2010 (2) TMI 755 - AT - Income Tax

Rejection of Books of Accounts on the basis of discrepancy in the percentage of production in Central Excise Register. In the absence of valid explanation 1/3 rd of the scrap claim of 29.17% is allowed on estimate and the balance of 19.45% is treated as suppressed production and the addition made. - Held that - Without pointing any specific defect or difference, in our considered view, the AO was not correct in not accepting the percentage of scrap or wastage shown by the assessee. decided in favour of Assessee.

Summary

Issues:
Department's appeal against CIT(A) order for AY 2005-06 regarding deletion of addition for suppressed production.

Analysis:
The department objected to the deletion of Rs.64,53,524/- addition made by the AO on account of suppressed production. The AO found discrepancies in the Central Excise Registers regarding the percentage of output in each category of raw material used by the assessee. The AO rejected the books of account and made additions based on discrepancies in wastage claimed by the assessee. The CIT(A) found no change in facts compared to earlier years and noted errors in the AO's computation of wastage percentages. The CIT(A) concluded that the AO did not compare like with like and deleted the addition.

The department argued that the AO did not examine additional evidence and detailed submissions before the CIT(A). The department contended that discrepancies in Central Excise registers were not pointed out in earlier years, leading to non-following of previous Tribunal orders. The assessee's counsel emphasized strict checks by the Excise department and acceptance of wastage/scrap shown in returns. The counsel argued that the AO failed to compare production and wastage of each item separately, leading to erroneous conclusions. The Tribunal found no infirmity in the CIT(A)'s findings, noting no material defects in the AO's reasoning. The Tribunal held that the AO should have pinpointed specific defects or discrepancies in the current year compared to earlier years if not following previous orders.

The Tribunal confirmed the CIT(A)'s order, dismissing the department's appeal. The Tribunal emphasized the importance of comparing like with like and the duty of the AO to identify specific differences or defects if not following previous orders. The Tribunal upheld the CIT(A)'s decision based on the lack of evidence of discrepancies in the current year compared to earlier years.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition for suppressed production, emphasizing the importance of comparing like with like and identifying specific differences if not following previous orders. The department's appeal was dismissed, confirming the CIT(A)'s order for the assessment year in question.