9911796707
TMI Blog2016 (10) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted earlier. Thus there is no error and difference of ₹ 22,08,399/- (1930603+277796) is reconciled. It is stated that these credit notes were produced before the AO but were not understood by the AO. It is stated that these objections of the AO that the difference could not be explained is contrary to the facts. It is further stated that books of accounts were duly submitted before the AO as the AO himself has noted in the assessment order that books of accounts, bills and vouchers etc. were examined on test check basis. We find that the AO has noted that in spite of repeated opportunity, the assessee has not submitted the books of account after the date 9.9.2011 on which the assessee was required to justify the defect as mentioned above to cross verify the contention of the assessee. We find force in the contention of the ld. Counsel for the assessee that assessee had submitted plausible explanation to the defects as pointed out by the AO. We also noticed that in the paper book the assessee has given certificate that except document at sl. No. 10, all other documents were part of the record of the lower authorities. Therefore, it can be inferred that these mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -10. The action of the ld. CIT (Appeals) is based on surmises and presumptions and is contrary to the facts and circumstances of the case and law and deserves to be deleted. 5. The appellant craves leave to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings. 2. Briefly stated the facts are that the case of the assessee was picked up for scrutiny assessment and assessment under section 143(3) of the I.T. Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 28.12.2011. While framing the assessment, the AO rejected the books of accounts of the assessee on the basis that the assessee has not taken various items of stock materials like purchase of copper wire vide Invoice dated 9.3.2009 valued at ₹ 6,14,724/- and further dated 6.03.2009 of ₹ 65,131/- in closing value of stock. It was also observed by the AO that the value of scrap of 5223.150 kg has been taken at ₹ 200/- per kg and also on perusal of Form No. 4 of the raw material dated 31.03.2009 it has been seen that the assessee has declared loss of 184.950 kg while no complete details of production had been shown against them. After rejecting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g has also increased substantially. He submitted that when there is a drop in production quantity and increase in the cost, it resulted into sharp decline in gross profit. The ld. Counsel submitted that on the one hand average selling price has fallen during the year under consideration and at the same time the cost of production has increased during the year under consideration, leading to the sharp reduction in GP. The ld. Counsel submitted that 80% component of selling price consists of Copper and the prices of Copper are linked to prices determined at London Metal Exchange and Bombay Metal Exchange. The ld. Counsel drew our attention to historical price graph for copper for the financial year 2006-07, 07-08, 08-09 and 09-10. He submitted that from the graph it is evident that during the year under appeal there was a down fall in prices from August onwards and particularly from November 2008 to March, 2009 there was a drastic downfall in the prices. The ld. Counsel submitted that the assessee has suffered huge loss on account of downfall in the prices at London Metal Exchange to the extent of stock maintained by the assessee as the sales happen on the fortnightly running rates w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Stock and the closing stock is valued at Cost or market price whichever is lower. Ld. Counsel submitted that the scrap generated is not sold and is re-converted into Pipes. There cannot be any exact scientific basis for valuation of Scrap generated. However, the assessee has always linked it to the purchase cost of raw material i.e. Pipes and has valued accordingly. Ld. Counsel submitted that the assessee has valued it at reasonable rates and valuation of scrap is in fact at the highest rate during the year under consideration in comparison to last purchase price. Ld. Counsel submitted that valuation of closing finished goods, raw material, work-in-progress, consumables, aluminum scrap, aluminum pipe, PVCHSP has been found in order by the AO and no under valuation is noticed by the AO. Ld. Counsel submitted that moreover the record of the assessee is subjected to inspection by the Excise Authorities and the Excise Authorities have not found any defect in the records so maintained. Ld. Counsel submitted that there can be no basis of suppression of closing value of stock and the same has been mentioned without proper appreciation of facts. Ld. Counsel further submitted that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling, pre-final drawing and end forming were got done by the assessee. Ld. Counsel submitted that another objection of the lower authorities is that the purchases of Copper wire were not entered in the Stock Register. He submitted that the AO has alleged that Invoice No. 1022 dated 09.03.2009 of M/s. New India Extrusions Pvt. Ltd. Qty. 2576.800 kgs value ₹ 6,14,724/- was not entered in the books. Ld. Counsel submitted that the AO has failed to correctly understand the actual transaction and has totally misunderstood the fact that the invoice has not been taken into closing stock. Actually the material received under this