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TMI Blog2014 (12) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- CIT (A) has rightly accepted the appeal of the assessee and held that the income from commission is to be assessed as income from business as disclosed by the assessee - there was no reason with the AO as to why and what circumstances, he has established this income as income from Other Sources and not as Business Income, as shown by the assessee company – thus, the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 3286/Del/2006, ITA No. 3287/Del/2006 - - - Dated:- 14-11-2014 - G. D. Agarwal And Diva Singh,JM,JJ. For the Petitioner : Sh. Ankit Gupta, Adv. For the Respondent : Sh. J. P. Chandraker, Sr DR ORDER Per Diva Singh, JM Both these appeals filed by the Revenue are being decided together for the sake of convenience as both of them were heard together. The departmental appeals against the separate orders dated 04.07.2006 of CIT(A), Muzaffarnagar have been filed for 2001-02 assessment years in the case of two different assessees on the following grounds:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 93,59,942/- made by the Assessing Officer on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The assessee company is engaged in the manufacturing of M.S.Ingots etc. Raw material used is sponge iron and M.S.Scrap. During the year under consideration, the production of finished goods has been shown to be 7916.736 MT out of total consumption of raw material at 9499.202 MT, giving yield rate at 83.34% and burning slag at 16.66%. In the case of M/.s Vehelna Steels Ltd., factory located in the same area, yield has been shown at 94.23% and in comparison to that, this company is showing a much lower rate of yield. m/s Vehelna Steel used sponge iron of 1708.670 MT i.e 41.43% where as the assessee used 68% sponge iron. SO considering the ratio off use of sponge iron the yield is adopted at 90%. In view of the above facts, I hold that the manufacturing records maintained by the assessee, do not reflect the true picture of the manufacturing results. Therefore, I reject the books of the assessee. Therefore, applying rate of 90% of the total yield of total finished goods is worked out at 8549.282 MT. As per the assessee, the value of finished goods is worked out as 7916.730 MT has been shown to be ₹ 117139095/- which gives rate of ₹ 14796.40 per MT. Suppresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. The case, as cited by the Assessing Officer are distinguishable and not applicable to the assessee s case, no such addition has been made in the past as well as in future . Similar type of additions have also been made in the case of M/s Pawan Alloys Castings Ltd. in Assessment Years 89-90 and 90-91. The Learned C.I.T.(Appeals) have deleted the Ad-hoc estimated additions of ₹ 20,80,000=00 and ₹ 750000=00 respectively as have been made on the issue of yield only. The orders of the Learned C.I.T(Appeals) have also been confirmed by the Hon ble ITAT with the observation that the additions are not sustainable because have been made on estimated basis and moreover, the purchase and sales of the Company are verifiable because well recorded in the books of accounts and the Assessing Officer was totally failure in bringing out any strong reason for such addition. The situation is absolutely similar as of the assessee appellant before your good self. The Copies of the Orders, as stated above, are being enclosed for your ready reference. The case of M/s Vahelana Steels is not applicable as no data of the said Co. has been compared with the assessee appellant Co. The raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come u/s 115JB was computed at ₹ 3,91,510/-. The return was processed u/s 143(1) and subsequently selected for scrutiny after issuance of section 143(2) 142(1) alongwith questionnaire etc. The AO on a perusal of schedule-13 of the Audit Report noted the following income :- 1. Commissioner received 2,05,34,037/- 2. Interest on security 29,275/- 3. Interest on FDR 65,291/- 6.1. Considering the details given in Schedule 13 of the Audit Report, he issued a show-cause notice to the assessee to justify the claim of commission received with confirmation and proof of services rendered by the assessee. The assessee is found to have given the following information which is extracted from the assessment order:- M/s KCS Financial Services Ltd. - 436463/- M/s M.V.Marketing (P.) Ltd. - 281587/- M/s M.V.Marketing (P.) Ltd. - 1440680/- M/s M.V.Marketing (P.) Ltd. - 242928/- M/s M.V.Marketing (P.) Ltd. - 2940000/- M/s Adhunik Sales India - 1300000/- M/s Kylsans Finance Pvt. Ltd. - 