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TMI Blog2016 (1) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... be ruled out. The Tribunal, therefore, deleted the trading additions. We do not find any additional evidence having been admitted by the Ld. CIT(A) except comparative chart of expenses. The Ld. DR was unable to point out as to what was the fresh evidence on the basis of which the Ld. CIT(A) allowed relief to the assessee. Even the ground of appeal of the Revenue in this regard is very vague. - Decided in favour of assessee. - ITA No. 2229/Kol /2010 - - - Dated:- 4-12-2015 - N. V. Vasudevan, JM And Waseem Ahmed, AM For the Appellant : Shri Sanjay Mukherjee, JCIT-SR-DR For the Respondent : None ORDER Per Waseem Ahmed, Accountant Member This appeal by the Revenue is arising out of order of Commissioner of Income Tax (Appeals)-I, Kolkata in appeal No.128/CIT(A)-1/Ward-1(2)/06-07 dated 15.05.2007. Assessment was framed by ITO Ward-45(2), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his order dated 26.10.2006 for assessment year 2004-05. 2. At the time of hearing none appeared on behalf of assessee even though notice of hearing was issued to assessee through registered post. However, we find that it is a R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gone through the submission of Ld. AR as well as the assessment order passed by Assessing Officer and find that books of account were maintained as per Accounting Standard as well as by excise law. It is showing the accounts are incorrect or incomplete is a revenue. The facts as narrated by AR remained the question of rejection of books of account cannot be justified. This ground is therefore allowed. Aggrieved, Revenue is in appeal before us on the following ground : 1. On the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the application of sec. 145 of the I.T. Act denying the comment of auditor's report. 5. We find from the aforesaid discussion that the AO has not brought sufficient reasons for rejecting the books of accounts. The AO formed the opinion for the rejecting the books on account of some procedural lapses highlighted by the Auditor of the company in his report. While rejecting the books of the assessee, Income-tax Officer has to consider the following aspects : (i) Whether the assessee has regularly employed a method of accounting? (ii) Even if regular adoption of a method of accounting is there whether the ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entries in the books of account was not correct; there is no finding that the assessee is not employing a method of accounting; and there is no finding that such a method of accounting has been irregularly employed by the assessee. In the absence of any such finding, there being no reason germane to the unacceptability of the book results, it must be held that the Tribunal as well as the Revenue authorities below had no materials before them, on the basis of which it could be said that the trading results were not verifiable and that, therefore, they should not be accepted, nor is it their case that the trading results could not be deducible from the entries of the books of accounts regularly employed. [See also C. Arumugaswami Nadar vs. CIT (1961) 42 ITR 237 (Mad)]. The Patna High Court, therefore, held that- the finding of the Tribunal upholding the rejection of the book profit shown by the assessee was vitiated by reason of its reliance upon suspicion, surmises as also irrelevant material. The finding that sales were unverifiable is not based on the materials on record and is an arbitrary finding. In view of above, the ground raised by the Revenue regarding rejectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserves to be deleted and on merits as stated above this ground is allowed. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 9. We have heard Ld. DR and perused the materials available on record. Before us, Ld. DR vehemently relied on the order of AO. We find that during the appellate proceedings before Ld. CIT(A) Ld. AR of assessee submitted the arguments, which extracted from the order of Ld. CIT(A) is reproduced below:- It is wrong to assume that sale price cannot be less than cost price. In a manufacturing, cost exceeds sales price due to various reasons such as purchase of raw material at high rate, lack of quality control High cost of production due to wrong calculation, over consumption of electrically or power where quality is not stabilized in the first year, use of Finally techniques etc. In this case, the appellant also incurred high cost of production due to following reasons: 1) Assessee was engaged in the business of manufacture of steel ingots from scrap. Low gross profit was due to decrease in sale price of finished goods and increase in cost of raw materials and also the very high outgo on account of electricity. This b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the Assessing Officer is not based on any cogent reason. 6. The reason for the high cost of production which ultimately resulted in a loss under the manufacturing and trading account was mainly due to the high expenditure on account of electricity as have been explained in detail above. Considering the facts and circumstances as submitted above, it is humbly prayed that the addition of ₹ 84,40,567/- may kindly be deleted. From the aforesaid discussion, we find that AO has nowhere rejected the sales or purchase of assessee vis- -vis other manufacturing expenses incurred by assessee during the year. We find that AO, after rejecting the books of accounts, had presumed that no prudent business man would sell the goods less than the manufacturing cost. However, there is no restriction under any law that assessee cannot sale the product less than its manufacturing cost. Moreover, it was the first year of its business of the assessee and assessee was not having expert knowledge of its business intricacies. We further find that AO has disallowed the loss incurred by assessee without any rational ground. Whereas the AO had not pointed out any material defect in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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