TaxTMI 
TaxTMI 
2025 (11) TMI 1760
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....1 2018-19 29.01.2021 NIL 143(3) 2. Since the issues involved in both the cross-appeals filed by the assessee and the Revenue are common therefore, they are taken together for consideration and decided by way of a common order as below :- ITA Nos.292 & 734/Del/2021 [Assessment Years : 2017-18] 3. First we take the cross appeal filed by assessee in ITA No.292/Del/2021 and by Revenue in ITA No.734/Del/2021 both for AY 2017-18. 4. Brief facts of the case are that the assessee is a company, engaged in the business of manufacturing of laminated packing material since its inception. A survey and seizure operation was carried out at the business premises of the assessee company on 31.01.2018 and during the course of survey, certain documents were seized by the survey team and statements on oath were recorded of the staff members and Directors of the assessee company besides physical verification and inventorization of the stock available. As a result of search, the notice u/s 153A of the Act was issued. The assessee furnished its return of income u/s 139 of the Act, declaring total income of INR 54,94,520/- on 26.10.2017. After the search, in response to notice u/s ....
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....ndings in this regard. 5. That the Ld. CIT(A)-24, New Delhi has erred on the facts and in circumstances of the case and in law by not allowing assessee's appeal in so far that the Ld.AO has not provided proper opportunity of being heard and violated the principle of natural justice by either rejecting or ignoring the submission made by appellant assessee. 6. In view of the facts and circumstances of the case the appellant prays that the additions may kindly be deleted or any other order which this hon'ble court deems fit and proper be passed. 7. That the appellant craves leave to add, alter, amend or withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing of these grounds." ITA No.734/Del/2021 [Assessment Year : 2017-18] 1. "The order of CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case, the Commissioner of Income Tax (A) has erred in law and on facts in restricting the addition of Rs. 4,38,48,334/- on account of unaccounted profit from unaccounted sales to Rs. 1,89,90,978/-. 3. The appellant craves to add, ame....
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....unaccounted sales and unaccounted profit are tabulated as below- A.Y. (i) Power & Fuel Rs. Units Consumed Productions in (kg) @2,7819 factor Rate of finished goods (Rs. /kg) @25% Growth rate Value of production (Rs.) = (iv)*(v) Sales as per the books of accounts (Rs.) Difference (Rs.) = (vii)- (vi) Discount of 25% for indirect taxes and wastage and other errors (Rs.) Unaccounted profit (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) 2013-14 34,96,695 5,20,188 14,31,505 58.32704 83495470 529,00,718 30594752 22946064 3391428 2014-15 40,22,824 5,22,101 14,36,769 72.9088 104753134 584,56,282 46296852 34722639 5132006 2015-16 58,47,088 7,34,047 20,20,023 91.136 184096855 986,64854 85432001 64074001 9470137 2016-17 96,27,205 10,32,454 28,41,210 113.92 323670658 1857,61,426 137909232 103431924 15287238 2017-18 124,54,567 14,84,226 40,84,441 142.4 581624365 1860,59,782 395564583 296673437 43848334 2018-19 175,97,340 18,65,126 51,32639 178 913609747 4422,67,757....
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....-14 62,97,305 11.90 AY 2014-15 66,03,254 11.3 AY 2015-16 67,09,003 6.8 AY 2016-17 2,05,91,588 11.08 AY 2017-18 2,25,72,848 12.13 AY 2018-19 4,86,07,076 10.99 Average GP 10.7 a. The survey team has calculated production on the basis of working of the factory at a given point of time and further converted it full year, however in reality it does not hold true as electricity consumption and resultant production cannot be calculated by running the machinery for a short span of time(137 minutes in the case of the appellant). This is further supported by judicial pronouncements given at Para 12.12 of our reply. Further, as held in various judicial pronouncements consumption of electricity cannot be taken as a base for calculating production in any case whatsoever. The assessee strongly objects on this ground and relies on judicial pronouncements Commissioner Central Excise vs. M/S R.A. Castings (P) Ltd. and Ors.(Hon'ble Apex Court), Century Tiles Ltd. vs. Joint Commissioner of Income Tax (2014) 51 taxmann.com 515 (Ahmedabad), ITO vs. Pragati Fashions [2012] 18 taxmann.com 269 (Ahmedabad), CIT vs. Paras Agro P....
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....Size and volume of orders affects the capacity utilization of plant 3 Labour productivity 4 Quality of raw material used, size and thickness of the raw material used. 5 Type of material to be produced as customised as per customer demands 6 During the testing and sampling phase the machine is run multiple times adding nothing to the production but adding cost to company inform of electricity consumption, material wastage, etc. 7 In case of rejection of material at inspection stage the entire printing process has to be re-performed and the already printed material is discarded. 8 The speed and cooling process for work in progress adds to non-productive time 9 Non standardized finished good therefore production capacity cannot be calculated with same formula for all finished products 10 Downtime and changeover time cannot be determined in advance 12.1.2 It is submitted that Ld.AO during the course of survey noticed that there were three units in which assessee has installed various machines and four machines have been installed at unit 1 while two machines were installed at unit 2 and in unit 3 machines were used for finished g....
