9911796707
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Issues Involved:
1. Deletion of additions on account of inflation in the consumption of nickel catalyst. 2. Deletion of additions on account of suppression of yield. 3. Deletion of disallowance of advertisement and publicity expenses. 4. Rejection of books of accounts under Section 145(2). 5. Suppression of sales of oxygen gas. 6. Levy of interest under Sections 234B and 234C. Detailed Analysis: Issue 1: Deletion of Additions on Account of Inflation in the Consumption of Nickel Catalyst The Revenue argued that the CIT(A) wrongly deleted the additions for excessive consumption of nickel catalyst. The AO observed that the consumption of nickel catalyst was significantly higher and erratic across various months. However, the CIT(A) noted that the consumption for the assessment year 1991-92 was lower than the previous year (1990-91), where it was accepted by the AO. The assessee provided evidence showing that the variation was due to different types of oil used and other operational factors. The Tribunal upheld the CIT(A)'s decision, stating that the AO's comparison with the year 1986-87 was not justified. Issue 2: Deletion of Additions on Account of Suppression of Yield The AO noted a substantial fall in the GP rate and yield of vanaspati ghee, leading to the addition on account of suppression of yield. The CIT(A) deleted these additions, observing that the yield for the assessment year 1991-92 was higher than the previous year and that no defects were pointed out in the books of accounts. The Tribunal confirmed this, emphasizing that the AO's comparison with earlier years was not justified and that the book results could not be rejected without specific defects. Issue 3: Deletion of Disallowance of Advertisement and Publicity Expenses The AO disallowed Rs. 60,000 out of advertisement and publicity expenses, citing the lack of a stock register for the distribution of wall clocks. The CIT(A) deleted this disallowance, considering the total turnover of Rs. 30 crores and the reasonableness of the expenses. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the deletion of the disallowance. Issue 4: Rejection of Books of Accounts under Section 145(2) For the assessment year 1991-92, the AO rejected the books of accounts due to low yield, low GP rate, and excessive consumption of raw materials. The CIT(A) held that there were no valid reasons for rejecting the book results for this year. The Tribunal agreed, stating that no specific defects were pointed out in the books of accounts, and the reasons provided by the AO were not sufficient grounds for rejection. For the assessment year 1992-93, the AO found evidence of unaccounted sales during an inspection by the Excise & Taxation Department. The CIT(A) upheld the rejection of the book results for this year, and the Tribunal confirmed this decision, agreeing that the evidence justified the rejection. Issue 5: Suppression of Sales of Oxygen Gas The AO made an addition for suppression of sales of oxygen gas, assuming a production ratio with vanaspati ghee. The CIT(A) deleted this addition, noting that the production of oxygen gas was not directly related to vanaspati ghee production and that there was no evidence of unaccounted sales. The Tribunal upheld the CIT(A)'s decision, finding the addition unjustified. Issue 6: Levy of Interest under Sections 234B and 234C The AO charged interest under Sections 234B and 234C in the demand notice without specific directions in the assessment order. The CIT(A) upheld this, but the Tribunal quashed the AO's order for charging interest, citing the Supreme Court's decision in CIT vs. Ranchi Club Ltd., which requires specific directions in the assessment order for charging such interest. However, the Tribunal noted that interest on the basis of returned income would still stand. Conclusion: The Tribunal dismissed the cross-objection filed by the Revenue for the assessment year 1991-92 and upheld the CIT(A)'s deletion of the additions for excessive consumption of nickel catalyst and suppression of yield. The Tribunal also confirmed the deletion of the disallowance of advertisement and publicity expenses. For the assessment year 1992-93, the Tribunal upheld the rejection of the book results and the addition for suppression of sales but reduced the addition amount. The Tribunal quashed the AO's order for charging interest under Sections 234B and 234C but maintained the interest on the basis of returned income.
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