arithmetic c....
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....atio of consumption and percentage of yield. The results of the assessee vary from year to year as regards percentage of consumption vis- à-vis yield. On the strength of the discussion, the A.O. held that the actual yield was only 83.17% as against the claim of 106%. In this respect, the A.O. has also referred to the statement of Sri Kailash Chandra Kesarwani, partner of the firm, recorded on oath on 04.09.2009 in which he had stated that he would not disclose the issue of consumption and yield on account of trade secrecy and surrendered Rs. 50,00,000/- for this reason. 8.11 Finally after extracting the statement of Sri Kailash Chandra Kesarwani, the A.O. concluded as under :- "From the statement, it is very clear that assessee is suppressing its production and for which it has been surrendered at the time of search and seizure proceedings. The average percentage of yield comes to 105.66% as per above submission of assessee. Clearly, if 100 Kg. of items is consumed then 105.66 Kg. of finished goods would receive. Total production has been shown 890193.600 Kg. as against total consumption of raw materials at 1070326.496 kg. (838742.500 + 231583.996). Thus, t....
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....resent case main arbitrary and illegal addition of Rs. 6,95,66,165/- was made by the assessing officer on account of alleged suppressed production. The similar type of addition has been made uniformly in all the subsequent assessment years. In this way it is necessary to bring the facts about the business results of the assessee firm to your kind knowledge which are as follows : A.Y Profit before Salary to Partners and Depreciation Net Profit 2004-2005 1,34,40,749.47 90,01,169.47 2005-2006 2,72,25,321.32 2,22,65,272.32 2006-2007 3,35,12,098.96 2,83,73,514.96 2007-2008 2,09,53,302.73 1,53,71,921.73 2008-2009 1,67,76,395.23 1,08,84,426.23 2009-2010 1,53,12,230.72 95,35,365.72 2010-2011 1,73,13,670.63 1,14,86,998.63 That from the above chart it will appear that the appellant disclosed progressive income year after year but net effect has been ignored from consideration by the learned authorities. 21. That during the entire assessment proceeding only a single notice dated 11.07.2011 was issued connected with the production activities and such notice is a common notice by mentioning the assessment ....
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.... of JCIT or DCIT. Copies of the orders are enclosed in the paper book at pages no. ______. In this regard in para no.4 on page no. 7 of the written submission, observations of the assessing officer regarding our books of account have been mentioned. Thus our book results, trading results, production activities and norms, consumptions and yields of various raw materials and production, sales, and profit etc. everything was accepted by the department in past in Toto by passing a well reasoned and speaking assessment order Under Section 143(3) of the Income Tax Act and not Under Section 143(1) of the Income Tax Act but unfortunately no cognizance was given to those earlier assessment records although apprised in the written submissions filed before the assessing officer though during the assessment year under consideration also similar method and manner of books of accounts and production/consumption norms as in the past years have been adopted and maintained by the appellant. 24. That in this regard there is an another very important point/ facts to be considered by your good self is that this issue was already raised and considered during Assessment Year 1999-2000 where vid....
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....oduced hereunder:- "I have considered the facts of the case and find merit in the arguments of the appellant. I agree that the addition is not based on any hard fact but on certain presumptions. From the Assessing Officer's Order it is clear that during survey proceeding under Section 133A of the Income Tax Act no incriminating document or material was found to give reason to conclude excess production or out of books sales or yield or out of books purchase of raw materials. There is less expenditure on account of consumption of raw material to produce more end product. Instead of appreciating better result in comparison to earlier years the assessing officer has assumed that the assessee might have consumed out of books purchased to show better yield. Why the answer will do this is not explained. Provisions of Section 69 of the Income Tax Act does not apply to fictitious excess stock based on estimate of possible consumption determined mathematical Calculations. The finding of the Assessing Officer is without any tangible evidence and it is based on inferences involving unwarranted assumption. Accordingly the addition of Rs. 3,40,69,013/- made by the Assessing Officer....
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....voked, purchase, sale and closing stock have been accepted hence entire addition is illegal and baseless. This shows also that even principles of consistency is missing in the order. 28. That, Sir, similar and identical formula/ basis have been adopted for making addition for alleged suppressed production in all the assessment years 2004-05 to 2010-11 whereas appellant has adopted and followed the same method/manner/pattern for maintaining books of accounts and production process for manufacturing Tobacco on commercial principles since inception of the firm and there is no change in any way therefore the arbitrary addition made by the assessing officer by alleging suppressed production is unjustified and illegal. It is also submitted that the production of tobacco is an excisable items and the production has been accepted by the Central Excise Authorities and excise duty has also been paid on the clearance of the manufactured goods from the godown under control of Central Excise Department and our declared sales was accepted year after year and in view of this fact no such addition could be made. Kindly consider Allahabad High Court decision as reported in 320 ITR 116 in t....
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....re the assessing officer and after thorough scrutiny of the same though the assessing officer was satisfied but she framed the assessment order by discarding all such facts/ details furnished and made the arbitrary addition which is unjustified and illegal. Sir, in the original assessment books result was accepted whereas in the proceeding u/s 153 A(1)(b) of the I.T. Act again on the same book of accounts addition was made by alleging suppression of production which is not correct and out of purview of section 153A(1)(b) of the I.T. Act. The provision of section 153A(1)(b) of the I.T. Act is not meant for repetition of proceedings and to draw different view as above in present case. 32. That sir the trading result position for the assessment year under consideration and for earlier two assessment years are as under:- Assessment year Declared sales Gross profit Gross profit rate Result in assessment 2002-03 26,17,95,483 5,90,90,630 22.57% Accepted u/s 143(3) 2003-04 33,09,13,848 7,06,23,739 21.34% Accepted u/s 143(3) 2004-05 (under consideration) 32,76,14,467 7,03,55,084 21.47% Accepted u/s 143(3) and now in disput....
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....losing stock in the assessment order nor any adverse findings about trading results. The search party prepared the inventory of raw materials and finished products but since no suppressed production was found in the premises nor any hidden place was unearthed by the search party, where any such alleged suppressed production was lying then Sir a question arises for consideration and adjudication before your goodself is that after all where such alleged suppressed production has gone specially when there is no allegation about EXIT of suppressed production by the Excise authorities (Central Excise) because the excise-duty is leviable at the point of EXIT (clearance) from the godown of the goods under the strict supervision of Central Excise Authorities nor in this regard any query was put to the appellant before framing the assessment order. In fact no discrepancies in the production was found but the discrepancy of alleged suppressed production was created by the Assessing Officer on her own estimation though the accuracy of the account maintained by the appellant had not been doubted or challenged during the year or also during last 45 years by the authorities of Income Tax, Sales ....
