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TMI Blog2014 (1) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... - Assessing Officer has not pinpointed any specific defect in the books of account of the Assessee – thus, CIT(A) was justified in holding that there was no basis for the Assessing Officer to reject the waste/scrap claimed by the Assessee and estimate the generation of scrap at 5% of material consumed and production loss at 1% of the total production - The Assessee had failed to produce cost records which it was statutorily required to maintain but the same was neither produced before Assessing Officer or CIT(A) though the Assessee claims that the various records prescribed have been maintained by it - The Assessee has not given any valid justification for not producing the aforesaid records for verification though it claimed to have maintained the same – Decided partly in favour of Assessee. - ITA No.294/Ahd/2010 - - - Dated:- 12-6-2013 - G C Gupta And Anil Chaturvedi, JJ. For the Appellant : Shri Ravindra Kumar For the Respondent : Shri Dhiren Shah ORDER:- PER : Anil Chaturvedi This appeal is filed by the Revenue against the order of CIT(A)-VIII, Ahmedabad dated 9.09.2009 for assessment year 2006-07. 2. The facts as culled out from the order of lower autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer further noticed that the Assessee was required to maintain cost records under the Companies Act, 1956. He accordingly directed the Assessee to furnish the cost records. Since the Assessee did not produce the cost records, Assessing Officer proceeded to reject the book results under Section 145 of the Act and thereafter proceeded to estimate the generation of scrap at 5% of the material consumed and the production loss at 1% of the total raw material consumed and made disallowance of Rs. 81812227/- and it was worked out as under:- Sr. No Particulars Waste/scrap Claimed by A Restricted in Kgs % Disallowance (Kgs) Rate per Kgs Amount 1 Scrap Generated 9,11,237 2,92,814 6,18,423 90.05 5,56,88,992 2 Process Loss 3,48,702 (5.95%) 58,605 (1%) 2,90,097 90.05 2,61,23,235 Total- 12,59,939 3,51,419 9,08,520 8,18,12,227 6. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). Before CIT(A), Assessee filed additional eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se has been verified from the details submitted by the appellant. It is noticed that the appellant has maintained proper accounts. Further, these accounts were produced before the A.O during the assessment proceedings. The appellant vide letter dated 23-12-2008 [Page No. 135 136 of Paper Book] submitted all relevant records in respect of scrap generation and burning loss, daily production records, excise records alongwith month-wise summary of consumption / production data and costing of finished goods. The A.O has not come across any defect or discrepancy in the details submitted by the appellant. The appellant is engaged in the business of manufacturing of Carbon and Alloys Steel, S.S. seamless and Welded Tubes and Pipes and the scrap generated and sold by it is subject to Excise Duty and Sales Tax. The books of accounts of the appellant are audited under the Income Tax Act and under the Companies Act and it is not a case of the A.O that the appellant did not furnish details regarding accounts maintained by it. 4.16 As regards the maintenance of Cost Records u/s. 642(1) r. w. s. 209(1)(d) of the Companies Act, 1956 as relied upon the A.O, It is seen that the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.45% N.P. Ratio 3.30% 4.80% 4.98% From the perusal of the aforesaid chart, it is evident that there is no material variation in G.P. Ratio N.P. Ratio. The A.R. also produced before me a statement showing percentage of scrap and process loss in production process for the year under appeal as well as for the earlier years and subsequent years. The scrap percentage and process loss percentage of Seamless Tubes/ Coils is as under:- F.Y. 2003-04 F.Y 2004-05 F.Y. 2005-06 Scrap % 15.14% 15.44% 15.56% Process Loss % 7.02% 5.56% 5.95% The aforesaid chart was also submitted before the A.O during the course of assessment proceedings. There is no such material variation in scrap and process loss percentage during the period in comparison to last two preceding financial years. The appellant has also maintained the Books of accounts under the Companies Act and under the Income Tax Act and has also maintained the Excise Records relating to rawmaterial consumption, production, scrap generation and sale of finished goods showing the complete partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others 150 CTR 267 wherein the Hon'ble Court has held that:- "In view of the finding reached by the Tribunal that there were no discrepancies or defects pointed out in the books of account and further that they were regularly maintained and also on the finding that there was no material brought on record to establish that purchases or expenses were inflated or sales suppressed and a/so in view of the finding that this was not a case that there was no method of regular accounting employed, the Tribunal was fully satisfied in coming to the conclusion that the provisions of s. 145(2) could not be invoked. This conclusion is based on finding of fact and raises no question of law. The Tribunal, as regards the raw material used, took note of the fact that according to the assessee, the average weight changed from time to time looking to the quality and market requirements. The explanation so offered has not been controverted by the Revenue by bringing any material on record, as held by the Tribunal. Looking to the explanation offered and three sets of details of average weight found and furnished before the lower authorities on different occasions, the Tribunal observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urmises and conjectures and same cannot be upheld. In view of this I don t find any ground to sustain the addition of Rs. 8,18,12,227/- in the income of the appellant. Therefore, the addition so made by the A.O. is hereby deleted and the appellant succeeds in this ground of appeal. 7. Aggrieved by the aforesaid order of CIT(A) the Revenue is now in appeal before us. Before us the learned D.R. submitted that the production process does not involve any melting process. During the course of assessment proceedings, the Assessee was asked to produce the parties to whom it had sold scrap but the Assessee did not produce any of the parties. He further submitted that the Assessee was required to maintain cost records as prescribed under Section 642 (1) read with Section 209(1)(d) of the Companies Act, 1956. The auditors of the company have also stated in their auditor report that the Government has prescribed maintenance of cost records for the company and the same are maintained by the Assessee. The learned D.R. further submitted that despite having maintained the cost record, the Assessee did not produce the same for verification either before Assessing Officer or before CIT(A). The ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as compared to earlier years. The assessment of the Assessee for A.Y. 04-05 05-06 was framed under Section 143(3) and no addition on account of process loss and generation of scrap was made in earlier years. He placed on record at page 256, the assessment order for A.Y. 04-05 and for A.Y. 05-06 at page 263 of the paper book. It was further submitted that the conclusion of the Assessing Officer that there is no melting loss is without any basis. He also placed on record at page 74 of the paper book the comparative statement of production process loss and scrap generated for the year under appeal and two previous assessment years. From the aforesaid statement, he pointed out that the percentage of scrap generated was more or less similar to that of immediately preceding assessment year and even the process loss was comparable to earlier years. The learned A.R further submitted that even though the Assessing Officer took nearly four months to submit the remand report but in the intervening period he did not deem fit to carry out necessary cross enquiry from the respective parties in respect of confirmations submitted by the Assessee and also did not conduct any inquiries. He ..... X X X X Extracts X X X X X X X X Extracts X X X X
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