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....g per unit of electricity after dividing by 1753.6kg at pg. 16 of the Assessment Order. On the basis of this calculation the Ld.AO calculated unaccounted profit for AYs 2013-14 to 2018-19 and for the year in concern i.e., 2017-18 of Rs 4,38,48,334/- and the addition of the same has been made by the AO. 12.3 It is submitted that the Ld.AO has failed to appreciate that in the manufacturing unit, you cannot merely take calculation of finished product at the last leg. The Ld. AO did not appreciate the flow chart provided during the course of assessment proceedings. The process of flow chart is reproduced here under: 12.4 It is submitted that from the perusal of the aforesaid chart, your goodself would appreciate that the process of printing is the first step. The printing is to be made on either plastic or on paper. The assessee had two types of machines: one printing machine of Lapramake, which prints only plastic and another printing machine namely 'polygraph make' which prints only paper. Both these machines are placed in unit 1, so 100% production by lapra make is printing on plastic and 100% printing is made by polygraph make on paper. In the unit 2, a di....
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....were raised in Hindi only. Thus, reliance on the basis of statement of Sh. Tek Singh is not full-proof and the statement was recorded in a preconceived mind set. 12.5 It is therefore necessary to understand the nature of business instead of jumping on to conclusion merely because of the final process. One has to understand that assessee company is engaged in the business of printing on the material and at each stage manual process of inspection is involved as the goods to be delivered are rejected on the basis of incorrect printing due to dim ink, tilted printing, missed out printing etc. and so whenever printing is in process, a person has to look into that roll is in proper line, alignment, not overlapping etc. Hence, even in the course of printing machine used to be stopped many times due to aforesaid reasons as cost of printing and paper is material. After the process of printing, second process is of overcoating so that this print should not be spoiled. This cannot be immediately started though ink is dried out but the process takes time and again one has to look into correct overcoating on the printed material. The third process of pasting/lamination of second materi....
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....17 for straight calculation purposes. In column 'f' per hour capacity has been mentioned by multiplying 'd' 'e' with 60 minutes. The down time as stated 40 percent which is certified by the engineer in column 'g' due to which production loss per hour has been stated in column 'h' and in column 'I' net production capacity has been stated by reducing 'h' from 'f'. in column 'j' working hours have been given as 12 and actual capacity finally annual capacity has been calculated in column 'k' and 'l'. it is submitted that on the basis of this calculation of table no 2 and 3 and 4 and 5 which are similar, calculation go table no 1 has been made. Capacity of 30% of table no.4 and 70% of table no 5 has been taken and total annual capacity after down time of plastic has been taken as 1,70,417.52 and of paper 10,76,814. The per hour capacity after down time is arrived at by dividing the factor 12 hours and 25 days and 12 months and so capacity of plastic has been calculated as 47.34 and of paper 299.12, and proportionate capacity has been shown of plastic and paper as 14.2 and 209.38 respectively which co....
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....and other errors as shown in page no 17 of the assessment order in the last but one column of the table. The Ld.AO cannot merely give discount unless he is going through the process of production after understanding the business and the production process. 12.7 It is humbly submitted that calculation by the factor 971 is therefore incorrect as he has taken the figure for the flow chart of 100% production capacity of undercoating, without understanding the actual production after down time of 583 kg. Likewise, he has divided by the factor 1753.6 merely on the basis of cutting machine which can also not be basis being the last leg of the production. 12.8 It is further submitted that the Ld.AO has taken the figure of 971kg which is the 100% capacity of coating machine for calculation of factor of rate of production of finished product per unit of electricity without appreciating that down time of production on various factors explained above in short cannot be ignored. As reiterated in case of assessee company downtime is crucial for production of finished goods as the assessse company is engaged in production of customized goods that is as per the need of customer t....
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.... Gross Profit as per form 3CD (in Rs.) Gross profit margin as per 3CD % Expenditure not considered while calculating GP in 3CD (in Rs) Revised Gross Profit (in Rs) Revised Gross profit margin % Labour charges (a) Depreciation of machinery (b) Fuel expense (c) Total of expenditure not considered (a+b+c) AY13-14 5,29,00,718 1,21,35,424 22.94% 30,99,115 27,39,004 - 58,38,119 62,97,305 11.90% AY14-15 5,84,56,282 1,24,97,953 21.38% 32,87,689 26,07,010 - 58,94,699 66,03,254 11.30% AY15-16 9,86,64,854 1,36,94,681 13.88% 29,03,616 40,82,062 - 69,85,678 67,09,003 6.80% AY16-17 18,57,61,426 2,76,35,100 14.88% 22,82,770 47,60,742 - 70,43,512 2,05,91,5 88 11.08% AY17-18 18,60,59,782 2,60,28,079 13.99% - 34,55,231 - 34,55,231 2,25,72,8 48 12.13% AY18-19 44,22,67,757 6,85,18,632 15.49% - 23,14,216 1,75,97,340 1,99,11,5 56 4,86,07,0 76 10.99% v. The summary of average gross profits of last six as submitted before are produced as under: Assessment year Gross profit in Rs Gross ....
