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TMI Blog2010 (1) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... working made by him as under:- Total No. of bags consumed 28449 Weight of Maida in above bags @ 90 Kg. 2560410 Weight of empty jute bag (i.e. 900 gms) in 90 kg. Packing 25604.1 Loading/ unloading/transportation/Moisture @ 250 gms per 90 kg bag. 7112.25 Shortage of Maida while taking it out from 90 Kg of packing @250 gms per kg. 7112.25 Powering 1 Kg. of Maida while taking it out from 90 Kg of packing @ 2 Kg. per bag. 56898 Final consumption of Maida 2463683.4 Yield of Bread in Kg. after fermentation (consumption) in bowl of 45 Kg. 70/45 3832396.4 Balance (after) : 1% loss during the packing. 3794072.436 After 1% loss in packing/slicing and dispatching 3756131.712 After loss on rejection @2% 3681009.077 Net Maida considered for production of bread in Kg. 3681009.077 Rate per Kg. of bread @ 11.56 42552464 Sale declared in A.Y. 1998-99 31051476 SUPPRESSED SALE 11500988 5. The A.O. made the aforesaid addition by observing that the assessee's books of account did not reflect the two states of affairs with regard to the consumption of Maida for the purpose of manufacturing breads. On the basis of the quantity of Maida consumed by the assessee for production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's case, search was conducted on 08.01.004 and sale rate of 1 KG of bread was worked out by the A.O. at ₹ 11.56 per KG for organized industries, which was also applied to the assessee's case though the assessee's plant is totally based on conventional method than the modern organized method adopted by Britannia industries etc. He further submitted that in the present assessment year 1998-99, the addition has been made on the basis of the rate of bread in the case of Britannia industries etc. pertaining to the assessment year 2004-05 and, therefore, the addition made in the present assessment year have no basis. The assessee placed before the ld. CIT(A) the prevailing rate of bread during the year 1998-99 giving the working of the wastage and the rate of sales of bread as under:- "(a) Net Maida considered for production by the assessing authority is in Kg. is 36,81,009.77 rate in 1998-99 is @ ₹ 8.96 per kg. sales out to be ₹ 3,29,81,845/-. (b) Sales declared in the trading is ₹ 3,10,51,476/- for assessment year 1998-99. Thus difference as per department working works out to be only ₹ 19,40,371/- instead of ₹ 1,15,00,988/-." It was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad loafs are made manually. It was also submitted that in the immediately preceding years the wastage worked out by the assessee, on actuals, has been accepted and, in such facts and circumstances of the case, the A.O. could not have rejected the claim of wastage without assigning good reasons and without relying on good evidence. 4.2 I have considered the facts and circumstances of the case, the reasoning of the A.O. and the submissions of the assessee. No doubt the issue is a very complex one as shortage in maida does occur more so in the unorganized sector where bread loafs are manufactured manually. Also, there is no denying the fact that the A.O. could not have uniterally estimated the shortages on account of maida without assigning cogent reasons, or without citing comparable cases, specially where in last few assessment years the same percentage of wastage has been accepted. On the other hand, it is also a fact that the accounts of the assessee are not full proof and the working given by him cannot be accepted as sacrosanct. In such facts and circumstances of the case i.e. the estimate of wastages of the A.O. and that of the assessee the best option would be to take the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les. 11. Against the ld. CIT(A)'s order, the assessee is not in appeal. However, the department has filed this appeal by taking a ground that the ld. CIT(A) has erred in deleting the addition on account of suppression of sales. 12. The ld. D.R. has submitted that the working made by the A.O. in Annexure-A annexed to the assessment order to determine the suppressed sale is justified inasmuch as the assessee has not been able to produce and furnish necessary evidences and books of accounts to prove and establish that the book results are true and correct and no sale has been suppressed by the assessee during the year under consideration. The ld. D.R., therefore, submitted that the additions made by the A.O. be restored. 13. The ld. Authorized representative for the assessee has submitted that it is wrong on the part of the A.O. that no books of account and details were produced by the assessee before him as would be clear from the observation made by the A.O. himself in his assessment order for A.Y. 2003-04, the base year in which the matter has been discussed by the A.O. and finding in that year are applied to earlier years, where he has mentioned that the examination and verific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 7.17 per loaf of bread by 800 grams meaning thereby that the rate per KG applied by the CIT(A) would be ₹ 8.96 per KG. The total sales shown by the assessee has been shown at the rate of 8.96 per KG. The A.O. has estimated the sales at ₹ 11.56 per KG for all the assessment years i.e. from assessment years 1998-99 to 2003-04 but nothing has been pointed out by the A.O. to say that the breads were sold by the assessee at 11.56 per KG in all the years. Therefore, the rate applied by the A.O. at 11.56 per KG in this assessment year 1998-99 cannot be sustained. The ld. CIT(A) has adopted the rate of 7.17 paisa per loaf on 800 grams in the light of the estimation made by the A.O. in the case of one Shri Ramesh Kumar Batra where the A.O. has applied the sale price at ₹ 7.66% for 800 grams loaf of bread. Therefore, the ld. CIT(A)'s estimation cannot be said to be unjustified. With regard to the extent of wastage in the absence of full particulsrs, the ld. CIT(A) has worked the mean of wastage claimed by the assessee at 3.7% and the wastage estimated by the A.O. at 25%. The wastage claimed by the assessee has been found to be on higher side but at the same time the est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's case that hardly 5% of the total sales are received in small coins/ torn notes. 