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2019 (2) TMI 1701 - AT - Income TaxAddition on account of the difference in the job work - CIT (A) deleted the addition made by the AO by observing that there was no concealed job work as alleged by the AO - HELD THAT - Addition was made by the AO merely on the basis of the difference of sales shown by the assessee in its books and the excise records. There was no other material available with the AO suggesting that the assessee has carried out any job activity outside the books of accounts. The assessee in support of his claim that it has carried out the job work on behalf of other parties has filed the excise returns, production registers, VAT returns, stock registers, declaration filed to the excise authorities, TDS certificate issued by the loan license party. All these documents are available on record. But the AO has not pointed out any defect in such documents. AO was very much empowered to take the confirmation from the loan license party under section 131/133(6) of the Act, but he failed to exercise his powers given under the statute. DR before us has not brought anything contrary to the finding of Ld. CIT(A). Accordingly, we do not find any reason to interfere in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is dismissed. Addition on account of suppressed production - HELD THAT - AO observed the difference in the production due to the job work carried out by the assessee during the year. We have already adjudicated the similar ground of the Revenue vide paragraph numbers 9 to 9.4 of this order. The reasoning given in ground No. 1 of the Revenue as discussed above will also be applied to this ground as well with full strength. Therefore, we do not find any infirmity in the order of the Ld.CIT(A). Hence, the ground of appeal of the Revenue is dismissed. Addition on account of lower GP ratio - AO has estimated the gross profit at the rate of 25% - HELD THAT - If the AO was not satisfied with the gross profit ratio shown by the assessee, then he should have referred the gross profit declared in the earlier and subsequent assessment year. We find that the assessee in earlier years has shown the GP less than 25% of the turnover. The necessary details of the GP ratios. But the AO has not made any reference to the GP ratio declared by the assessee in earlier assessment years. Therefore we are of the view that the GP ratio taken by the AO is based on his surmise and conjecture. Thus we do not find any reason to disturb the finding of the CIT (A). Hence the ground of appeal of the Revenue is dismissed. Addition on account of undervaluation of closing stock - HELD THAT - The accounting standard 2 issued by the ICAI requires the assessee to show closing stock either on cost or market value whichever is less. The AO in the case on hand has rejected the valuation done by the assessee without adducing any reason thereon. DR before us has also not brought anything on record contrary to the finding of the CIT (A). Hence we do not find any reason to disturb the finding of the Ld.CIT (A). Hence the ground of appeal of the Revenue is dismissed. CIT(A) contravening the provisions of section 251 of the Act by directing the AO to verify the contention of the assessee - HELD THAT - CIT (A) has not restored the matter for fresh adjudication. But it was restored to the AO to adjudicate the issues with the direction. Therefore, we hold that there was not blanket direction provided to the AO which is in contravention to the provisions of section 251 of the Act. AO in giving effect order to the Ld.CIT (A) direction has deleted the addition in its order dated 9th June 2011. The copy of the order is placed on record. Thus we are of the view that once addition deleted by AO, there remains no grievance to the AO. Accordingly, the ground of appeal filed by the Revenue does not require to be adjudicated separately. As such the ground of appeal of the Revenue as discussed above becomes infructuous.
Issues Involved:
1. Deletion of addition on account of the difference in job work. 2. Deletion of addition on account of suppressed production. 3. Deletion of addition on account of low GP ratio. 4. Deletion of addition on account of undervaluation of closing stock. 5. Directions to AO for verification of certain additions and expenses. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of the Difference in Job Work: The Revenue contended that the CIT(A) erred in deleting an addition of ?1,90,23,678/- made by the AO due to a discrepancy in job work income. The AO observed a difference of ?7,60,94,713/- between the turnover disclosed in the audited financial statements and excise records, attributing this to concealed job work income and adding 25% of this difference to the total income. The CIT(A) deleted this addition, noting that the job work was done on a loan license basis, and the discrepancy was due to the excise law requirements. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's addition was based on assumptions without any corroborative evidence and that the assessee had provided sufficient documentation to support its claims. 2. Deletion of Addition on Account of Suppressed Production: The AO found a difference of 1,55,56,482 units between the production shown in excise returns and the books of accounts, leading to an addition of ?1,60,23,176/-. The CIT(A) deleted this addition, explaining that the difference was due to job work carried out on a loan license basis. The Tribunal agreed with the CIT(A), reiterating that the AO had ignored the factual explanations and documentation provided by the assessee, and thus, the addition was unwarranted. 3. Deletion of Addition on Account of Low GP Ratio: The AO added ?3,52,600/- to the total income, assuming a gross profit (GP) ratio of 25% instead of the 23.71% reported by the assessee. The CIT(A) deleted this addition, noting that the AO did not provide any basis for the higher GP ratio and that the GP ratio for the previous year was only 22.5%. The Tribunal upheld the CIT(A)'s decision, stating that the AO's estimation was arbitrary and not based on any comparative analysis. 4. Deletion of Addition on Account of Undervaluation of Closing Stock: The AO added ?1,07,220/- to the total income, arguing that the closing stock should have been valued at ?0.34 per tablet instead of ?0.26 per tablet. The CIT(A) deleted this addition, stating that the valuation method used by the assessee (cost or market value, whichever is lower) was appropriate. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide any valid reason to reject the assessee's valuation method. 5. Directions to AO for Verification of Certain Additions and Expenses: The AO made several additions totaling ?52,70,635/- for various reasons, including suppressed sales and disallowance under section 40(a)(ia). The CIT(A) directed the AO to verify the assessee's contentions and modify the assessment order accordingly. The Tribunal noted that the CIT(A) had not issued a blanket direction but had provided specific instructions for verification. Furthermore, the AO, in compliance with the CIT(A)'s directions, had deleted the additions in a subsequent order. Hence, the Tribunal dismissed this ground of appeal, deeming it infructuous. Conclusion: The Tribunal upheld the CIT(A)'s decisions on all grounds, dismissing the Revenue's appeal. The Tribunal emphasized that the AO's additions were based on assumptions and lacked corroborative evidence, while the assessee had provided sufficient documentation to support its claims. The Tribunal also noted that the CIT(A)'s directions for verification were appropriate and had been duly complied with by the AO.
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