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....als) which is hereby confirmed and the ground of appeal of the Revenue is dismissed. Further it was held It is an established position of law that the result disclosed by regularly maintained books of account cannot be rejected unless it is found that the books of account maintained are either incomplete or unreliable or the method of accounting employed is such that on the basis of it correct profits of the assessee cannot be deduced. (page number 117-131 of PB) iii. In the case of Commissioner Central Excise vs. M/S R.A. Castings (P) Ltd. and Ors. Central Excise Appeal No. 67 of 2009 pronounced on 09.09.2010, The Hon'ble Allahbad High Court upheld the order of the Tribunal whereby the Hon'ble Tribunal held that it is a settled principle of law that the electricity consumption cannot be the only factor or basis for determining the duty liability, that too on imaginary basis. The Department's SLP to Hon'ble Supreme Court was also dismissed on 31.03.2011. The Hon'ble CESTAT had held in the said case as "Electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, th....
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....ferring to the above mentioned case of R.A Castings Pvt Ltd held as under, "The Assessing Officer had completely based its addition on the aforesaid report of the Investigating Team and had also show caused the assessee to establish its point in view of the said report of the Investigating Team. The Customs, Excise & Service Tax Appellate Tribunal (supra) in the appeal filed by the assessee and its Director has categorically held that no cogent evidence has been brought on record to prove that the output had been cleared clandestinely. Further it has been held that there was no cogent evidence to show either suppression of purchase of input or removal of goods. In view of the aforesaid findings of the Customs, Excise & Service Tax Appellate Tribunal in assessee's own case there is no merit in any addition being made in the hands of the assessee on account of the alleged suppression in production and also Alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assessee. We are also in agreemen....
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....understand its sales he would be justified in rejecting the accounts and making an estimate of the escaped turnover. But, the high consumption of electricity alone cannot be held to be a material justifying the rejection of the accounts particularly when the assessee's accounts had once been accepted during the regular assessment proceedings." 8.1 Similar view was also expressed in the cases of Satyanarayan Pareek (supra) and The New India Rice Mill (P) Ltd (supra). In these circumstances, in our considered opinion there is no infirmity in the order of the Id.CIT(A). Accordingly, we uphold the same. viii. Vishal Paper Industries vs. JCIT reported in [2013] 32 taxmann.com 247 (Chandigarh - Trib.) 11. We have considered the rival submissions, facts of the case and relevant record. The ld. CIT(A) had adjudicated the ground No. 4 of the present appeal, in para 5.7 of his order, as reproduced above. The AO worked out suppression of actual production by the assessee- appellant, on the ground of consumption of abnormally high electricity. The AO has taken 492 electricity units, in the months of July 2006, and further allowance of 15-20%, on account of variat....
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....ion with consumption of electricity and production of manufactured goods. Having regard to the above legal and factual discussions, we do not find any substance and merit, in the findings of the ld. CIT(A). Therefore, such findings cannot be sustained. Consequently, this ground of appeal of the assessee- appellant is allowed. (page number 206-224 of PB) 13. THAT ONCE AUDITED BOOKS OF ACCOUNTS ARE ACCEPTED AS SUCH NO ADDITION IS PERMISSIBLE 13.1 It is submitted that once audited books of accounts are accepted and, it is not disputed that sales are duly recorded in books of accounts and consequently income thereof has been offered as taxable income by reflecting the same in the trading and profit and loss account of appellant. It is submitted that in these circumstances no addition is permissible on account of alleged assumed unaccounted sale. Appellant in this regard seeks to place reliance upon following judicial pronouncements: i) CIT vs. OM Overseas 315 ITR 185 (P&H) ii) CIT vs. Mascot India Tools & Forgings (P) Ltd. 320 ITR 116 (All) iii) Asstt. CIT vs. Shankar Exports 64 DTR 409 (Jai) iv) CIT vs. Paradise Holidays 325 ITR 13....