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.... checked and verified by the excise authorities - It is beyond comprehension that any addition on account of alleged suppressed sales can be made without any valid basis whatsoever on record-Findings recorded by the Tribunal are based on appreciation of fact and material available on record and there is no illegality or infirmity in the order passed by the Tribunal- No interference is called for. (ii) Accounts - Rejection - Estimation of income - Books of account are supported by the purchase vouchers, vouchers for expenses, stock records, excise records and therefore, hypothetical and imaginary calculation of GP Rate cannot be made unless some specific mistakes in the accounts are pointed out - It is not disputed that the turnover and GP rate declared by the assessee in the year under consideration is better as compared to preceding year - In the absence of any specific instances of mistakes in the books of account and other records, the book results cannot be rejected on the basis of any such hypothetical calculations based on erroneous presumptions- Findings of Tribunal based on appreciation of material did not call for interference. That Sir in the light of th....
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....by the excise department for verification of stock and they alleged that there was excess stock of tobacco as a result pilot experiment was also conducted by the excise authorities and thereafter they, arrived at a conclusion that the increase in weight on account of the addition of chemicals, perfumes, menthol etc was purely temporary and the weight by and large come to the level of the weight of coloured leaves. Therefore the excess in weight found at the time of verification of the stock by the officers was on account of the addition of chemicals perfumers and other volatile substances and this increase in weight was purely temporary and the actual weight nearly settled down to the level of the weight of the coloured leaves after completion of the process of the manufacturing and was accounted for. In this way the higher authorities of the Central Excise department also held that in such type of nature of manufacturing of tobacco there is wastage process loss and evaporation loss of ingredients used/ mixed and the same are temporary due to which the ultimate result is that there was no increase in weight accepted by Central Excise Appellate Tribunal in assessee's own case. ....
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....method of yield percentage working as adopted by the auditors and not due to any manipulation as alleged by the assessing officer. Sir, If a uniform method is adopted in all the assessment years then there will be no difference at all in the yield percentage figures in any of the years but the Learned assessing officer never tried to understand this fact and made such a irrelevant allegation based on her own wishes to justify the addition and search. Actually these two ratio - (i) the accounting ratio of material consumed/finished goods produced (as per class 32 of Form 3CD) (ii) the percentage of yield of the principal raw material (as per class 28 of Form 3CD) are altogether different in nature and purpose and the same can not be compared with each other as compared by the Ld. Assessing officer without understanding this true fact. 41. That at page 25 of the assessment order the assessing officer stated that in the course of search operation in the statement no specific reply was given on ratio of consumption and percentage of yield whereas the assessee explained all the items used in production of Tobacco, their consumption and opening and closing stock. But the assessi....
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....arch assessment since all details regarding consumption / production were before the department prior to the search. Sir, if department had any doubt regarding the same, it could have been raised during the regular assessment proceedings upto assessment year 2004-05 and not in the proceeding under section 132(1)/ 153 A(b) of the Act. When no incriminating material was found in the course of the search relating to any of the assessment year of the block period then the original assessment for such year could not be disturbed on the ground of alleged suppressed production through wrong working and own colourfull calculations of the assessing officer. In view of above factual and legal position the addition in question on account of so called suppressed production in a uniform manner for assessment year 2004-05 to 2010-11 are not corresponding to such material found during the course of search therefore the addition made in the pre-search assessment year is unjustified and illegal. 43. That without prejudice to above, it is found that having not rejected the books of account of the assessee for all the years under consideration, the assessing officer derived a colourful stati....
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....to survive in the business market it is not possible for the appellant to disclose its tradesecrete. d) From the aforesaid brief account/ details the yield during the various stages of manufacturing process can not be uniform on account of the fact that the raw materials are purchased largely from agricultural produce or vegetable products, some of which are hygroscopic in nature and some are volatile. The consumption of silver leaves and other perfumery items varies on account of the various manual process and nature of the business as explained above. 45. That on the basis of charts as reproduced at para 36 above the assessing officer has tried her level best to make the issue clumsy and has narrated her concocted theory by attacking on the consumption of raw materials in a wrong way and with ill motive only. True facts were submitted before the Assessing Officer again and again that there is no fixed rate of ratio or parameter for the consumption of various raw materials in the manufacturing process of the Tobacco as the same always varies at the stages of production processes /depending upon quality of raw materials used and quality of Tobacco manufactured by ....
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.... to take disadvantage of the said surrender when such surrender was in good faith and only on persuasive query on the point of ratio of raw tobacco consumption and production and as a matter of fact it was a heavy surrender in volume as such adverse inference of the same has been wrongly taken for making a stand for the addition which is unjustified. That likewise the contention of the assessing officer that if 100 kg of items is consumed then 105.66 kgs finished goods would receive is totally incorrect because the assessing officer failed to understand this fact that it does not happen so in the production of tobacco and result of final product never comes in 1 to 1 ratio in comparison to the materials and ingredients used in the production, because it involves dust, wastage, evaporation and other processing losses, so, sir kindly consider this aspect in its practical background. For example, while preparing a cup of tea, its various ingredients such as water, milk, sugar, tea-leaf are mixed in a cup and heated and after getting essence and colour of the tea leaf and other ingredients used, the wasted-tea leaf bags are thrown out, thus here also we do not get similar weig....
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....aper book showing the consumption of raw tobacco and quantity of the production compared with the working of alleged suppressed production done by the assessing officer. In this connection it is also necessary to mention here that our earlier assessments were made after thorough scrutiny and passed under Section 143(3) of the Income Tax Act. Copies of the orders are at page no. ____ to ______ of the paper book. So kindly consider observations of various senior officers of the department in their orders and please compare the same with the present assessment order passed under Section 153A(b) of the Income Tax Act. In the referred chart earlier years position of consumption of the raw tobacco in the production has also been given based on which it is clear that on declared consumption the department has accepted our declared production. Therefore there is no sense to create artificial excess production without giving the source of raw tobacco used for such alleged suppressed production and proving its sales or stock and excise duty paid on such excess production and thus it puts a serious question on judicious approach of the concerned assessing officer. 48. That in this re....
