2019 (3) TMI 588 - HC - Income Tax

Suppressed production - manufacturing processes leads to loss of material which depending upon the product is in the range of 3% to 10% - HELD THAT - AO had carried out minute examination of the material on record. He had held and established that the sale of finished product was below what the assessee ought to have produced and sold even ignoring the production loss and loss of caustic soda and soda flakes during the chemical process. The entire issue was thus, purely factual in nature based on the evidence on record. CIT(A) and the Tribunal confirmed this view of the AO. When two Revenue Authorities and the Tribunal had concurrently decided the issue based on appreciation of evidence on record, we do not find any question of law arising. The assessee s contention of appropriate opportunity being not given by the AO was also considered and rejected by the CIT(A). Perusal of the order of the AO would demonstrate that sufficient opportunities were granted. The central issue was only one namely of the production loss viz. a viz. stock shown by the assessee in the books. The assessee had itself produced voluminous evidence. This is not a case where the Assessing Officer had caught the assessee by surprise. There may be minor discrepancy or inaccurate recording of non-essential facts by the CIT(A) and the Tribunal. However, the same would not vitiate the very order or shake the foundation of their orders. No question of law arises

Summary

Issues:
1. Reliability of the appellant's books of accounts and claimed processing loss
2. Justification of upholding the rejection of books of accounts and adhoc addition made by the respondent

Analysis:
1. The appellant, engaged in manufacturing bulk drugs, filed an income tax return for the assessment year 2009-10, which was scrutinized by the Assessing Officer. Discrepancies in raw material consumption and output led to the rejection of the appellant's books. An addition of ?96.98 lakhs was made by the Assessing Officer, which the CIT(A) and the Tribunal upheld. The appellant contended that production loss due to chemical reactions caused the discrepancies, but the Assessing Officer found a significant shortfall in the sale of finished products, leading to the addition.

2. The Assessing Officer meticulously examined the evidence and determined the suppressed production based on factual findings. Despite the appellant's arguments regarding production loss and loss of materials during the manufacturing process, the Assessing Officer, CIT(A), and the Tribunal concurred on the shortfall in the sale of finished products. The courts found no legal question as the issue was factual, supported by evidence. The appellant's claim of lack of opportunity was dismissed as the Assessing Officer provided ample chances for the appellant to present evidence. Minor discrepancies in the lower court's orders did not invalidate the decision.

3. The courts emphasized that the Assessing Officer's decision was well-supported by evidence, and the appellant's failure to meet the expected production and sales figures was established. The rejection of the appellant's books and the addition made were deemed justified based on the evidence presented. As no legal question arose from the case, the appeal was dismissed, affirming the lower courts' decisions.