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TMI Blog2012 (10) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Issue remit back to the file of AO to compare it with industrial standards and corroborate it with further evidence if at all any adverse conclusion is to be drawn on the consumption of material claimed by the assessee. Issue remand back to AO - I.T.A. Nos. 1048, 1049 & 1050/Mds/2012, C.O. Nos. 102, 103 & 104/Mds/2012 - - - Dated:- 31-7-2012 - SHRI ABRAHAM P. GEORGE AND SHRI S.S. GODARA, JJ. Revenue by : Shri S. Dasgupta, JCIT ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : These are appeals and cross-objections filed by the Revenue and assessee respectively, directed against a consolidated order dated 29.2.2012 of Commissioner of Income Tax (Appeals)-II, Madurai, for impugned assessment years. 2. Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment years. Thereafter, assessee moved in appeal before the CIT(Appeals) and the CIT(Appeals) held that there were no substantial variation between the quantum and quality of production between the two units of the assessee. According to him, Assessing Officer had not found any evidence regarding an excessive claim of loss. Further no flaw was noted in the quantitative details of production or sale of manufactured items. CIT(Appeals) was of the opinion that entire production of the assessee was carried on in a factory managed by its supervisors working at various level and there being continuous scrutiny by Central Excise authorities, there could be no excessive claim of loss, of the nature alleged by the Assessing Officer. He, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We find that there is no adequate discussion in this regard in the impugned order. We do not know how the invisible loss was assessed by the assessee. How the assessee complied the data? What was the moisture content in the cotton at the time of purchase? Whether any record was kept for that? What technique the assessee did apply to find out the quantum of invisible loss? What percentage of loss was shown in the preceding years? Is there any variation in the percentage claimed in those years and what was the reason for such variation? These are some of the issues which are to be looked into before determining the quantum of invisible loss. Nothing was done in this regard. We, therefore in the interest of justice set aside the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer for consideration afresh. According to it, invisible loss on consumption material could not be equated with cash. Further, as per the assessee, its books were not rejected and there was no material for making an addition at all. As for the questions raised by the Tribunal, reply of the assessee was that invisible loss was considered by balancing method and data for this was compiled from cotton stock register, yarn producing register and waste stock register. Since balancing method was used, there was no need for any separate technique for quantifying the loss. As per the assessee, there could be variation in the loss due to quality changes, mix changes and changes in end product mix. 5. CIT(Appeals) was appreciative of these con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of CIT(Appeals), it has filed copies of Profit Loss account for the impugned assessment years. As noted by CIT(Appeals), no loss by the name staking loss or invisible loss is appearing in its Profit Loss account or balance sheet of these years. No doubt, assessee had worked out the raw material consumption based on the opening quantities, purchased quantities and closing quantities. This cannot be a reason for arriving at a conclusion that assessee had claimed any staking or invisible loss. As noted by the ld. CIT(Appeals), loss of quantities in production process could vary and at the best, this would be a measure of inefficiency or efficiency of a unit. No doubt, this Tribunal in its earlier order dated 16th February, 2007, hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial norms could be due to production efficiency or inefficiency levels of the units. There is no rule that every unit manufacturing cotton yarn should have same standard of production. None of these factors were considered by the lower authorities. In such a situation, we are of the opinion that the Assessing Officer as well as CIT(Appeals) failed to carry out the direction of this Tribunal for working out excess loss if any claimed by the assessee, by way of increased consumption of raw material, namely, cotton and fibre. We, therefore, feel that the matter has to go back to the A.O. for consideration afresh and he has to work-out the consumption, compare it with industrial standards and corroborate it with further evidence if at all an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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