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Issues involved: Appeal against CIT (A) order for assessment year 2005-06 regarding addition on account of estimated excess scrap generation.
Summary: 1. The sole issue raised in the present appeal is regarding the addition made by the Assessing Officer on account of excess generation of scrap amounting to Rs. 2,57,351/-. The Assessing Officer calculated the excess scrap generated based on the rate of generation in subsequent years, resulting in an addition to the assessee's income. 2. The assessee contended before CIT (A) that there was no basis for adopting the 2% scrap generation rate as there were no defects in the accounts or stock records. The CIT (A) partially upheld the addition, citing higher scrap generation in subsequent years and lack of quantitative details of finished goods. The CIT (A) directed the Assessing Officer to consider actual scrap generated and reduced the rate of scrap for partial relief. 3. During the appeal, the assessee argued that the books of account were maintained regularly and accepted by the Assessing Officer, with no defects found. The assessee maintained stock registers for scrap generation, verified by excise authorities, challenging the CIT (A)'s decision to uphold the partial addition. 4. The Tribunal found that there was no material evidence to support the finding of excess scrap generation during the relevant year. While the Assessing Officer based the addition on subsequent years' data, the Tribunal noted that this inference was merely a suspicion. As the assessee maintained stock registers for manufacturing and scrap generation, and the trading results were accepted, the Tribunal concluded that no addition was justified. Therefore, the Tribunal deleted the entire addition, allowing the appeal filed by the assessee.
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