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TMI Blog2013 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... as recorded that the extra consumption remained un-reconciled by the assessee worked out at 14.12% as per the annexed chart. In these facts, it would be most reasonable and proper to estimate the extra consumption at 15% as against 20% estimated by the CIT(A), as the assessee has filed a chart showing extra consumption remained un-reconciled at 14.12% and this ground of appeal, in this issue is partly allowed - Directed to work out the extra consumption at 15% as against 20% directed by the CIT(A). Estimation of G.P. rate - Estimatimation of profit element at 38% on the ground of extra consumption made by the CIT(A) – Held that:- Entire amount of extra consumption could not be added as income in the hands of the assessee, and that only profit element shown could be added as income. The CIT(A) has estimated the average GP at 35% as fair and reasonable estimate of income, considering the GP rate declared by the assessee in the relevant year as well as in the other years. There being no mistake in the order of the CIT(A), on this issue and his estimate of GP at 35% being most reasonable, the same is upheld, and the ground of the appeal of the assessee, on this issue is dismissed – ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the extra consumption is also on the higher side. The learned DR has opposed submissions of the learned counsel for the assessee. He submitted that a number of defects were pointed out by the AO in the assessment order, and the assessee could not reconcile the same, and therefore, the rejection of the books of accounts by the AO was justified. He submitted that the extra consumption was rightly estimated at 25% by the AO for the reasons recorded by him in the assessment order, and should be sustained. He submitted that the entire expenses on purchase of raw material has already been debited by the assessee in its books of accounts, and therefore, 100% of the unaccounted sales should be added as income in the hands of the assessee, and not merely the average GP at 36% of such extra consumption should be added, as done by the CIT(A). He submitted that the AO has passed a well reasoned assessment order in this case, and should be sustained. He relied on the order of the AO. 5. We have considered rival submissions carefully, and also the orders of the AO and the CIT(A). We find that the AO has pointed out a number of defects in account books of the assessee, which could not be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumption. We are in agreement with the decision of the CIT(A) in estimating the profit element out of extra consumption, and not adding the entire sales as well as extra-consumption as income in the hands of the assessee. We also find that there is no direct evidence of any unaccounted sales made outside the books of accounts. However, the addition is partly upheld on account of estimating on the basis of preponderance of probabilities, in the facts of the case of the assessee. Accordingly, the order of the CIT(A) in estimate the profit element at 36% of such extra consumption is fair and reasonable, is upheld and the grounds of the appeal of the assessee are dismissed. 8. ITA No.765/Ahd/2013 - Asstt.Year 2008-2009 (Revenue's appeal). 9. The only ground raised in this appeal of the Revenue is as under: "1. The Ld.CIT(A) has erred in law and on facts in directing the A.O. to work out the extra consumption at 10% and adopt GP at 36% of such extra consumption without appreciating the fact that the assessee was manufacturing drugs on loan and license basis. It had purchased finished goods from open market and sold it without maintaining any quantitative details. As per Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the assessee by the department. Both the parties before us submitted that facts of the case are identical, as in the assessment year 2008-2009 of the assessee. 14. We have considered rival submissions. For the reasons recorded while disposing of the appeal of the assessment for A.Y.2008-2009 in ITA No.481/Ahd/2013 in the foregoing paras of this order, we hold that the books of accounts were rightly rejected by the department, and confirm the order of the CIT(A) on this issue. 15. Other issue in this appeal of the assessee is regarding the estimation of extra consumption at 20% by the CIT(A) as against 40% by the AO. We find that the CIT(A) has given a finding that the working of the extra consumption made by the AO could not be upheld in toto because it suffers from various infirmities. The CIT(A) has recorded that the AO had worked out the consumption in case of many items on the basis of the formula/information given on the packing material and without considering the material procured by the assessee or explanation offered by him. He has further recorded that it is also noticed that there were arithmetical mistakes in case of working made in some of the products, an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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