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TMI Blog2014 (6) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee's appeal "1. The Ld. CIT(A) has erred both in law and on facts of the case in confirming the action of AO in rejecting the books of account u/s 145 of the Act. The Ld. CIT(A) ought to have held that AO was not right in rejecting assessee's books of accounts." Ground of Revenue's appeal in ITA No. 3091/Ahd/2010 "1. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of Rs.48,04,034/- made on account of disallowance of Freight Inward, Outward & Octroi expense. 2. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of Rs.1,10,27,492/- made on account of suppressed conversion charges." First we take ITA No. 2809/Ahd/2010 (Assessee's appeal) 2. The assessee's sole ground of appeal is against confirming the addition of Rs.64,09,187/- made by the ld. A.O. u/s. 143(3). The assessee company derives income from the business of job work of manufacturing of alloys, steel casting as in past. The assessee had declared Gross Profit of Rs. 4,62,27,426/- on sale of Rs.19,69,19,616/- which works out to 22.57% as against gross profit of Rs.4,75,88,572/- on sales of Rs.17,67,36,617/- which works out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec.145(3), the G.P. rate is applied at 26.73% (as declared by the assessee for the preceding year) on the sales of Rs.19,69,19,616/- for the year under assessment. Thus, the Gross Profit is worked out as under :- Sales for the year declared : Rs.19,69,19,616 GP rate applied as discussed above : 26.73% GP declared : Rs 4,62,27,426 GP works out : Rs 5,26,36,613 Short fall in GP declared (i.e. 52636613-46227426) : Rs 64,09,187 In view of the above discussion, the trading addition of Rs.64,09,187/- is made on account of low Gross Profit." 3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had confirmed the addition by observing as under: "2.3 I have considered the submission made by the appellant and observation of the AO. During the appellate proceeding, the appellant was asked to file the rates of conversion charges and its increase over the last three or four years. The appellant has filed copy of the agreement, and it is seen that the rate of conversion of the job charges were fixed on first of April 2003 and they have remained the same till date. It is very interesting that over the last three years there has been no change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions were made by the ld. A.O. in A.Y. 03-04 & A.Y. 06-07 in ground nos. 2 & 3 and Revenue's ground of appeal in A.Y. 06- 07 on identical issues, in both the years, the CIT(A) deleted the addition on GP addition, which were challenged by the Revenue before the Hon'ble ITAT, but Revenue's appeal in both years have been dismissed. The ld. A.R. further submitted that assessee's books of account are audited which had been furnished in Form No. 10CCB along with return. The ld. A.O. had wrongly rejected books of account u/s. 145 of the Act as no defects had been pointed out. The A.O. rejected in the books result u/s. 145 of the IT Act on account of non maintaining the stock register of raw material and closing stock. The assessee also claimed abnormal burning loss during the year and GP rate also have fallen down. The stock register impounded by the A.O. and was with him. All the required details were submitted before the A.O. Reason of declined GP had been explaining before both the authorities. The ld. A.O. simply compared the various datas of the assessee and came to conclusion that assessee had suppressed the income. Thus, he requested to delete the addition made by the A.O. and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m which had higher margin and the same was not repeated in the year under consideration. This factual aspect has not been controverted by the revenue by bringing any contrary material on record. Further, during the year under consideration, increase in diesel price and power also contributed to fall in gross profit. The learned CIT(A) has given a finding that the assessee has declared process loss of 10% to 11% consistently. Further, the assessee is liable to excise whereupon the assessee is required to maintain day to day stock register in RG 23. During the course of survey proceedings carried out at the assessee's premises on 12-10-2004, the stock register maintained was also impounded. In view of these facts, the learned CIT(A) has given a finding that the assessee had maintained day to day stock registers. These factual aspects have also not been controverted by the revenue by bringing any contrary material on record. In view of the totality of the aforesaid facts we are of the view that in the present case, no interference is called for to the order of the learned CIT(A). We thus confirm the findings of the learned CIT(A) and dismiss this ground of appeal of the revenue." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are same in the current year. As in that year, the honorable ITAT observed that the department has not pointed out as to whether this freight and octroi was paid in respect of raw materials brought from the principal or finished goods supplied back to the principal. Under the circumstances, the finding of the CIT9A) that the freight and octroi expenditure claimed by the assessee has incurred on purchase of consumables and stole materials, cannot be disturbed. The honorable ITAT deleted this disallowance. Since the facts in the current year are same as in assessment year 2003-04, the disallowance made by the AO is deleted respectfully following the decision of honorable ITAT for assessment year 2003-04. This ground of appeal is therefore, allowed." 8. Now the Revenue is before us. Ld. Sr. D.R. heavily relied upon the order of the A.O. and past history of the case and argued that similar additions were made in earlier year. Thus, additions made by the A.O. should be confirmed. At the outset, ld. A.R. argued that CIT(A) was right in deleting the addition by considering the past history of the case and favourable decision by this Court in A.Y. 02-03, 05-06 & 06-07. The identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he factory. These submissions had not been controverted by the A.O. He simply relied upon the agreement between the appellant and Principal. The freight and octroi expenditure shown in the agreement was for incoming the raw material and on sending back casting was borne by the Principal. Thus, both the expenses are different. Therefore, we confirm the order of the CIT(A). 10. Ground no.2 of the Revenue is against deleting the addition of Rs.1,10,27,492/- made on account of suppressed conversion charges. The facts are that the assessee had claimed shortage on account of burning loss/ process loss @ 10.60%. The A.O. gave reasonable opportunity of being heard on this issue and propose to add back excess burning loss of 5.6%, amounting to Rs.1,10,27,492/-, which was worked out as under: Total Production 12180.578 MT Additional Production corresponding to 5.60% of burning loss (A) 682.112 MT Total Conversion Charges Rs. 19,69,19,616 Average Conversion Charges (B) Rs.16166.69/PMT Suppressed Conversion Charges (A x B) Rs.1,10,27,492 The assessee was offered reasonable opportunity vide letter dtd. 10.10.2009. After considering the assessee's reply, ld. A.O. held that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A) who had deleted the addition by considering the past history of the case. The operative portion is as under: "4.3 I have considered the submission made by the appellant and observation of the AO. From the assessment order as well as the appellate order of the CIT(A) for AY 2006-07 and A.Y. 2003-04, it is seen that on this issue the addition has been deleted. Since the facts in the current year are same as in the last year, the addition made by the AO is deleted, following the decision of CIT(A) in the earlier year on this issue. This ground of appeal is therefore allowed." 12. Now the Revenue is before us. Ld. Sr. D.R. supported the order of A.O. and argued that as per the agreement between the assessee and its Principal. The raw material and store shortage on account of burning loss in conversion is to be borne by the Principal and not by the assessee. The loss in conversion is burning loss and not process loss. The Production Manager and the Melting Engineer had admitted that the burning loss @ 5%. Thus, ld. A.O. was right in estimating the burning loss. On the other hand, ld. A.R. submitted that appellant manufactures alloy steel castings from various types ..... 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