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.... 14. THAT ADDITION IS BASED ON ARBITRARY CONSIDERATIONS, HYPOTHETICAL IMAGINATION, PRESUMPTIONS AND ASSUMPTIONS AND THEREFORE, THE ADDITION PROPOSED IS ILLEGAL, INVALID AND UNTENABLE ADDITION 14.1 It is submitted that the addition is based on arbitrary considerations, hypothetical imagination, presumptions and assumptions and therefore, the addition proposed is illegal, invalid and untenable addition. It is submitted that a from the bare perusal of the order of assessment, it is evident that addition of unaccounted sales has been made without any material and purely on hypothetical assumption by computing the production in Kg for per unit of electricity consumed without pointing out any defect in the books of account without there being any material to even remotely suggest that there is any unaccounted production or unaccounted sales. It is submitted that it is settled law that suspicion howsoever strong cannot partake the character of evidence. 14.2 Reliance is also placed on the judgment of Hon'ble Apex Court in the case of Uma Charan Shaw & Bros. Co. v. CIT reported in 37 ITR 271. It has been further held in the following cases that suspicion howsoe....
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....el for the Department and after giving best consideration to the matter one is quite unable to see any reason or basis for the so called finding recorded by the Tribunal that the assessee was in possession of 35 notes on the day the Ordinance was promulgated or that 10 notes were from some undisclosed source. These cannot be recognised as finding at all. The assessee's business was not one in which large amount of petty notes might have been necessary for the purpose of business, and keeping money in large notes is evidently more convenient for counting, for making payments and for other purposes and no material has been placed to show that the explanation offered by the assessee was one which was inherently improbable or one which could not be accepted. The so-called estimate made by the Tribunal was based on no reason and was a mere guess. In fact there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being re....
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....nce to principle of natural justice as recognised by all civilized states is of supreme importance when a quasi judicial body embarks on determining disputes between the parties. These principles are well-settled. The first and foremost principle is what is commonly known as audialteram pattern rule. It says that none should be condemned unheard. Notice is the first limb of this principle- It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed against the person in absentia becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair-play. 13. How then have the principles of natural justice been interpreted in the Courts and within what limits are they to be confined? Over the years by a process of judicial interpretation two rules have been evolved as r....
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.... the order was passed, that is to say, 24-8-1977 the order was a nullity because it was in violation of principles of natural justice. See in this connection, the principles enunciated by this Court in State of Orissa v. Dr. (Miss) Binapani Dei AIR 1967 SC 1269 as also the observations in Administrative Law by H.W.R. Wade, 5th edn., pages 310-11 that the act in violation of the principles of natural justice or a quasi-judicial act in violation of the principles of natural justice is void or of no value. In Ridge v. Baldwin [1964] AC 40 and Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 the House of Lords in England has made it clear that breach of natural justice nullifies the order made in breach. If that is so then the order made in violation of the principles of natural justice was of no value ... " 15.4 Further reliance is placed on the following judicial pronouncements: a) 249 ITR 216 (SC) Tin Box Co. v CIT b) 82 ITR 824 (SC) CIT v. Electro House c) 344 ITR 541 (Del) CIT vs. Eshaan Holding (P.) Ltd. 15.5 In view of the aforesaid, it be held that, assessment has been framed in violation of principles of natural jus....
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....s duly supported by a scientific method which deserves to be uphold. Further, Ld.CIT DR submits that Ld.CIT(A) on assumption basis reduced the cost of production vis-à-vis GP rate and therefore, he prayed for the confirmation of the order of the AO in this regard. 10. Heard the contentions of both the parties and perused the material available on record. From the perusal of order of Ld.CIT(A), we find that Ld. CIT(A) has considered various aspects and contention raised by the assessee in its order. The observations made by Ld.CIT(A) as contained in para 6.3.31 to 6.3.38 are as under :- 6.3.31 I have duly considered the assessment order as well as submissions of the appellant. During the course of search and survey at premises of the appellant, all the functional activities of the factory like Printing, Coating Lamination, Cutting Pouch Making etc. were made to run at full capacity from 1:50 pm to 4:07 pm. The opening and closing units of electricity at 1:50 pm and 4:07 pm were 15,47,903 units and 15,47,990 units respectively. Thus, 87 units of electricity was consumed in 137 minutes. As per detailed calculation given in the assessment order, the Assessing Officer....
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....tor or basis for determining the duty liability that too on imaginary basis especially when Rule 173E mandatorily requires the Commissioner to prescribed/fix norm for electricity consumption first and notify the same to the manufactures and thereafter ascertain the reasons for deviations, if any, taking also into account the consumption of various inputs, requirements of labour, material, power supply and the conditions for running the plant together with the attendant facts and circumstances. Therefore, there can be no generalization nor any uniform norm of 1046 units as sought to be adopted by the Revenue especially when there is no norm fixed under Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. In the following case laws, it....
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....scientious view that the learned CIT (Appeals) has rightly reversed the findings of the Assessing Officer" 4. The aforesaid findings are arrived at by the Tribunal on the basis of relevant material before it. It is the finding of the Tribunal that some variation during few months in the electricity consumption cannot be a ground and the addition made by the Assessing Officer on that premise wus un presumption. It is in the realm of appreciation. No error was committed by the Tribunal in arriving at such finding. The finding being in nature of finding of fact, the present appeal does not raise any substantial question of law for consideration. It is well settled that the appeal under section 260A of the Act cannot be entertained when the order of the Tribunal rests on fining of facts." 6.3.35 Hon'ble Punjab & Haryana High Court in the case of CIT vs. Ram Steel Industries [2015] 62 taxmann.com 41 (Punjab & Haryana), wherein Assessing Officer in original assessment, made an addition on account of suppressed sale of finished goods. Later on Commissioner cancelled assessment under section 263 and directed Assessing Officer to pass a fresh assessment order. In pursu....