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....sessing officer in each year due to which figure of artificial suppressed production was increased and worked out by the assessing officer which is absolutely baseless. Sir, the process of manufacturing of tobacco is a technical matter and Zarda is not manufactured in the manner as suggested/calculated by the Assessing Officer. Sir fact is that since the assessing officer could not understand the entire manufacturing process as a whole due to which such type of confusion was designed/created by the assessing officer and Sir, if tobacco is manufactured in the manner as calculated/ decided by the assessing officer then the said Zarda shall be hardly purchased by any consumer/user because in Zarda, its taste & flavour is most important aspects & which only attracts the consumers. 50. That Sir already we have put and example for preparation of cup of tea in para 46 above similar position is there also in our production of Zarda and therefore in its true perspective only assessments in all the earlier years have been made by accepting our norms of production since the date of inception of the firm. Thus in nut-shell the theory of alleged suppressed production as launched by the....
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....fficer to tax the amount of alleged artificial production worked out by the assessing officer because in the production costs various other elements are also involved. The assessing officer no where has stated in the order that there was suppression of sale and purchases nor she mentioned any thing about payment of excise of duty on the finished goods derived out of such alleged suppressed production or whether the excise duty was charged and paid on each and every exhit item of finished goods. Moreover there was no finding of excise department that any excise duty was suppressed then question of taxing the alleged suppressed production as worked out by the assessing officer does not arise. The records go to show that there is no finding nor any material referred in the assessment order about the suppression of investment in acquiring the alleged suppressed production. Sir total sales or total production cannot be regarded as profit/ income of the assessee. In support of this the assessee rely on following decisions ................ 1- (2003) 263 ITR 610 (MP) 2- (2002) 258 ITR 654 (Guj) 3- (2008) 304 ITR 52 (MP) 4- (2008) 302 ITR 63 (Guj) ....
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....he Central Excise Department, the production and sale could be disbelieved on just whims and surmises of the assessing officer and also without any incriminating material found during the search. 7- Whether in any view of the matter and keeping in view the nature of production of chewing tobacco and manufacturing process as already explained earlier and various ingredients used in obtaining the finished product the evaporation/ driage/ shortage and process loss disclosed could be disbelieved on hypothetical grounds and surmises and excess production be created and considered on the basis of baseless calculations without considering the above mentioned driage, evaporation and process loss etc ?. 8- Whether in any view of the mater the alleged suppressed production worked out by the Assessing Officer. and its value as worked out at Rs 6,95,66,165/- could be wholly treated as the income of the assessee in determining the total income as against the judicial views and fiscal statutes as to assessment of real income ?. Sir in order to decide the appeal of the assessee on the point of addition of the amount of Rs. 6,95,66,165/- made for alleged suppressed produ....
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....en against the guidance of Ministry of Finance of CBDT i.e. no uncalled for harassment should cause to the tax payer." 10 The submission of the assessee was forwarded to the A.O. for examination and comments. Vide his letter dated 19.08.2013, the A.O. has submitted as under :- "Addition of Rs. 6,95,66,165/- on the ground of suppression of production - A. O. in her assessment order has made addition on the ground of suppression of production and main basis of the addition was that the assessee did not provide any evidence which could show what was the itemwise percentage of wastage/evaporation in perfumery items such as chemicals, masala, silver and silver-vark and kimam During the remand proceedings, A.R. of the assessee was asked to provide the percentage of wastage of the items i.e. chemicals, masala, silver and silver-vark and kimam. On 26.07.2013, Shri Sanjay Gupta, A.R. of the assessee replied that it is not possible to quantify the itemwise percentage of the waste item or percentage of evaporation for each item separately. He further submitted that the assessee only weigh the finished goods and gain in the finished goods is 6% approximately which is also rec....
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.... fact in Para 19 to 53 at page 29 to 84 of the first paper book which comprises various charts etc. During the remand proceeding again the entire books of accounts including the excise records, stock and production register duly checked by central excise authorities books and records were examined and contentions of the assessee checked and found correct also. The books and records were thoroughly scrutinized by the assessing officer who was fully satisfied with method and maintenance of books of account as a result there is no adverse comment in respect of books of account or method of accounting in the remand report. In the present case a uniform /addition right from the assessment year 2004- 05 to 2010-11 as alleged suppressed production which is not based on any seized materials, suppressed production or stock found on search that has been worked out as a uniform percentage of production i.e 105.66 % and thus worked out alleged suppressed production and after deducting the actual production as per regular books of accounts and records duly accepted by the central excise authorities ignoring the truth. In the remand report the only allegation of the assessing officer appears to ....
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....weight loss is there in form of whole leaf tobacco and masala during the process of manufacturing. In this way a claim of loss/wastage/evaporation has been duly accepted by the department so the issue of loss/evaporation/wastage has finally concluded. But unfortunately the assessing officer worked out the production on own whims considering that the production of finished product is the excess which resulted in working out alleged suppressed production. That the assessing officer slightly doubted that masala is used in grinded form or not and to this affect it is submitted that for grinding work two big machines are installed in the factory premises long ago and through those machines grinding work goes on regularly. So the question of doubt in this regard does not arise. Photo of grinding machines which are installed in factory premises are enclosed herewith. The assessee also made a request to assessing officer to visit of factory premises but not considered the assessee's request as a result in reality the manufacturing process was not examined properly by the department to do proper justice. In these background we are enclosing herewith photograph of manufacturing ....
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....;s case is well covered by decision passed by the appellate court. (d) That in the entire block period of assessment there is no whispers about the invoking of provision of section 145(3) of the act and once the said provision for rejection of account was not invoked then the addition made is unwarranted because for rejection of account invoking of provision of section 145(3) is a mandatory requirement. In this regard there are various decisions in support of the assessee including the decision of apex court and various High Courts etc and list of case law is at page 100 enclosed onward. (e) That the most important facts has been ignored that manufactured tobacco (Product) Zarda is subject to excise duty and for this purpose necessary details as per central excise rules and regulation are maintained which are periodically checked by the central excise authority and also audited/periodically and till date nothing adverse found in any year and in this way clean chit was given to the assessee by the central excise authority in the light of books maintained. Sir, during the year excise duty paid is amounting to Rs. 19,52,49,186/- The assessee's case is well covere....
