TaxTMI 
TaxTMI 
2025 (8) TMI 681
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.... on account of out of book purchases of raw material based on production input-output ratio. However, the second issue arises only in A.Ys. 2017-18, 2018-19 and 2019-20. 3. So far as the first issue is concerned, to begin with, we will take up ITA No. 1947/Mum/2025 for A.Y. 2013-14 as the lead appeal as the facts relating to the issue in dispute are more or less identical in all the assessment years, though, parties vary. 4. Be that as it may, briefly stated, the assessee hitherto is a resident corporate entity, engaged in the business of various kinds of masalas and spices in the brand name 'Everest'. It is necessary to put on record that the business was earlier carried on by a partnership firm in the name and style of M/s. S. Narendrakumar & Co. (Everest Masala Group). Subsequently, the partnership firm converted to a company and become the present assessee, i.e., M/s. Everest Food Products Pvt. Ltd. A search and seizure operation u/s. 132 of the Act was carried out on the assessee on 26.11.2019. As a result of such search and seizure operation, proceedings were initiated u/s. 153A of the Act for the block of six assessment years, prior to the year in which the search and ....
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....ntiate the genuineness of the transaction and the rendering of services by the said contractor. The contractor was registered with various government authorities, including the Income Tax Department, Service Tax Department, and Food Safety and Standards Authority of India (FSSAI), and held all necessary licenses and certifications for carrying out the packaging activity. During the course of assessment proceedings, the appellant furnished substantial evidence to prove the genuineness of the transaction. These include: (i) Copies of contractual agreements, invoices, and payment proofs. (ii) Registration certificates and licenses issued under relevant statutory provisions such as the Legal Metrology Act, FSSAI Act, and BMC Health regulations. (iii) Detailed inspection reports, movement registers, and goods receipt notes substantiating the flow of materials and the completion of packaging services. (iii) Proof of TDS deductions and compliance with statutory obligations. (v) Correspondence between the appellant and the contractor, which demonstrated active communication regarding the services rendered. 6.4.4 It is also pertinent to ....
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.... expense. The addition made by the Assessing Officer is accordingly deleted and the ground of appeal is allowed. 9.1 Thus, based on the above ld. CIT(A) deleted the addition. 10. Before us, learned Departmental Representative ('ld. DR' for short) relied upon the observations of the A.O., whereas, the ld. Counsel appearing for the assessee strongly relied upon the observations of learned First Appellate Authority. 11. We have considered rival submissions and perused the materials on record. In our view, the issue in dispute is purely factual. Hence, the outcome of the issue solely depends upon the supporting evidences furnished and brought on record by the assessee. In course of hearing, it was explained before us by ld. Counsel for the assessee that the manufacturing facility of the assessee does not support or make it feasible for packaging of the products in small packets like 50 gms, 100 gms., etc. Therefore, the small packaging items are outsourced to various parties on the condition that they will have to package the items maintaining strict quality and standard of the products. It is a fact on record that in course of assessment proceedings, the assessee had ....
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....ion, TDS % and amount, net amount payable after TDS, etc. 18. Copies of Debit Notes issued on the party for usage of face masks, hairnet, hand gloves, disposable caps, leakage problem in machine, negligence from operator, taflon tape roll, consumer complaint of packaging of meat & chicken (Ogms, wastage of laminated rolls. etc. 19. Advance payments requirement requests from the contractor 20. Copy of Service Tax challan paid by the contractor MrDyaneshwar T Kamble. 21. Proof for rental premises used by Dyaneshwar Kamble for using of premises at Kaycee Ind. Ltd. Compound, 70 Lake Road Bhandup (West), Mumbai-400080 in form of Service Tax e-payment challan. 22. Copies of Movement Inward-Outward register of the contractor depicting the date, vehicle, no., in-time, L/S, L/F, Out-time, location & no. of boxes, provided to the appellant 23. Proof in the form of Goods inward-cum-outward receipt along with Vehicle Nos. depicting the vehicle through which goods transported 24. Proof of material sent to Tulja Packaging in form of Delivery Challan having Vehicle Nos. and the detailed description of masalas and no. of boxes transpor....