invoice is against the copper scrap sent by the assessee for conversion into copper pipes vide its Invoice no. 534 dt. 11.02.2009 quantity 2739.250 kgs. Therefore this is not a purchase made by the assessee but a conversion of scrap into pipes which is duly shown in the RG-1 Register page no. 71 Entry No. 1 on 11.02.2009 for removal of 2739.250 kgs of scrap for conversion under cover of invoice no. 534 dated 11.02.2009,on payment of excise duty of ₹ 49,307/- and cess ₹ 986/- and ₹ 493/- respectively. This scrap was received after conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been found by them. The records have been found to be satisfactory. The ld. Counsel drew our attention to Internal Audit Report of the assessee as prepared by the Excise Officials which is enclosed at paper book pages 119 to 123. Ld. Counsel submitted that the authorities below have failed to peruse the records and have made baseless allegations without any substance. The ld. Counsel submitted that another objection of the AO was that the complete details of purchases were not shown. Ld. Counsel submitted that the AO has mentioned that process loss has not been declared properly and is not verifiable. Ld. Counsel submitted that as per the AO, on perusal of Form No. 4 of the Raw material dated 31.03.2009 it has been seen that the assessee has declared loss of 184.950 kgs while no complete details of production had been shown against them. The ld. Counsel stated that process loss shown at 184.950 kgs forms part of the total process loss for the month of March which is 517.780 on the production of 18451.150 kgs. He submitted that the total purchases for the entire month is entered on the last date of the month. Ld. Counsel submitted that the AO has totally misunderstood the facts exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It is stated that records related to raw material and manufactured products are subject to audit by the department of Central Excise. It is contended that the authorities under the Central Excise Act, in fact, audited the records of the assessee and our attention is drawn to the Audit Report of the Central Excise Authority. 3.5. The ld. Counsel for the assessee demonstrated from the records that discrepancies as noted by the AO in fact, does not exists. The AO has noted that Invoice No. 1022 dated 09.03.2009 of M/s. New India Extrusions Pvt. Ltd. Qty. 2576.800 kgs value ₹ 6,14,724/- was not entered. In this regard the ld. Counsel contended that the AO has failed to correctly understand the actual transaction and has totally misunderstood the fct that the invoice has not been taken into closing stock. Actually the material received under this invoice is against the copper scrap sent by the assessee for conversion into copper pipes vide its invoice no. 534 dated 11.02.2009 qty 2739.250 kgs. Therefore, this is not a purchase made by the assessee but a conversion of scrap into pipes which is duly shown in the RG-1 Register at page no. 71 Entry No. 1 on 11.02.2009 for remova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the payment made to persons covered u/s 40A(2)(b). It is pertinent to note that conversion charges amounting to ₹ 69,29,015/- and 13,85,726/- was paid to sister concern M/s. Kwality Tube and Capillary and M/s. Sam Enterprises respectively therefore the total payment for conversion charges of ₹ 83,14,741/- was paid to sister concern out of the total charges of ₹ 92,86,773/- and the assessee neither justify the payment of job work nor the generation of scrap thereon even though he has not produced any record or challan for sending the raw material and receiving the finished goods from them. It may not be out of context to mention that the Proprietor of M/s. Kwality Tubes and Capillaries is Mr. Sandeep Papriwal the Director of the company and 75% of the job work of ₹ 69,29,015/- out of total ₹ 92,86,773/- has been got done at the factory of the director for which no relevant details were furnished during the assessment proceedings. The reason of decline of G.P. as explained by the assessee is not acceptable as the copper rate are declined in the month of September to November and in the other months the rates either remained constantly same or were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite of repeated opportunity, the assessee has not submitted the books of account after the date 9.9.2011 on which the assessee was required to justify the defect as mentioned above to cross verify the contention of the assessee. We find force in the contention of the ld. Counsel for the assessee that assessee had submitted plausible explanation to the defects as pointed out by the AO. We also noticed that in the paper book the assessee has given certificate that except document at sl. No. 10, all other documents were part of the record of the lower authorities. Therefore, it can be inferred that these materials were available before the AO. The AO has not given any finding on this evidences, therefore, in our considered view, the AO was not justified in rejecting the books of account without properly examining the same and giving a specific finding on the material so placed before him. The books of account cannot be rejected in a casual manner and proceed to estimation of GP merely on the basis of past history of the assessee. If the assessee is able to demonstrate that the facts and circumstances were different from the earlier years resulting into fall in GP ratio, the GP rate ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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