1173967/- M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use of raw material and production is comparable as under:- Raw Material M/s Vehelna Steels Doaba Rolling Mills Sponge Iron 1708.670 MT 3472.460 MT Iron Scrap 2387.558 MT 627.040 MT Ferro Alloys 28.008 MT -- Production of furnished goods:- M.S.Ingot/R.R. 3886.240 MT 3605.780 MT Slag/Burning Loss 237.996 MT 494.320 MT From the above chart, it is understood that the percentage of sponge Iron used in raw material is 84.69% in the case of assessee and 41.43% in the case of Vehelna Steels. In the case of Vehelna Steels the yield has been shown at 94.23%. The assessee was asked to justify the burning loss shown at 12.06% vide order sheet entry Dt. 23.02.2004. The assessee has failed to justify the same and result shown are very low and are not justified. Therefore, I hold that the manufacturing records maintained by the assessee, do not reflect the true picture of the manufacturing results. Therefore, I reject the books of the assessee U/s 145 of Income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on estimated basis. The yield depends on so many factors like quality of the Raw-material. Quality of the finished goods produced. Roll of skilled and unskilled labor in the Manufacturing Process. In the year under consideration, the Sales of the Company were ₹ 3.61 Crores and goods produced by the Company have been accepted in the market as Branded goods. The case, as cited by the Assessing Officer are distinguishable and not applicable to the assessee s case, no such addition has been made in the past as well as in future . Similar type of additions have also been made in the case of M/s Pawan Alloys Castings Ltd. in Assessment Years 89-90 and 90-91. The Learned C.I.T.(Appeals) have deleted the Ad-hoc estimated additions of ₹ 20,80,000=00 and ₹ 750000=00 respectively as have been made on the issue of yield only. The orders of the Learned C.I.T(Appeals) have also been confirmed by the Hon ble ITAT with the observation that the additions are not sustainable because have been made on estimated basis and moreover, the purchase and sales of the Company are verifiable because well recorded in the books of accounts and the Assessing Officer was totally failure in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the income may please be accepted as income from business as accepted in the past. Kindly allow the appeal and oblige . 8. Aggrieved by this, the Revenue is in appeal before the Tribunal. 9. Right at the outset the Ld. AR had opened his arguments contending that the issue is covered in favour of the assessee in both the appeals qua Ground No.2 by virtue of the judgement of the Hon ble High Court in the case of M/s Doaba Rolling Mills Pvt. Ltd., Meerut. It was his submission that the two cases are connected cases inasmuch that additions were made and deleted by the AO and the CIT(A) on similar reasoning. The decision dated 20.02.2013 in ITA No.-115/2011 by the Hon ble High Court (copy placed on record) following the order of the Tribunal in 2005-06 and 2006-07 assessment years, considering the order of the D Bench of the Tribunal in ITA No.-642/Del/2010 dismissed the departmental appeal with costs. For ready-reference, we reproduce the same from the copy of the judgement filed:- In the memo of appeal, the following substantial question of law has been proposed:- (1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Doaba rolling Mills Pvt. Ltd. and the order of the ITAT relied upon by the assessee. Merely placed reliance upon the assessment order for both the concerns. Qua the second issue addressed by Ground No.1 wherein the comparison has been made with the position for M/s Vehelna Steel Ltd., he placed reliance on the assessment order for both the appeals. 11. We have heard the rival submissions and perused the material available on record. It is seen that qua the first issue in the case of both the assessees the finding of the CIT(A) in deleting the addition on the reasoning that no defects were pointed out in the books of accounts of the assessee is justified on facts. It is seen that the AO in the case of both the concerns proceeded on the footing that the facts pertaining to the case of M/s Vehelna Steel Ltd. situated in the same area were identical. The said presumption is not borne out from the record as the recording of facts in the two assessment orders itself demonstrates that as opposed to sponge iron used by M/s Vehelna Steel Ltd. of only 41.43%, the assessee had used sponge iron as a raw material to the extract of 68% and 84.69% respectively. Consequently the yield w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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