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.... in the hands of the assessee on account of the alleged suppression in production and also Alleged investment in purchase of raw material. In view thereof, we hold that no addition on account of profit on the sale of unaccounted production or on account of unexplained investment merits to be made in the hands of the assessee. We are also in agreement with the observations of CIT (Appeals) in deleting the aforesaid addition as no independent evidence has been brought on record to establish that the assessee had, a) suppressed its production and; b) it made sale of its unaccounted production, outside the books of account. Upholding the order of the CIT (Appeals)we dismiss the ground Nos.1 and 2 raised by the Revenue." 6.3.37 Hon'ble ITAT Kolkata in the case of ITO vs. M/s. Hemraj Rice Mills (I.T.A No. 578/Kol/2011 dated 30.04.2014) held as follows: "8. We have heard both the ld. Counsel and perused the record. We find that the AO has not been able to point out any defects in the books of account of the assessee. Nothing has been brought on record that there is any evidence of suppression of sales by the assessee. We find that variation in the consumption of elec....
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....ent, GST Department and regularly filing its prescribed returns which was not considered. (v) The Assessing Officer has calculated production on the basis of production of a particular process i.e. cutting and pouching which is the end process of the production of the appellant company. The fact cannot be denied that the appellant company is engaged in production of highly customized products with each product and stage of production consuming different amount of electricity (vi) As pointed out by the appellant, production of the company is dependant on various external factors, including a Production process is offline therefore the output of one stage is fed manually to next stage b Size and volume of orders affects the capacity utilization of plant c Labour productivity d Quality of raw material used, size and thickness of the raw material used. e Type of material to be produced as customised as per customer demands f During the testing and sampling phase the machine is run multiple times adding nothing to the production but adding cost to company inform of electricity consumption, material wastage, etc. ....
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....) has taken GP rate of 10.70% which is average GP rate of AYs 201314 to 2018-19. 12. As observed above, in para 6.3.39, Ld. CIT(A) has taken the rate of production of finished goods per unit of electricity at 2.0 KG per unit though he himself accepted the contentions raised by the assessee which are summarized in para 6.3.38 of the appellate order as reproduced above wherein Ld.CIT(A) has accepted that measurement of electricity consumption was not the best possible method of computing undisclosed sales or income. In the said para, Ld. CIT(A) further observed that when no reason or justification was given for the estimation of production more particularly looking to teg fact that books of accounts maintained are not rejected by the AO himself. Further, the said books of account were regularly inspected by other government agencies like Excise Department or VAT Department etc. Ld. CIT(A) also agreed with the claim of the assessee that the production is also dependent on various external factors like (a) offline production process, (b) size and volume of the orders affects the capacity utilization of plant, (c) labour productivity (d) quality of raw material, size and thickness, (....
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....found during the survey proceedings, in an arbitrary manner. 3. That the learned CIT(A)-24, New Delhi has grossly erred both on the facts and in circumstances of the case and in law by confirming the addition of Rs. 3,17,33,177/- by giving partial relief on account of unaccounted purchase u/s 69 rws 115BBE of the Income Tax Act, 1961 without any proper reasoning and without any supporting incriminating material found during the survey proceedings, in an arbitrary manner and ultimately leading to double taxation on account of ground no. 1 mentioned above. 4. On the facts and in circumstances of the case and in law the Commissioner of Income-Tax (Appeals) grossly erred in confirming the generation of single DIN for order of assessment u/s 153A of the Income Tax Act, 1961, which is bad in law as per circulars No.19/2019 dated 14.08.2019. 5. On the facts and in circumstances of the case and in law the commissioner of income-Tax(Appeals) grossly erred by dismissing the ground for generation of single DIN for order of assessment u/s 153A and 143(3) of the Income Tax Act, 1961, which is bad in law as per circulars No. 19/2019 dated 14.08.2019. 6. That t....
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....f electric consumption and accordingly, by following the same observations, the additions in the year under appeal is hereby, deleted. Accordingly, captioned grounds of assessee's appeal are allowed and captioned grounds of Revenue's appeal are dismissed. 19. Ground No.3 of the assessee and Ground No.3 of the Revenue are with respect to the addition of INR 4,65,79,617/- made by the AO on account of alleged excess stock found during the course of survey which was reduced to INR 3, 17,33,177/- by CIT(A). 20. Before us, Ld.AR re-iterated the submissions made before Ld.CIT(A) in this regard wherein it is contended that the stock found during the course of survey was quantified and inventoried in Annexure SF 1 to SF 6 which are the inventory sheets prepared at various factory sites and godowns of the assessee company. It is submitted by Ld.AR that from the perusal of these sheets which are available at pages 38 to 43 of the Paper Book filed by the assessee, it could be seen that they contained the quantity in "0.00 KG meaning thereby in round figures such as 9200 KG, 53,000 KG, 3060 KG, 2418 KG, 5250 KG, 4000 KG" etc. and in none of the case, it is given in the odd figures....