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....ssee, the A.O. has made the disallowance. While doing so, he has not given any reason why the documentary evidences furnished by the assessee are not acceptable. Even, no other contrary evidences have been brought on record by the A.O. to establish that the concerned person was not a genuine businessman. Merely because the labour register for sub-contracting work, purchase bills for machinery use, number of employees and ESIC payment could not be furnished by the sub-contractor, it cannot negate assessee's claim and falsify the other relevant and valid documents furnished by the assessee. In respect of transaction with M/s. S. M. Enterprises also, facts are identical. As could be seen from the observations of learned First Appellate Authority in the impugned order, identical documents were also furnished by the assessee both before A.O. and learned First Appellate Authority. While, the A.O. has discarded the evidences without recording any valid reasons for doing so, learned First Appellate Authority, in our view, has rightly appreciated the veracity of the evidences furnished by the assessee after verification. 14. In the aforesaid view of the matter, we do not find any reason ....
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....io worked out to 92.35%. Thus, based on such materials on record, the A.O. issued a show cause notice to the assessee proposing to make addition on account of out of book purchases, which might have resulted in higher input-output ratio post demonetization period. In response to the show cause notice, the assessee furnished a detailed reply, vehemently objecting to the proposed addition. The A.O. however, did not find merit in the submissions of the assessee. Referring to the input-output ratio found in case of a sub-contractor, Rashi Agro Industries Pvt. Ltd. to whom the assessee has outsourced certain work, the A.O. observed that the average input-output ratio shown by the assessee suggests out of book purchases to achieve that ratio. Accordingly, taking the input-output ratio of 92.35% per kgs., the A.O. worked out the out of book consumption at Rs. 15,70,42,451.63 and added it to the income of the assessee. 17. The assessee contested the aforesaid addition before learned First Appellate Authority. 18. Before learned First Appellate Authority, the assessee furnished the relevant documentary evidences to refute the allegation of out of book purchases. After considering the ....
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....of account of the assessee are duly audited and the assessee having all documentary evidences to support its purchases and sales. Therefore, mere use of statistical data in place of actual documentation would show that the conclusion drawn by the A.O. was based on incorrect assumption, statistic misinterpretation and clerical errors. Thus, based on the aforesaid factual finding, learned First Appellate Authority deleted the addition made by the A.O. u/s. 69C of the Act on account of outside book purchases. 19. Before us, learned Departmental Representative ('ld. DR' for short) relied upon the observations of the A.O. Whereas, ld. counsel appearing for the assessee took us through various documentary evidences furnished before the departmental authorities to reiterate the stand taken before them. 20. We have given a thoughtful consideration to rival contentions and perused the materials on record. Undisputedly, the entire basis of addition is the result of input-output ratio allegedly found in course of trial run at various factories of assessee during search and seizure operation. Based on such input-output ratio derived during the trial run, it has been alleged that ....
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.... the facts on record, in course of trial run carried out by the department in course of search and seizure operation itself, the input-output ratio of the factories at Vikhroli and Umbergaon worked out to a much higher figure. For chicken masala at Vikhroli factory it worked out to 98.38%. For the same product at Umbergaon factory the ratio worked out to 95.7%. For meat masala it worked out to 94.71% and 94.70% respectively. For garam masala at Umbergaon factory the ratio worked out to 94.82% for one lot and 95.68% for another lot. Thus, as could be seen from the above, the input-output ratio cannot be standardized as it depends on various factors such as the quality of the raw material, area of production, soil quality, water availability, etc. Merely based on the result of trial run conducted for a few days, the input-output ratio for multiple assessment years cannot be determined, as it lacks scientific basis and is far removed from the actual facts and figures. 22. One more factor which carries much relevance is, though, similar input and output ratio has been shown by the assessee in subsequent assessment years 2020-21, 2021-22 and 2022-23, no such addition has been made by....