TaxTMI 
TaxTMI 
2025 (9) TMI 216
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi failed to appreciate appellant's ground that when Section 145(3) was not invoked, book result could not have been disturbed by the assessing officer. 3. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi failed to appreciate the manufacturing process and the input-output formula of the Appellant's products. 4. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in sustaining addition of Rs. 10,22,875/- by way of purchases outside of books. 5. The learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi erred in sustaining addition of Rs. 1,72,250/- by way of disallowance of depreciation on alleged purchase of solvent machineries. 6. The Appellant craves leave to add, amend, alter and withdraw any ground of appeal at anytime up to the hearing of this appeal." 3. Ground Nos.1 to 3 raised by the assessee are interconnected and mixed. These grounds relate to addition of Rs. 1,51,58,520/- by way of low production yield of groundnut oil. 4. Brief facts qua ground Nos. 1 to 3 are as follows. The a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l production on the basis of different laboratory reports available with the department which in turn are impounded from the premises of the assessee and the yield as per laboratory reports are basically accepted in the same oil mill belt and in the same line of business of groundnut oil extraction which has been reiterated by the assessee during the course of survey proceedings, the production of groundnut oil is calculated as under: From the above, it was observed by the assessing officer that the groundnut oil yield/production is suppressed to Rs. 3,34,32,720/-. Accordingly, vide show cause notice dated 04.02.2015, the assessee was asked to explain the suppression of groundnut oil production of Rs. 3,34,32,720/- and the same amount was proposed to be added to the total income of the assessee for the year under consideration. 6. During the assessment proceedings, the assessing officer, issued notice to the assessee, to explain the transactions and manufacturing process.In response to the notice of the Assessing Officer, the assessee submitted its reply before the assessing officer, which is reproduced below: "As regards suppression of ground nut oil for production ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the total output is much more i.e. 105.28 than total input pg 100.00 which shows that the method is incorrect and illogical. More, recovery of oil would technically reduce recovery of other products, as the input is same quantity. Thus, the method adopted by you is illogical. Single point yield rate cannot be applied to a two- stage oil recovery process. The deduction made by you of husk from the ground nut seeds for computing the yield is totally unaccountable methods. In all solvent plant and oil mill business the proper method of yield is above as stated. Without applied the husk, there could not be recovery of oil. In this aspect, we are also practically bringing before you the weight scale, ground nut and G.N. oil cake and de-oilcake to explain the above stated method of working which is adopted while calculating the yield. Thus, the yield arrived by us is correct. In support of this also, the certificates for yield from the expert laboratories and authorized Associates are submitted herewith which as under: (1) The Solvent Extractors' Association of India, Mumbai (2) The Saurashtra Oil Mills Association, Jamnagar (3) Intertek Indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tment came across laboratory reports of different agencies deciding groundnut oil yield and which was made to understand to the department that in this belt of Saurashtra considering the fertility of land, water, climatic condition, favourable for cultivation etc., the yield of ground oil as reported by the different agencies in surrounding Saurashtra region is most adopted and acceptable in this line of business. Therefore, the suppression of production of groundnut oil worked out taking into consideration the formula as laid down by the oil agencies for Saurashtra region (i.e. by taking average of 48% yield) an amount of Rs. 3,34,32,720/-, was added to the total income of the assessee for the year under consideration. 8. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The ld. CIT(A) noticed that it was already mentioned by the assessing officer that on the consideration of the appellant's argument that out of 200 gms of raw ground nuts, the seed content would ideally be 144 gms. and accordingly, the assessing officer has taken the seed content at 38,07,1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al. This appeal was heard on merit on 8th July 2024 and soon after the hearing appeal, the ld.DR sent the letter to the Bench, stating that he would like to get rectify the mistake in figures, under section 154 of the Act, and also requested the Bench to provide sufficient time to get the rectification done. Accordingly, the Bench, vide order sheet entry dated 22.07.2024, had refixed the case for hearing on 14.08.2024 and time was given to the ld. DR to get the rectification done on or before 3rd October 2024. Further time was granted to ld. DR, upto 15th October 2024, however, Ld. DR. did not receive the rectification order. Therefore, the appeal was finally heard on 15th October 2024, with the consent of the ld. DR for revenue. 