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....ly sales figures have been deducted from the stock and manufacturing figures have not been added. Further purchase figures of raw material has been added but consumption figures have not been reduced. 15.2 It is submitted that statement of Sh. Sanjay Gupta recorded and he informed that he was working in the company only for the last three years. On the specifie question on migration of the data from Tally 7.2 to Tally ERP, the accountant Sh. Sanjay replied that technical assistance from service provider was obtained who installed and migrated the data and so thereafter we are not maintaining data on Tally 7.2. It was also explained that they were feeling difficulty in filing returns of GST in Tally 7.2 like uploading data for GST-R and so they have shifted to ERP. On the specific question of books of account of the financial year, it was replied that only current financial year data is available in the system while earlier data was available in pen-drive which was destroyed and so not available with him but the same can be obtained from the chartered accountant S.K. Varshney and Associates. Ld. ACIT while recording the statement also raised question on the Tally data for a....
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....tant has specifically stated that previous year's data was destroyed by him and so earlier data was obtained from the chartered accountant for which answers were required to be obtained from the chartered accountant as the Tally ERP 9 was started w.e.f. 01-01-2018 as earlier Tally 7.2 was maintained. The product may not be bought during the year in concern but the stock might be continuing due to specific colors utilised from time to time. The Ld.ACIT or the assessing officer has not raised any question to the Chartered Accountant for understanding the reason if there was any doubt in their mind. It is submitted subsequently. Ld. ACIT during survey raised question on packaging material used for chewing tobacco of some of the parties etc. to which hereplied that orders were received on phone by his seniors and they maintain such record of purchase orders. Ld.ACIT also raised question on fire occurred in the premises of factory and the bills which were destroyed prior to Financial Year 2016-17 but the accountant being new, he was not aware about the same. Exactly, though he answered in reply to question no. 37 that there was fire incident in the factory at ground floor in which h....
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....,72,22,239/- has been calculated amounting to Rs. 4,65,79,617/- which was added by the AO during assessment as excess stock on account of unaccounted purchases u/s 69. 15.4 It is submitted that during the course of assessment proceedings vide letter dated 24-12-2019, it was submitted that survey team has calculated the unaccounted production in arbitrary manner and it was further requested to provide copy of statements recorded and also objection has been raised on the working done by the survey team. On the stock, it was explained that the figures adopted on physical verification of stock are absurd as company never maintained closing stock more than 4.54 crores which was declared at the end of the year during the year in concern. In the earlier years, opening and closing stock's figures are hereunder stated: Year ending on Purchases (in Rs) Sales (in Rs) Closing stock (value in Rs) 31-03-2012 5,40,94.281 6,55,11.109 69.20.911 31-03-2013 3.72,68.501 5.29,00.718 1.24,28.440 31-03-2014 4.19,35.132 5,84,56,282 2.32,02,186 31-03-2015 7,80.91.380 9.86,64,854 2.52,02,175 31-03-2016 14.61.21.632 18.57.61.42....
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....ng the finished product as per electricity consumed so time left for calculating the stock was not much due to which they have simply calculated the quantity in round figures. After the survey various efforts were made to get the details of calculation but the assessing officer was unable to provide the details due to which proper reply or comment on the calculation could not be given. Despite this, assessee in the reply submitted that : i) The company never maintained such a huge closing stock as calculated by the survey team ii) The stock of stores and spared taken during the survey amounts to Rs. 1,85,58,050/- which is just the purchases of stores and spears from July to January as evident form the purchase register which clearly indicates that team failed to consider the consumption in pattern of the said material and this questions the relevance of entire physical verification. Copy of ledger is placed on. Page No. 116-117 of PB. Also tabulation of stock on 31st March for each assessment year and comparison of SF5 as recorded by survey team and stock ledger is produced bellow: Assessment year Stock of Inks and consumables as on 31st March in comparison ....
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....gth then answer". To the further question number 46 about his position to verify these details he replied with "no" which clearly states that neither he affirms such physical verification done nor he approves the amount computed thereto. He further as an answer to question number 48 stated that,"there will be a detailed explanation for you as I need some time to review everything and produce the correct answers." An affidavit by Shri AnujSood denying the figure arrived after physical verification and statement u/s 131(1)(a) are placed on page number 118-127 of PB Thus it is evident from the above that the addition made is purely on the basis of assumptions, suspicion, and is preposterous without any incrementing material bringing into record which is illegal, unwarranted and forbidden by law. In this regard it is submitted that the ld. AO has not provided the detailed calculation along with working on how the figures of physical stock was calculated. Copy of application filed with Ld. AO is placed on page number 271-272 of PB and subsequently an RTI in this regard was filed on 27/11/2020 and till date no information whatsoever has been provided till date. Copy of acknowled....