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....r has worked out artificial production at 11,30,906.975 kgs. as compared to real production 8,90,193.600 kgs. In this way artificial difference i.e. alleged suppressed production as created/worked out in production is 2,40,713.375 kgs but the assessing officer failed to state the fate of such extra production and likewise failed to state where such extra production has gone and also failed to state position of excise duty because the assessing officer has accepted the payment of excise duty as per production and as per regular books of accounts. (m) That the assessing officer applied yield percentage twice first from the stage of raw tobacco to finished product and flat rate again applied yield percentage on production which is not correct. (n) That alternatively without admitting, the whole of the alleged suppressed production cannot be legally treated as the income of the assessee for the purposes levy of tax thereon because other outgoing are also to be considered for making such production hence only the element of net profit on such alleged amount could be considered and as such from all angels the addition of Rs. 6,95,66,165/- as income unjustified and uncal....
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....e not been furnished, therefore, the process is not open to verification. Another objection of the A.O. is that the ratio of consumption of different items of raw material has not been explained on the pretext of secrecy. The A.O. has also examined the genuineness of purchases of sandal wood oil and on the facts given in the foregoing paras, she proved that the purchases were bogus. The A.O. also found discrepancy in the consumption of packing materials as there are no records for issuance and consumption. The appellant states that the addition is not based on any search material nor was any discrepancy pointed out in the books of account. The appellant's argument is that in the past its book results were accepted in Toto. The A.O. was faulty in deviating from past practice when the method and manner of books of account and production / consumption norms, followed from year to year, have not changed. The appellant has also given reference to addition of Rs. 3,40,69,013/- made on identical issues for A.Y. 1999-2000 which was in pursuance of survey proceedings u/s 133A and the same was deleted by the first appellate authority. The appeal of the department against the ord....
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....umes, menthol etc. was purely temporary and the weight of the coloured leaves come almost to the same level after evaporation. Loss of weight on the use of other materials for example perfumes, chemicals, silver and silver vark, kimam and masala etc. is on account of evaporation and processing. The surrender of Rs. 50 lakh was only with the intention to purchase peace of mind and to avoid litigation. But the surrender did not represent the acceptance of suppression of production. The yield during the various stages, manufacturing process cannot be uniform as the raw materials are largely agricultural produce or vegetable products, some of which are hygroscopic in nature and some are volatile. There is no fixed rate of ratio or parameter for the consumption of various raw materials in the manufacturing process of the tobacco. The yield always varies on account of quality of raw materials used. The consumption and product cannot be matched at 1 to 1 ratio but the A.O. failed to understand this simple fact. The appellant has given the example of preparation of a cup of tea wherein various ingredients such as water, milk, sugar, tea leaf are mixed and heated, after getting the essence ....
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....duced only during the assessment proceedings. The production account is a necessary account for manufacturing business, so much so that in the case of a shoe manufacturer, where production register and information as to consumption of raw materials in the form of an issue register are not maintained, besides other imperfection in wages account, rejection of accounts and estimate of income, which was held, cannot be avoided. The said decision was given by the Hon'ble Allahabad High Court in the case of Omax Shoe Factory Vs. The Commissioner of Income Tax reported in 281 ITR 288 (All). In the instant case the A.O. found that the assessee did not maintain any production register, day to day consumption of raw material was also found not properly maintained, the A.O. rejected the books of account. The Hon'ble High Court held that: "7. Admittedly, assessee is the manufacturer and exporter of leather shoes, therefore, it was necessary to maintain production register and day to day record of production and consumption register of raw material. Unless the consumption register for raw material and the production register relating to the manufactured goods are maintained, th....
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....the raw- materials and production of finished goods. It has been further held that mere maintenance of quantitative details did not establish the fact that the assessee had maintained a day- today stock account of raw-material and finished goods. The Court up held the view of Tribunal that the income could not be properly deduced from the accounts maintained by the assessee, therefore, application of proviso to Section 145(1) of the Act has been held justified. 12. In the case of Awadhesh Pratap Singh Abdul Rehman and brothers v. Commissioner of Income Tax reported in 210 ITR page 406, the Division Bench of this Court has up-held the rejection of books of account on the ground that neither the stock register was maintained nor sales were found verifiable in the absence of cash memo. 13. In the case of Bastiram Narayan das Maheshwari v. Commissioner of Income Tax reported in 210 ITR page 438, the Division Bench of Bombay High Court has up held the rejection of books of account and the application of the proviso to Section 145 in the absence of day-to-day manufacturing account of Bidi including quantity of Bidi manufactured daily, figures of Bidi leaves consumed per....
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.... rejected for non maintenance of manufacturing account as required u/s 12(2) of the U.P. Sales Tax Act. The said section of Sales Tax Act requires to maintain stock register in respect of raw materials as well as products obtained at every stage of production. Apex Court held that if the stock book as contemplated u/s 12(2) of U.P. Sales Tax Act, is not maintained, it leads to the conclusion that the account books are not reliable. Though the judgment is under the U.P. Sales Tax Act, it is relevant in the context of the present case. The A.O. has gone at length dealing with the issue of purchase of sandal wood oil and has established that certain purchases were not genuine. On the facts that the appellant has not maintained production register to ascertain stage wise consumption and yield on day to day basis coupled with the fact that certain purchases of sandal wood oil are not found to be genuine, it can be held that the books of account of the assessee are not reliable which can give complete and true picture to deduce the profits therefrom. Though the A.O. has not expressely mentioned invoking the provisions of Section 145(3) of the I.T. Act, the whole discussion is fo....
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.... But as regards the ratio of weight of other materials mentioned above in the finished product, the same deserves better understanding and consideration. In this respect even the A.O. has considered the manufacturing process of Zarda. In the submission before the A.O. during remand proceedings, the appellant has explained the manufacturing process by enclosing photographs of each stage from page 76 to 104. Here I will consider those processes which may result in wastage and residuals. In the process of manufacturing of Kimam, it is explained that, whole leaf tobacco is put in big containers for boiling along with the water. The Ark i.e. raw kimam is taken out from the containers. The residuals / waste become useless and are thrown away. The photographs of residuals / waste are given on page 79 of the paper book 3. The spices are dried under the sun, those are baked and grinded. This process also results in certain weight loss as the skin of the spices is removed before grinding. The tobacco, mixed with the spices and raw kimam and glycerin is spread on the roof for drying, obviously to remove the water content. Then the appellant has explained the process of making aroma. In this p....
