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TMI Blog2014 (10) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... contention that it has shown the sale of scrap generated during the course of process has not been rebutted and such a sale has been allocated on pro–rata basis on production - The finding of the CIT(A) that if the scrap sale of 240.740 MTs is reduced from the shortage shown then the assessee's irrecoverable loss is only 2.02% which is much below the 3.74% worked out by the AO has not been disputed - such an addition cannot be sustained without finding any defect either in the production record or in the books of account or in the scrap sales shown and adjusted by the assessee, then there is no justification of making any addition simply on ad–hoc manner as done by the AO by holding that 0.74% of the loss claimed by the assessee is excessive – the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 2067/2013 - - - Dated:- 14-8-2014 - D. Karunakara Rao, AM And Amit Shukla, JM,JJ. For the Petitioner : Shri Vijay Mehta For the Respondent : Shri A K Kardam ORDER Per Amit Shukla,JM. The present appeal has been preferred by the Revenue challenging the impugned order dated 25th January 2010, passed by the learned Commissioner (Appeals) XXX, Kolkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this commission cannot be considered as contingent liability. 3. The Assessing Officer, however, rejected the assessee's explanation and held that mere payment without finalisation / determination of all expenses does not construe ascertained liability and therefore, disallowed the same as contingent liability. While doing so, the Assessing Officer relied upon the Hon'ble Supreme Court in Shree Sajjan Mills Ltd. v/s CIT, [1985] 156 ITR 585 (SC). 4. Before the learned Commissioner (Appeals), it was submitted that the assessee had made the provisions of commission of ₹ 9,22,777, based on mercantile system of accounting only and the expenditure is allowable if it becomes due during the previous year, irrespective of the fact whether it has been paid during the year or not. The said amount of payment of commission have been paid in the subsequent assessment year in 2008 09, which has been accepted by the Department. The assessee has also submitted bank advice for commission paid to the agents and also letter to the bank by the assessee for making the commission payment to the agent, etc., and the same has not been rebutted. In support of the contention, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowable as deduction and the same has been quantified on the basis of certain percentage even though it has been discharged in a near future date. There is a reasonable certainty in the quantification of the commission payable and, therefore, such a provision is to be allowed in this year only. Moreover, it is seen that in the subsequent year such a payment has been accepted by the Assessing Officer. In view of these facts, we do not find any reason to deviate from the finding recorded by the learned Commissioner (Appeals) and the same is affirmed. Ground no.1, raised by the Department is dismissed. 8. Ground no.2, relates to addition of ₹ 9,76,821, on account of wastage / shortage claimed by the assessee in the process of manufacturing of S.S. Billets. The Assessing Officer observed that the assessee has been using S.S. Billets as principal raw material and at the time of conversion of S.S. Billets through rolling process, there should hardly be any shortage or loss, because the scrap / residual part of S.S. Billet is again used for re rolling. The Assessing Officer required the assessee to justify the wastage / shortage of S.S. Billets. The assessee further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 217.165 Loss on production (%) (Burning loss end cut scrap) 3.74% Item Qty (MT) Produced during the year Allocation of scrap on pro rata basis of production (MT) Rolled 5284.20 5284.20 Annealed Pickled 171.28 3.23 Bright Bars 5859.06 110.39 Wires 1461.37 27.53 Total 12775.91 240.72 11. The learned Commissioner (Appeals), after calling for the remand report and also inviting the assessee's objection, held that the assessee's contention that cut end scrap generated in the process have been sold as scrap and duly disclosed in the books of account appears to be correct on record and also incorporated the details of such sales at Page 13 of the order. The learned Commissioner (Appeals) also perused the bills relating to sale of scrap fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 101.90 M.T 5594.298 M.T Loss on production 217.16 M.T (3.74%) The explanation of the Appellant regarding the loss in production of 3.74% was not accepted by the A.O. and restricted to 3% basically on the ground that the Appellant's loss due to cut end/scrap should be very negligible and that the cut ends and scraps were retained by the job workers resulting in the shortage of 3.4%. The A.O. also held that the Appellant's claim that cut ends and scrap retained by the job workers. The A.O. held that the Appellant can claim revised back of certain cut end and scrap from the job workers which has been done and this is so called charitable act of the Appellant in allowing the job workers to retain saleable scrap and cut ends is not believable and therefore restricted the Appellant's claim of loss from shortage at 3.74% to 3%. Now in Appeal it has been submitted that the cut ends and scrap generated in the process was not retained by the job workers but actually sold as scrap and disclosed by the Appellant in fact on which excise duty has also been paid. The detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of scrap, has not brought any defects in the books of accounts or the production record of the Appellant before rejecting the burning loss which is neither justified nor based on material facts. Further as mentioned above even the calculation of burning loss taken by the A.O. is not substantially based on the correct facts and figures. Therefore, considering the totality of circumstances and the evidences submitted, it is held that the A.O. was not justified in disallowing burning loss/wastage to the extent of 12. Before us, both the parties relied upon the respective orders. 13. After hearing the rival submissions and also on a perusal of the impugned order, we find that the assessee's contention that it has shown the sale of scrap generated during the course of process has not been rebutted and such a sale has been allocated on pro rata basis on production. The finding of the learned Commissioner (Appeals) that if the scrap sale of 240.740 MTs is reduced from the shortage shown then the assessee's irrecoverable loss is only 2.02% which is much below the 3.74% worked out by the Assessing Officer has not been disputed before us. Further, such an addition can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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