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.... iii) The calculation of the stock of the survey team has taken an arbitrary figure of gross profit in arbitrary manner as no details were provided because gross profit is unimaginable and does not hold correct for the assessee's industry iv) Survey team while calculating physical stock considered only purchases of miscellaneous items from July 2017 to Jan 2018 and failed to include the purchases for April 2017 to June 2017. If the same is considered it will show distorted results, as in manufacturing units consumption of raw materials and stores/ consumables are to be taken into consideration for arriving figures for closing stock. v) It was explained and not noticed that Tally ERP has shown correct opening stock while Tally 7.2 has shown incorrect opening stock and the mistake was merely clerical. 15.6 In the aforesaid circumstances, it is submitted that calculation of stock without based on any calculation at arbitrary figures in arbitrary manner may not be accepted and addition of Rs. 4,65,79,617 may kindly be deleted. 16. Ground 6 of grounds of appeal is in respect of issue that impugned order of assessment has been framed withou....
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....d. Notice is the first limb of this principle- It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed against the person in absentia becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair-play. 13. How then have the principles of natural justice been interpreted in the Courts and within what limits are they to be confined? Over the years by a process of judicial interpretation two rules have been evolved as representing the principles of natural justice in judicial process, including therein quasi judicial and administrative process. They constitute the basic elements of fair hearing, having their roots in the innate sense of man for fairplay and justice which is not the preserve of any particular race or country but is shared in common by all men.....
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....-11 that the act in violation of the principles of natural justice or a quasi-judicial act in violation of the principles of natural justice is void or of no value. In Ridge v. Baldwin [1964] AC 40 and Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 the House of Lords in England has made it clear that breach of natural justice nullifies the order made in breach. If that is so then the order made in violation of the principles of natural justice was of no value ... " 16.4 Further reliance is placed on the following judicial pronouncements: a) 249 ITR 216 (SC) Tin Box Co. v CIT b) 82 ITR 824 (SC) CIT v. Electro House c) 344 ITR 541 (Del) CIT vs. Eshaan Holding (P.) Ltd. 16.5 In view of the aforesaid, it be held that, assessment has been framed in violation of principles of natural justice and therefore the same is vitiated and, not in accordance with law. 17. It is therefore, prayed that the addition so made along with interest levied may kindly be deleted and appeal of the appellant company be allowed. Sir, should your goodself require any further information/documents to dispose off the instant appeal, the appe....
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....ength and then answered. He thereafter, refused to verify the stock inventory prepared further with respect to the excess stock had stated that he has valid explanation which will be offered later. The relevant questions and answers available at Page No.45 to 48 of the Paper Book in para 126 are reproduced as under :- 23. It is also seen that the AO in the recasted trading account at page 24 of the assessment order has taken direct expenses at INR 2.15 crores whereas from the perusal of final accounts, it could be seen that the assessee has claimed direct expenses (employees benefit expenses of INR 2.96 crores), and power and fuels expenses of INR 1.75 crores besides depreciation on the machinery which have not been considered for working of the closing stock as on the date of survey. One more glaring fact ignored by the lower authorities is that when director of the assessee company denied the verification of stock as proper, no efforts was made by the Revenue to re-verifying the physical stock found and quantified which further shows the casual approach taken by the Revenue. The sole basis for alleging the discrepancies is the mis-conception of the AO of transfer of accounting....
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.... not as if the statement was recorded during the search proceedings nor was it the case of the revenue that because of some incriminating material that was unearthed during the search proceedings that it became necessary to record the statement of 'V'. It could not, therefore, be said that the statement of 'V' was a direct consequence or result of obtaining some incriminating material which showed that the assessee had undisclosed income. [Para 13] Quite apart from the above, it was found that the statement of 'V' was recorded behind the back of the assessee. When the assessee was in fact allowed to cross-examine 'V' after his second statement was recorded, 'V' had retracted from his earlier statement. The Assessing Officer, nevertheless, relied upon the earlier statement given by 'V' completely disregarding his subsequent statement.[Para 14] Under those circumstances, the revenue had not been able to raise any substantial question of law which would necessitate admission of the instant appeal." 24. Considering these facts and circumstances of the case and further looking to the facts that if the stock of INR 4.65....