12. On merit, Ld. Sr. DR for the Revenue submitted that assessing officer has reached the conclusion, based on the cogent evidences, available with him, and based on the reports of agencies, like, SOMA laboratory, perfect laboratory, Dhoraji and quality analytical laboratory etc, therefore the addition made by the assessing officer should be upheld. 13. On merit, the Ld. Counsel for the assessee submitted that assessing officer made addition on accou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all material relating to the productwise details were submitted, before the assessing officer. The assessee's books of accounts are audited u/s 44AB of Act, 1961 and the assessee has been adopting the same method since long and it has been accepted by the department. The method so adopted by the assessee is consistent method and in earlier years, the assessment has been framed u/s 143(3) of Act, by accepting the same method. The yield of product depends upon the quality of the groundnut products in each case and accordingly there could be some variation. 15. We note that in case of similar groundnut oil mill, as that of assessee, engaged in the groundnut oil production, the Hon'ble Gujarat High Court, having similar and identical facts, (as that of assessee), in the case of CIT vs. Patidar Oil Cake Industries, vide Tax Appeal No.1881 of 2009, dated 19.04.20211, deleted the addition, observing as follows: "4. We find that the entire issue is based on facts and upon appreciation of evidence on record. The Tribunal having taken into account different factors emerging from the record, found that there was no reason to believe that the purchaser was bogus. We do not find an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssed production of 3,62,771 kgs., he has made addition of Rs. 1,68,21,691/- by way of value of suppressed sales of groundnut oil. As against this method applied by the assessing officer, according to the assessee, the husk of 20.32% cannot be first reduced from groundnut and 48% cannot be directly applied to the balance percentage of 79.68% but the yield can be arrived at technically only by considering the entire manufacturing process. From the copy of statement of the chemist of the assessee Mr. Gami which is relied upon by the assessing officer we find that in all his replies, the chemist has referred to the said yield out of groundnut oil seeds (emphasis supplied) and not to groundnuts. The partner of the assessee Mr. Kishorbhai has also referred to 48% yield on groundnut seeds. The said statements gets further support from certificate issued by Saurashtra Oil Mill Association which has also before the assessing officer in which also the yield of 42% to 52% is under laboratory testing the groundnut seeds and after describing the technical process of oil mill and solvent extraction, the said certificate states that the oil recovery after all process can be between 35% to 37%. We....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and discarding the evidence produced by the assessee. No question of law, therefore, arises. In the previous assessment years also, similar figures presented by the assessee were accepted by the department. 8. In the result, the Tax Appeal is dismissed." 16. Therefore, we find that Jurisdictional Hon'ble Gujarat High Court, having similar and identical facts, ( as that of assessee), in the case of Patidar Oil Cake Industries(supra), held that addition should not be made in the hands of the assessee. 17. We note that stocks and purchases are accepted and only production of groundnut oil is disturbed by increasing its yield and no other item of production is disturbed by the assessing officer, although it is an integrated manufacturing process, which produces four different items from one raw materials. During survey, there is no evidence found of suppressed sales or suppressed production, therefore only production does not give rise to income, without there being sales. The yield noted on laboratory reports found in survey is misunderstood and misapplied by assessing officer and CIT(A) without appreciating the technical manufacturing process shown in flow chart. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the Revenue submitted that neither during assessment proceedings nor during the present proceedings, the appellant has submitted the reconciliation of the figures shown in the schedule 8 of the balance sheet and the party ledger accounts. The onus always lies on the appellant to prove the genuineness of the transactions. Therefore, addition made by the assessing officer may be confirmed. 25. We have heard both the parties. We find merit in the submissions of ld. Counsel for the assessee to the effect that assessee submitted that the item-wise detailed chart which is tallied with the schedule 8 of Balance sheet. The assessing officer has taken figure from party ledger account which shows taxes also and other product purchases also and hence there would be difference which could be verifiable from the ledger itself. We have gone through schedule 8 of Balance sheet vis-à-vis ledger account of assessee, and observed no any difference, hence addition made by the assessing officer is directed to be deleted. 26. In the result, Ground No.4, raised by the assessee is allowed. 27. Coming to ground No.5 raised by the assessee, which relates to addition of Rs. 1,72,250/- by ....