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TMI Blog2018 (12) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... recipe with common raw-material. The ld.CIT(A) has appreciated the facts in right perspective and restricted the addition to ₹ 10,00,000/-. We do not find any infirmity in the order of the ld.CIT(A), which we confirm and reject the grounds of appeal of the Revenue. - ITA No.3304/AHD/2015 WITH CO NO.1/AHD/2016 - - - Dated:- 20-12-2018 - Shri Amarjit Singh, Accountant Member And Ms.Madhumita Roy, Judicial Member For the Assessee : Shri Rasesh Shah For the Revenue : Ms.Anupama Singla, Sr.DR ORDER PER AMARJIT SINGH, ACCOUNTANT MEMBER: This is Revenue s appeal and the assessee s cross objection against the order of the ld.CIT(A)-3, Surat dated 4.9.2015 passed for the assessment year 2012-13. Both are disposed of by this common order. 2. First we take Revenue s appeal. Only substantive ground raised by the Revenue in its appeal is that the ld.CIT(A) has erred in restricting the addition to ₹ 10,00,000/- instead of ₹ 1,47,96,500/- made by the AO on account of suppression of production. 3. Brief facts that can be noticed from orders of the ld.Revenue authorities are that the assessee is engaged in the business of manufacturing and export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of 1 Kg Sugar 1.53 1.31 4. Based on the above figures, the AO has noted that as compared to the F.Y.2010-11, the production of tutty fruity was 780 grams against consumption of 1 kg. papaiya, against this the assessee has shown production of tutty fruity only 530 grams. He further observed that similar was the position of consumption of sugar i.e. against 1 kg. of sugar, the assessee has shown production 1.530 grams in the year 2010-11 while for the same quantity of sugar, production for the F.Y.2011-12 was only 1.310 kgs. Comparing production and consumption ratio of papaiya and tutty fruity in the F.Y.2010-11, the production of tutty fruity in this year should be 8,35,339.67 kgs. i.e. [(661899/849879) multiplied by 1072577) against production of 5,69,700 kg. shown in the audit report. Similarly, if the ratio of consumption of sugar was applied, then the total production should be 10,33,781.81 as against 8,85,817 kg. shown by the assessee. Accordingly, the ld.AO worked out difference of suppressed production at 2,65,640/- as per the consumption of papapiya and 1,47,965 kg. for per the consumption of sugar. Accordingly, taking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no point in the AO s contentions that requisite details were not verifiable. 7. We have heard both the parties and considered respective submissions and also gone through the record carefully. As noticed above, the assessee was engaged in the business of manufacturing and export of food products. At the time of assessment, the AO has made comparison of net profit ratio shown during the year under consideration at 1.64% with the net profit ratio of 1.77% shown in the immediate preceding year by the assessee. Therefore, the AO has considered in comparing raw-material consumption for different products manufactured by the assessee. The AO has made comparison of total production from the consumption of 1 kg. sugar in F.Y.2010-11 and in F.Y.2011- 12. He has stated that as consumption of 1 kg. of sugar, there was a total production of 837612 kgs. in the F.Y.2010-11, whereas such production during the F.Y.2011-12 was 885817. Therefore, he has stated that production from consumption of 1 kg. of sugar was 1.53 kgs. in F.Y.2010-11 whereas production based on sugar in the F.Y.2011-12 was 1.31 kgs. He has worked out the difference in the production at 147965 kgs in the ratio of sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord maintained as the record of raw material issued for each product is not maintained separately. As the consumption of raw material for the final production could only be estimated based on type of final product that too on claim of assessee only, and is not verifiable, the rejection of books u/s 145(2) of the Income Tax Act,. 1961 is UPHELD. 8.1 Now, coming to the merits of the addition made. First the assessing officer has challenged the consumption of Papaya vis - a vis production of tutty Fruity' . The appellant submitted the details of entire purchase of Papaiya in different forms during the year. The appellant has submitted that Papaiya is purchased in form green , pealed and low quality in bulk. He caimed that green papaiya purchased is first pealed and then seeds are removed and then diced. These lose over 50 % in weight. This diced papaiya is stored in brine. Some times these pealed stored papaiya is purchased and production of tutty fruity per kg of pealed papaiya purchased is much different than of bulk papaiya and green papaiya purchases. 8.2 The bills show that different qualities of papaiya as above have been actually purchased. The details were r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down by as much as half , whereas the production of retail pack candy ( where sugar usage is very high ) has increased enormously to over 12 times ( 201400 kg against only 15,050 kgs last year ). The assessing officer s estimation is baseless and wild conjecture. On the other hand, assessee s consumption is not amiable to exact verification. 8.6 Rejecting the method of working of addition made by the assessing officer under these circumstances, I observe that appellant himself has shown larger consumption of sugar by around 1 % to 2 % for each product during the F Y 2011-12 than A Y 2010-11 , to justify its total sugar consumption ( Annexure -1). For example ; Tutty Fruity ( bulk product) 65.71% as against 65.3%. Tutty Fruity ( retail) 80 % as against 78%, Jam 57% as against 55%, Sharbat 40.2% as against 37.78%. 8.7 The total consumption of sugar is around ₹ 2 crores. If variance of 1-2 % is taken on different percentage of consumption, I hold that around ₹ 4 laksh purchase and consumption in sugar is either possibly claimed higher or related production is not verifiable. In totality, I uphold an estimated addition of ₹ 10,00,0007- to the trading resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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