5.2 I have considered this issue and I agree with the assessee that the A.O. has to be faulted for assuming that the entire sale proceeds are received in coins/ torn notes. Keeping in view the particular facts and circumstances of the case, I am of the opinion that the commission on conversion worked out at ₹ 31,050/- by the assessee is reasonable. While holding so, I have also kept in mind the fact that in past assessment years no such disallowance was made, and the claim of the assessee had been accepted. Keeping in view the above the addition of ₹ 6,21,029/- made by the A.O. is hereby deleted." 20. We have heard both the parties and have carefully gone through the orders of the authorities below. 21. After hearing both the parties and perusing the A.O.'s order, we find that the A.O. has made this addition purely basis on estimation and surmises. The A.O. has treated the total sales made by the assessee as received only in small coins and torn notes without any material. The A.O. has not pointed out any material to show and indicate that the assessee has actually incurred ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,26,839/- is also deleted." 25. It is pertinent to note that in all the assessment years from assessment year 1998-99 to 2003-04, the A.O. has disallowed on adhoc basis 20% of the total expenses. 26. On an appeal, in the assessment year 2000-01, 2002-03 and 2003-04, the ld. CIT(A) has reduced the disallowance to 10% against which neither the assessee nor the department is in appeal. However, in the assessment year 1998-99, 1999-2000 and 2001-02, the ld. CIT(A) has deleted the whole of the disallowance made by the A.O. to the extent of 20% of the total expenses. It is, therefore, seen that the ld. CIT(A)'s order is not in conformity in all the years. The assessee has not filed any appeal against disallowance sustained by the ld. CIT(A) to the extent of 10% in assessment year 2000-01, 2002-03 and 2003-04. Therefore, the disallowance to the extent of 10% is held to be justified by us. We, therefore, sustain the disallowance to the extent of 10% of the total expenses in this assessment year 1998-99 as so done by the ld. CIT(A) in the assessment year 2000-01, 2002-03 and 2003-04 against which no appeal has been preferred by both the parties. Therefore, this ground No. 3 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.80 per loaf of bread and recompute the suppression of sales accordingly. The rate of 7.80 per loaf of bread is with regard to the 800 grams of loaf of bread. (iii) The addition of ₹ 6,02,878/- made on account of commission on exchange of coins/ torn notes has been deleted by the ld. CIT(A) in the light of his decision in the past year. The ld. CIT(A) further hold that the commission of conversion worked out at ₹ 34,144/- by the assessee is reasonable. (iv) Similarly, the adhoc disallowance of 20% out of expenses has been deleted by the ld. CIT(A) as so done in the past year. 33. In the light of the fact that the issues involved in this appeal are quite identical and similar to the assessment year 1998-99 and 1999-2000, we are inclined to decide these issues in the terms of order in the assessment year 1998-99 and 1999-2000. We hold accordingly. 34. Now, we shall come to the ITA No. 1914/D/2008 pertaining to the assessment year 2000-01. 35. The grounds raised by the revenue in this assessment year 2000-01 are as under:- "1. The order of the ld. CIT(A) is not correct in law and facts. 2. On the facts and in the circumstances, the ld. CIT(A) has erred in dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst rate of bread of 7.66 per 800 gms of loaf directed to be applied by the ld. CIT(A). If the rate declared by the assessee is below ₹ 7.66 per 800 gms of loaf of bread, the A.O. shall recompute suppressed sale by applying the rate of bread at 7.66 per 800 gms of loaf of bread as so directed by the ld. CIT(A). With this observation, the ground with regard to the recomputation of suppressed sale is decided accordingly. 39. With regard to the addition of ₹ 7,16,019/- on account of commission allegedly incurred on exchange of small coins/ torn notes, the ld. CIT(A) has held that the commission on conversion worked out by the assessee at ₹ 33,908/- is almost reasonable being equal to 2% of 5% of sales which comes to ₹ 35,800/-. The ld. CIT(A), therefore, confirmed the addition to the extent of ₹ 1,892/- i.e. ₹ 35,800/- - ₹ 33,908/-. In the light of our decision in other assessment years decided hereinabove, we do not find any infirmity in the order of ld. CIT(A). 40. In this assessment year, the A.O. also disallowed 20% of total expenses in absence of relevant bills and vouchers. However, the ld. CIT(A) has reduced the disallowance to 10% a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of expenses, the ld. CIT(A) has restricted the disallowance to 10% which has neither been challenged by the assessee nor by the A.O. 44. Now, we shall come to the last appeal being ITA No. 1916/Del/08 pertaining to the assessment year 2003-04 where the grounds have been taken as under:- "1. The order of the ld. CIT(A) is not correct in law and facts. 2. On the facts and in the circumstances, the ld. CIT(A) has erred in directed the A.O. to recompute suppressed sale by applying wastage @ 2.85% as against 2.5% worked out by the A.O. 3. On the facts and in the circumstances, the ld. CIT(A) has erred in directing the A.O. to recompute suppressed sale by applying the rate of bread @ ₹ 7.66 per 800 gms. of loaf of bread as against ₹ 11.56 per 1000 gms. adopted by the A.O. whereas the assessee had himself declared sale price of bread @8.25 per 800 gms of loaf of bread. 4. On the facts and in the circumstances, the ld. CIT(A) has erred in deleting the addition of ₹ 8,46,625/- made on account of commission on exchange of coins/ torn notes." 45. In the light of our decision for the assessment years 2001-02 and 2002-03, the order of the ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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