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....uring the course of survey Annexure - SF 1 Udlehonra Nc 927/2/1/2. 528/ Pellian por Road, Khanda, Near Wilhelm Textiles. Gurugram-122001 Contact : 0124-4215232 10124-4215232 Quantaylin Kg:) -Rate/unit Ivaluefin &t.j Aluminum Foil 43935.00 Kg3 249.93 1,0# 80.575 8400.00 Kg5 283.35 3 2960.00 Kgs 166.01 4.94.05- 6000,00 Kas $ 79.550 1.5 1.75 203 1,62. 736 300 12,500 150.00 kgs 112.24 16,686 405.00 kgs1 304:23 123,713 653 4.21 195 1. 32,500) 33 2020 LUC.5.73 10,5.00 kgs 105.53 1.11958 12% 15:005290 Saltner.Ititty & 101 89.53 75 205 Toluene fau's) 1230, 00 Kg: 73.728 200 008 . 53.0001 Grind Total! 1.70.41.813 Reindersord RANENDEKSOOD 1 Noche & Gonature of this partoni . Nimo & 3. Signature bra: Signature of 2-2-11 MORAN CHOUCHIARY Document 3 27 Annexure - SF 2 inventory of Raw Material taket putin y the course cil survey L/s 133A conducted in the case of SOE PRINTPACK INDUSTRIES PVT410 Unt-Il, Knatra No: 928/3/2 Senrampur Road, Khanda Bear Withe nit Tealles, Gurugrain-122001 Contact 3:24-4215232 Fax 0:24-4215232 STOCK FOUND IN UNIT 2 Unit 2 S.No Quantic....
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....ocument 6 Annexure SFS inventory of other misc itents including stores and spares taken during the course of survey W/'s 13SA conducted in the case of ISOE PRINTPACK INDUSTRIES PVT LTD AT Unit-I, Knava No: 927/2/1/2, 928/1 Sehramour Road, Kharula, Unit-It Khasta No. 928/3/2 Hear Wilhelm Textiles, Gutvgrain-122001 Contect 0124-4215232 Particulvis Fax : 0124-4215232 Qúa itity Rate(ti Rs.) Gutvgrain-122001 Valuejin Rs ) JA Atlytic Raten PC 4595K 9600 208.33 28,63.968 Arpasol Blue 2GLN 20.00 Kgs 1600 32.000 Atpasolpink SBLG 10.00 KAS 1700 47,000 Albasol Yetlode R 130,00 KÄS 1.43.000 Abbau um Powder: 7520 50.00 Kgs 700 35.000 @Pistar XOV 175 RC Ink 314 12.560 SAD.CD KES 89 14.7600 380.00 kgs) 115 43,700; DK 200 Po /sie's DIC 500B 400.00 Kgs 226.86 90.744 30 Pcs O 800,00.Kes! 250.63 2,00,50- 950 2.60 CCO 5,85,000 50,250 200 G:04170267 195:00 Kgs 115 22.425 20.00 Kga 7:0 $2,000 1674.00 Krs 365.49 270.00 xga 225 8052:00 05 14,01.643; 432.00 865 Lamittap Geranium 350 PR 3 270 00 KgS LEinitop Volet 520 PR-2 180.00 Kgs Docthe CAC USOUN 242 -40.00c ....
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....,100.00 1.43,000.00 Aluminium Powder - 7520 50.00 Kgs 700.00 35,000.00 50.00 Kgs 700.00 35,000.00 Curestar XUV-175 RC Ink 40.00 Kgs 314.00 12,560.00 40.00 Kgs 314.00 12,560.00 Ethylene Vijfl Acetata Co Polyet 800.00 Kgs 250.63 2,00,500.0 800.00 Kgs 250.63 2,00,500.00 Gold Bronze Powder 280.00 Kgs 950.00 2,66,000.00 280.00 Kgs 950.00 2,60,000.00 Hostaperm Blue BX-IN 900.00 Kgs 650.00 5,85,000.00 900,00 Kgs 650.00 5,85,000.00 Hostaperm Green GNX IN 75.00 Kgs 750.00 56,250.00 76.00 Kgs 760.00 56,250.00 Hostaperm White 2310 100.00 Kgs 260.00 26,000.00 100.00 Kgs 260.00 26,000.00 Kwality Violet Toner V-77 60.00 Kgs 700.00 42,000.00 60.00 Kgs 700 00 42,000.00 Lemilop ARSR Black 1000 Co 1,674.00 Kgs 165.39 2,76,858 00 Unt- 1,674.00 Kgs 165.39 2,76,858.00 Lamtop ARSR Blus 800 Co 270.00 Kgs 181.00 48,870.00 270.00 Kgs 161.00 8,870.00 Lamilog ARSR WIte 110 PR-2 8,062.00 Kgs 174.00 14,01.048.00 8,052,00 Kgs 174.00 14,01,048.00 Carico BR Red 23333 CO- 432.00 Kgs 217.00 93,744.00 432.00 Kgs 217.00 93,744.00 Carried Over 58,048.00 Kgs 1,59,64,409.00 Page 1 Gates Valun Document 9 ISOE PRINTPACK INDUST....