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.... Add:Opening WIP 88819.550 838742.500 Add: Other materials remaining after Consumption as per assessee 51451.100 Final products as shown by assessee 890193.600 Total %age of yield 83.17. Here too the arithmetic calculations as made by the A.O. are important to understand. First, the consumption has been shown 120.23%. This is actually the figure of total consumption with reference to yield of finished product i.e. as under:- Total Consumption 10,70,326.496 Kg. Weight of finished product 8,90,193.600 Kg. 10,70,326.496 x 100 /8,90,193.600 120.23% The yield has been calculated at 83.17% by the A.O. The same can be understood as under:- 8,90,193.600 x 100/10,70,326.496 83.17% The figures what they represent, are explained. As regards the percentage of consumption with reference to yield, the A.O. has remarked that the percentage of consumption with reference to raw tobacco leaf used during the year under consideration is 120.23% whereas in column 32 of the audit report the same has been shown at 77.34%. During the appellate proceeding before me the appellant pointed out that the A.O. misund....
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....ct would be 105.66 Kg. In other words, on the consumption of 120.23 Kg raw material the yield would be 105.66 Kg. But it is pleaded that the A.O. misunderstood the ratio of yield taking that if the weight of all the consumables is 100 Kg the yield would be 105.66 Kg. I notice that this finding of the A.O. is incorrect and invalid with reference to the facts analyzed by her. Therefore, it is clear that the yield of 105.66% is with reference to consumption of 120.23% of raw materials. This fact is discussed by the A.O. on page 16 of the assessment order. The ratio of production shown by the appellant is with reference to the consumption of raw tobacco only. Here the appellant has not included the consumption of other materials. In a submission before the A.O., i.e. part of the paper book before me, the assessee had produced before the A.O. the chart of adjusted consumption and production. In respect of F.Y. 2003-04 the adjusted consumption is shown as 8,38,742.500 Kg. The weight of finished goods produced has been shown as 8,90,193.600 Kg. The appellant has pleaded before me that the percentage of production as shown by it should be understood with reference to these figures only whe....
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....bstances and menthol and is stored in drums for 2-3 days for absorption of adour flavor and taste and then it is spread on plastic sheets for drying. Further likewise the compound of chemicals perfumery items and menthol are volative in nature and evaporate in the atmosphere. All this facts in details brought on record by the assessee." The Income Tax Act and the Courts attach with the A.O. a heavy and onerous responsibility to compute correct income of the assessee when the books of a/c are rejected u/s 145(3) or proviso to Section 145 of the Act. This also requires the A.O. to evaluate not only the facts available on the records of the assessee but also the surrounding facts to arrive at a decision. As discussed in the foregoing paras, the assessee has not maintained stage wise production account to verify the wastage and yield. One has only the volume of raw materials and end product. The intermediary processes are not transparent, viz., how much kimam or perfume is produced on consumption of required raw materials. This means, the production of zarda shown by the assessee cannot be verified. This situation calls for judicious approach by the tax authorities. As discuss....
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.....Y. 2007-08 in respect of Kishore Zarda Factory, D.51/199, Surajkund, Varanasi (U.P.) and for F.Y. 2011-12 in respect of Sugandhi Snuff King, A-15 Block B-1 Extn., Mohan Co-op. Ind. Area, Delhi Mathura Road, New Delhi - 110044. The reference to the audit reports of different financial years in the above cases is also not material as the manufacturing process remains almost same. The ratio of material consumed to finished goods produced in the above cases as per Column 32(d) of 3CD reports is as under :- i) Kishore Zarda Factory 92.29% ii)Sugandhi Snuff King 90.37% You may furnish your comments on the comparability of the yield keeping in view of the above cases. The copy of the audit reports is enclosed herewith. Your comments, if any, may be furnished within a week of receipt of this letter." On the above, the appellant has submitted as under: "With reference to above it is submitted that alongwith the notice dated 05-09-2013 photo copy of two audit reports in the case of M/s Kishor Zarda Factory of Varanasi and M/s Sugandhi Snuff King of Delhi were provided to the assessee and required assessee's comment on the basis of these two c....
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.... nature of business and method of maintaining books of accounts addition were deleted in first appeal and then department filed an appeal before Hon'ble ITAT where the departmental appeal was dismissed as a result book results were accepted in toto. Sir, the assessee firm came into existence in the year 1967 and the founder of the company was Late Sri Bhola Nath Kesarwani who prepared a formula to make zarda and on the same line year after year production work is going on and the same was accepted by the department. The assessee is also registered with the central excise authorities and paying huge excise duty year after year on sale of zarda at the point of exit of goods from the manufacturing premises. The excise authorities also satisfied with our method of accounting. In this way our product/production is under the strict supervision of excise authority as a result excise authority issued recognition certificate from time to time which are also placed on record. These facts required consideration at your end. That, Sir the assessee's industry is not a organized industry in the eyes of law and the entire manufacturing work is handmade work as there is no involve....
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....s not satisfied me with any cogent reasoning that the cited cases cannot be comparable, as they are also engaged in the manufacturing of flavoured tobacco. In the light of the decision of Hon'ble Supreme Court in the case of British Paints (India) Ltd., the assessing authority is not bound to accept the system of accounting, regularly employed by the assessee, the correctness of which had not been questioned in the past. When the manufacturing process of the assessee not found fully transparent and when the production account does not give determinable picture of production, the book results must be rejected. Another argument by the appellant is that no incriminating material or excess stock was found during the course of search also deserves to be rejected as the A.O. has adversely commented on the stock found during the search, in the respective assessment orders. It is not necessary that direct incriminating evidences only will prove the suppression of production. Indirect and surrounding factors like investments in valuable items, real estate, bogus cash credits, huge expenses on households also prove generation of unaccounted income. The comparison between assessment based....
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....e value of suppressed production (on the average sale price per kg.) are given in the table form for A.Ys. 2004-05 to 2010-11 as under: 13. We have considered the rival submissions and the material on record. The assessee challenged addition of Rs. 2,69,03,083/- whereas department challenged deletion of addition of Rs. 4,26,63,081/-. 14. The ld. counsel for the assessee reiterated the submissions made before the authorities below. He has submitted that in earlier year, lesser yield of the production has been accepted by the Revenue Authorities. In comparable cases cited by the ld. CIT(A), there are distinguishable features, which are noted at PB 235A of the paper book and even the ld. CIT(A) considered that these cases may not be comparable on facts because the declared turnover of the assessee is more than the turnover declared in the comparable cases. In assessment year 1999-2000 similar addition was made by the AO which has been deleted by the ld. CIT(A) and confirmed by the Tribunal. Copies of the orders are filed in paper book at pages 345, 356 and 375. In assessment years 2002-03 and 2003-04, the AO in assessment orders u/s. 143(3) accepted the percentage of....
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....nce of books of account and in past also on the similar pattern the books of account have been maintained and lesser yield of production has been accepted by the Revenue Department. Even in assessment year 1999-2000 on identical facts, similar addition was made and it was a case of survey u/s. 133A and addition have been deleted. The ld. CIT(A) was of the view that production account is necessary for manufacturing business and the ld. CIT(A) rejected the books of account u/s. 145(3) by using the powers u/s. 251 of the IT Act even if the books were not rejected by the AO. The ld. CIT(A) found that the AO has analysed quantitative details of raw materials and finished goods as were given in the audit report. The ld. CIT(A) also found that though the AO has attempted to analyze the consumption of raw material and semifinished products for getting the finished products, in the process, the AO has also carried out some infructuous exercise. The AO called for the details of work-in-progress in terms of quantity also which were furnished and same was used by AO for computing the percentage of yield. Thus, the assessee pleaded before the ld. CIT(A) that the AO misunderstood the figures of ....
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....t the theory of findings propounded by the AO for the purpose of making the addition. The finding of fact recorded by the ld. CIT(A) rejecting the findings of the AO have not been disputed before us during the course of arguments and have also not been rebutted by the ld. DR through any evidences or material on record. The ld. CIT(A) thereafter proceeded to decide the issue on the basis of comparable cases in the line of the business. The ld. CIT(A) collected the audit reports of two concerns, namely M/s. Kishore Zarda Factory and Sugandhi Snuff King showing ratio of material consumption to finished goods produced in 92.29% and 90.37%. The assessee submitted its objections before the ld. CIT(A) and distinguished the same to say that these are not comparable cases. The ld. CIT(A) accepted that audit reports of these two concerns do not speak of the manufacturing process, but the department is concerned with the percentage of yield. The ld. CIT(A) heavily relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. British Paints ( India ) Ltd., 188 ITR 44 on the proposition that it is incorrect to say that the AO is bound to accept the system of accounting regularly ....
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....to be accepted for the purpose of believing the books of accounts properly maintained by the assessee. Hon'ble Supreme Court in the case of M/s. Flexi Pack, 319 ITR (Statute)(SC) 3, held that there is no question of going on estimate of income without rejecting the books of account of the assessee. In the case of assessee, it is admitted fact that the books of account of the assessee have not been rejected by the AO u/s. 145(3) of the IT Act. The ld. CIT(A) heavily relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. British Paints (India) Ltd., 188 ITR 44, in which the facts are clearly distinguishable from the facts of the case of the assessee. In this case, the assessee company was engaged in the manufacture and sale of paints, had, as a consistent practice, valued its goods in process and finished products exclusively at cost of raw materials totally excluding overhead expenditure. The ITO held that there was no justification to recognize a practice of valuing stock otherwise than in accordance with well recognized principle of accounting which require the stock to be valued at cost (raw material + expenditure) or market price whichever was lower. The AAC an....
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....income-tax authorities shall have to follow the principle of consistency. We rely upon the decision of Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT, 193 ITR 321, the decision of M.P. High Court in the case of Godavari Corporation, 156 ITR 835, decision of Supreme Court in the case of Union of India vs. Satish Panalal Shah, 249 ITR 221 and the decision of Delhi High Court in the case of Escorts Ltd., 338 ITR 435. Therefore, identical issue considered and decided in earlier years in favour of the assessee by the AO as well as by the Tribunal in various years should have been followed by the authorities below on the identical issue. It is also not in dispute that the end product, i.e., Zarda is excisable item/goods and subjected to inspection and control by the Excise Authorities and it is admitted fact that the Excise Department accepted the manufactured goods and cleared the goods manufactured on duty paid. Such a circumstance also supports the explanation of the assessee that there is no suppression of the yield. The case of the assessee is squarely covered by the decision of Allahabad High Court in the case of CIT vs. Mascot (India) Tools and Forgings Pvt. Ltd.,....
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....margin may be added. This view was re-confirmed in its later decision in the case of Samir Synthetics Mill, 326 ITR 410 (Guj.). Therefore, the addition maintained by the authorities below was highly unjustified. The ld.CIT(A) though cited the alleged comparable cases of M/s. Kishore Zarda Factory and Sugandhi Snuff King, but admitted in the impugned order that the cited cases of comparison may or may not have the same or similar process of manufacturing. They may not be manufacturing the perfumes, which is major source of loss of weight. They may be purchasing the perfumery items from the market. It would suggest that these were not the comparable cases to be cited against the assessee. The assessee has filed the complete details of sales declared by the assessee and these two concerns at page 235A of the paper book to show that in the case of Kishore Zarda Factory in assessment year 2008-09, the declared sales were Rs. 1.19 crores and in the case of Sugandhi Snuff King for assessment year 2012-13 the declared sales of Rs. 3.99 crores were shown. However, in the case of assessee for assessment year 2004-05, the declared sales were 32.76 crores and in the remaining assessment years ....
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....We accordingly, set side the orders of the authorities below and delete the entire addition in assessment year 2004-05. In the result, the appeal of the assessee is allowed and the departmental appeal is dismissed on this issue. 15.1 This issue is arising in the remaining appeals for the assessment year 2005-06 to 2009-10 under appeals before us in which the assessee has declared percentage of yield at 84.69%, 84.04%, 85.08%, 83.80% and 83.80%. The AO took the percentage of yield at 105.66% and the ld. CIT(A) restricted the addition by taking the percentage of yield at 90% as has been taken in assessment year 2004-05. The assessee as well as the revenue are in cross appeals on the identical issue. By following the order for the assessment year 2004-05 above, we set aside ITA Nos.358 & 374 to 378/Alld./2014 ITA Nos. 06 to 11/Alld./2014 113 the orders of the authorities below and delete the entire additions. In the result, all the remaining appeals of the assessee are allowed and the departmental appeals are dismissed on this issue." 6.1 No material facts have been brought for our consideration to persuade us to take a view different from the view already taken by Co-ordi....
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....een purchased from M/s. Cosmo Elmek, Varanasi and other parties. The AO collected the details of use of vehicle for supply of the material. The owner of the vehicle denied use of vehicle for transportation of goods. Therefore, the AO inferred that no goods were transported and ultimately purchases were found to be bogus. The ld. CIT(A) asked for the break-up of the purchase of the amount in question and the vehicle used for supply of the material. The assessee submitted before the ld. CIT(A) that the purchases have been made genuinely from this party. The AO started enquiry in the case of Sarita Industries, but made addition of different party in assessment year under appeal. M/s. Cosmo Elmek is genuine party. Its PAN and telephone numbers were furnished. It was explained that payments were made through demand draft and all entries are recorded in the books of account. Part payments were made in the assessment year under appeal and for balance amount, sundry creditor account is shown. The purchases of perfumes were made from this party. The AO has not made out any case that the expenses incurred have not been entered into the book of account. In earlier year, the AO examined the sa....
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....the purchase of 150 kg of Sandal Oil issued by M/s. Sarita Industries, Kanpur, proprietor Rakesh Narin Gupta. The goods were sent by vehicle No. MH04 - 8300. On enquiry, it was found that it is a Bajaaj Chetak Scooter, 1990 Model. Letter of RTO was confronted to the assessee and the AO also asked the assessee to produce Shri Rakesh Narain Gupta, proprietor of M/s. Sarita Industries for examination. The statement of Shri Rakesh Narain Gupta was recorded during the course of assessment proceedings in which he has explained that vehicle Number was wrongly mentioned because the correct number is MH 04-AW-8300. The address of the owner of the vehicle was also given as Shri Kashi Nath, but the report of the department shows that such person was not residing at the given address. No stock at the premises of Shri Rakesh Narain Gupta was found. There was no godown and signboard displayed. The amount was withdrawn immediately in cash after deposits of the drafts. In further investigation, it was found that for invoices Nos. 173 and 176, the material was sent through Car though the weight of the goods was 350 kg and 100 kg. The Tata Sumo which was used for transportation was not a commercial ....
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.... the assessee has similarly made purchases from same party which have not been doubted by the Revenue department. It is also interesting to note that in the assessment year under appeal, the assessee made total purchases from M/s. Sarita Industries for a sum of Rs. 1.23 crores approximately through six invoices. The AO accepted five purchases and did not make any addition. The AO doubted only purchase through one bill No. 172 without assigning any cogent and specific reason. It appears that the purchase of one bill was not found to be genuine because of particular use of vehicle for transportation or that owner of the vehicle did not confirm the fact of transportation of goods in favour of the assessee. However, the facts and circumstances and the material on record clearly show that the assessee made genuine purchases from M/s. Sarita Industries and payments are made through account payee drafts. Therefore, other considerations noted by the AO for making addition appear to be irrelevant. M/s. Sarita Industries was not found doubtful party because assessed to Income-tax as well as registered with Central Excise Authorities and transactions with this party in preceding and subsequen....
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....ome tax Authorities also. Purchases have been accepted by the Sales Tax department. No material was found during the course of search to prove bogus purchases. The payments are made through demand drafts. It was also found that no inquiry was made in the case of vehicle No. UP-65-AB 8414 used in transportation of goods. No other enquiry was made. The ld. CIT(A) despite these findings confirmed the addition of Rs. 4,54,240/- and balance addition of Rs. 23,05,474/- was deleted. Both the parties are in cross appeals on this issue. 30. On consideration of the rival submissions, we are of the view, this issue is same as is considered in assessment year 2006-07 on issue No. 6 above. Copies of the bills are filed in the paper book along with confirmation of the party. The totality of findings of the ld. CIT(A) proved that M/s. Cosmo Elmek Varanasi is a ITA Nos.358 & 374 to 378/Alld./2014 ITA Nos. 06 to 11/Alld./2014 133 genuine party and sales in their case have been accepted by the Sales Tax Authorities and party also confirmed the transaction with the assessee. We have dismissed the departmental appeal on this issue in assessment year 2006-07 on identical facts. It appears that....
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....gus purchases as maintained (Ground No. 9) :- 1- That the addition has been made by the assessing officer by alleging that purchase of perfumery items form M/s Cosmo Elmek C-13/129 Aurangabad, Varanasi is bogus purchase and by generating flimsy and vague ground the assessing officer added the amount of Rs. 73,16,513/- in the total income of the assessee. The assessing officer has discussed the facts in respect of purchase issue only in para 6 of the Assessment order. The said para contains 6 pages from page No 9 to 14 of the assessment order. From the discussion in the said para it will appear that the maximum portion of the discussion covers about the purchases from M/s Sarita Industries proprietor Rakesh Narayan Gupta of 105/682, Chandrika Devi Chauraha, Kanpur, although there is no dispute with regard to the purchase made from the said party during the year. Any how in para 6 of the order the main focus of the assessing officer is on M/s Sarita Industries and not in respect of M/s Cosmo Elmek (under consideration) which fact itself proves that how and in what manner the issue has been dealt by the Assessing officer to justify her addition and ultimately at page 14 of th....
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....he assessee firm are recorded year after year in their books as well as in the books of assessee. In this regard it is necessary to mention here that party's books of account are audited also. The position of transaction with M/s COSMO Elmek in earlier years and in the year under consideration are as under :- A.Y. Total Purchases Disputed Purchases Amount Paid Mode of Payment Final Outcome 2004-05 66,40,719.05 NIL 43,65,432.50 Demand Draft Accepted 2005-06 11,70,676.00 NIL 40,00,000.00 Demand Draft Accepted 2006-07 16,11,269.75 NIL 20,00,000.00 Demand Draft Accepted 2007-08 34,04,992.50 NIL 15,11,395.05 Demand Draft Accepted 2008-09 27,59,713.65 4,54,240.00 72,75,975.90 Demand Draft Under Consideration 2009-10 1,17,49,910.60 33,49,264.00 1,17,49,910.60 Demand Draft Under Consideration 2010-11 73,16,513.00 19,86,573.00 1,06,05,000.00 Demand Draft Under Consideration That from the above chart it will appear that in the case of-appellant earlier number of assessment were framed under Section 143(3) of the Income Tax Act and the pu....
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.... circumstances and material on record the addition is unwarranted. Even from the year of inception i.e. 1967 of the firm till date no such type of addition was made nor any such type of allegation was made by the department. The books were not challenged. The addition made by the assessing officer is based on post search enquiry. Even her statement of the driver of vehicle was recorded behind the back of the assessee which is not permissible as no opportunity was allowed to the assessee to cross examine the driver. In these back grounds it is pertinent to mention here that the purchases, from M/s COSMO Elmek are on FOR basis in which freight are paid by the seller of the goods and we have not to pay any freight. As soon as we received the goods we made entry of the same in our primary records i.e. DGR (Daily Goods Received Register) which are kept at gate and the same is first stage of recording. And maintaining of DGR is our regular practice and in such DGR each and every purchase of every items are recorded and likewise exit of finished goods are also recorded. In this way DGR is very important books but the assessing officer failed to give any due credence and cognizance to such....
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.... CIT(A) order, who reproduced the finding of the A.O. in following manner : " Finding : regarding contention as per point (a) & (b) above, purchases had been test checked and found there in the books of account,......................................." But the A.O. stated that the issue is suspicious because of the vehicle used by the seller. . 11 That, once the A.O. accepted that after test check, found that purchases were recorded in the books, then it is not the job of the assessee to find out the vehicle used by the seller. It is the look out of the seller. On receipt of the goods the same are recorded in DGR register and DGR register is not disputed by the two lower authorities. That the two lower authorities have wrongly considered the purchases made from the genuine, established and old parties since long during the year under consideration and in subsequent years also then there is no justification to consider the purchases as income of the appellant because purchase cannot be termed as income therefore the addition so made and confirmed is highly unjustified and incorrect. That the Commissioner of Income Tax (Appeals) confirmed a....
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....ned CIT(A) in the impugned appellate order dated 30/09/2013 is sustained and the addition of Rs. 19,86,573/- sustained by the learned CIT(A) is deleted. In effect, the entire addition of Rs. 73,16,513/- on account of disallowance of alleged bogus purchase is directed to be deleted. 9. In assessee's appeal, in ground No. 4 & 5, the assessee has disputed the addition of Rs. 3,58,05,157/-. The Assessing Officer made this addition, holding the same to be extra sales. The relevant portion of the assessment order is at paragraph 11 of the assessment order, which is reproduced below: 9.1 In the impugned appellate order dated 30/09/2013 of the learned CIT(A), the aforesaid addition of Rs. 3,58,05,157/- was confirmed. The relevant discussion is at paragraph No. 9 of the impugned appellate order, which is reproduced below for the ease of reference: 10. At the time of hearing, the learned A.R. for the assessee submitted that the addition has been made by the Assessing Officer and has been confirmed by the learned CIT(A) because of their erroneous understanding of basic principles of the accountancy. It was submitted by the learned A.R. for the assessee that the Assessing Officer ....
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....dition was made in the case of the assessee in earlier years; and the issue was decided by Co-ordinate Bench of Allahabad Tribunal in aforesaid order dated 15/07/2024. The issue has been discussed in detail in paragraph Nos. 6 to 17 of the aforesaid order dated 15/07/2024 of Co-ordinate Bench of Allahabad Tribunal (pages 113 to 116). In the aforesaid order, the issue was set aside by Income Tax Appellate Tribunal to the file of the learned CIT(A). The learned A.R. for the assessee submitted that this issue in the present appeal also should be restored back to the file of the CIT(A) with the direction to pass de novo order on this specific issue in accordance with law after providing reasonable opportunity to the assessee. Learned CIT, D.R. expressed no objection to this. No distinguishable facts and circumstances or provisions of law have been brought to our attention by either side to distinguish the facts and circumstances of the present appeals before us, from the facts and circumstances in the aforesaid order dated 15/07/2024 of the Co-ordinate Bench of Allahabad Tribunal. In view of the foregoing and as representatives of both sides are in agreement with this, this issue is re....
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....ussion is at paragraph No. 11 at pages 136 to 143 of the impugned appellate order. 18. At the time of hearing, the learned A.R. for the assessee submitted that no query was made by the Assessing Officer during assessment proceedings in respect of these expenses. He also contended that the transportation of goods has not been doubted by the Assessing Officer. He submitted that the aforesaid addition of Rs. 3,08,045/- therefore, be deleted. The learned CIT, D.R. relied on the impugned order of the learned CIT(A), and on the assessment order. 19. We have heard the rival parties and have gone through the material placed on record. The basic fact in issue is in dispute, which has not been resolved by the learned CIT(A). While the Assessing Officer alleges that the assessee did not provide details of these expenses; the assessee on the other hand claims that no query was made by the Assessing Officer in respect of these expenses. As the factual matrix regarding this issue is not clear from our records, we restore this issue also back to the file of the learned CIT(A) with the direction to decide this issue afresh in accordance with law after providing reasonable opportunity to the ....
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....4.22 % (838742.500/ 890193.600) % of yield 106 % (890193.600/ 838742.500) Details of Production and Issue of Coloured Tobacco Opening Stock of WIP in Kgs Coloured tobacco produced in Kgs Total in Kgs Production of Tobacco in Kgs Closing Stock in Kgs 88819-950 970645.100 1059464.650 890193.600 169271.050 That from the above chart marked as Annexure "A" it is submitted that richart "A" shows consumption at 94.22 % from adjusted consumption to production which is true and correct. The figure is supported by day to day stock CHART - B (As per Page 15 of Assessment Order) Items Quantity of consumption in kgs Quantity of finished goods in kg. % age of consumption Raw tobacco leaf after considering OB & CB of WIP 749922.950 890193.600 84.24 Chemical and perfumes 84911.450 (a) 9.54 Silver and silver-work 3353.246 (b) 0.38 Document 5 Masala 107228.300 (c) 12.05 Kimam 36091.000 (d) 4.05 WIP 88819.550 9.97 TOTAL 1070326.496 120.23 That with regard to chart marked as Annexure "B" it is submitted that while considering the quantity of consumption.assessing officer, has included figures of chemical and perfume, silver and silver vark, masala and ki....
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....9.193 863711.274 816464.000 47247.274 382.930 18092398.52 1109204.482 998284.034 929478.000 68806.034 365.850 25172687.47 1007166.032 906449.429 843983.000 62456.429 411.640 25713680.75 945101.031 850590.928 799434.600 51156.328 454.950 23273571.38 2008-2009 2009-2000 TOTAL 161662974.92 It may be noted that the A.O. had worked out the value of suppressed production on the average cost price. But that was not correct as concealed production would result in sale to fetch unaccounted income. So while correcting the approach of the A.O., assessment year wise income sustained and relief are also worked out as under: Table - B Assessment Year The value of cost of suppressed production worked out by the A.O. The sale value of suppressed production as per column no. 7 of Table - A Relief Allowed 2004-05 6,95,66,165 2,69,03,083.68 4,26,63,081.32 2005-06 6,24,83,585 2,01,25,980.73 4,23,57,604.27 2006-07 6,56,02,962 2,23,81,572.39 4,32,21,389.61 2007-08 6,26,17,961 1,80,92,398.52 4.45,25,562.48 2008-09 7,56,62,496 2,51,72,687.47 5,04,89,808.53 7,77,26,717 2,57,13,680.75 5,20,13,036.25 2010-11- 7,76,72,166 2,32,73,571.38 5,43,98,594.62 In acc....