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TMI Blog2018 (11) TMI 1647X X X X Extracts X X X X X X X X Extracts X X X X ..... ing material considered for 5 per pack at 7,08,735/-. Accordingly the CIT(A) has quantified investment on purchases price at 29,95,775/- considered the same for addition as unexplained expenditure as against the amount of 20,30,568/- computed by the AO. CIT(A) further observed that in view of decision of ITAT in the case of Vijay Proteins Ltd., for AY 1991-92 where the peak amount of purchase at 10,08,844/- on 10.05.1997 is less than the confirmed addition, hence, the total addition was confirmed at 29,95,775/- and balance addition out of 1,33,16,116/- was deleted. We find that these findings of the CIT(A) are correct as the CIT(A) has considered its findings by following the decision of Tribunal in the case of Vijay Proteins Ltd., (Supra) and allowed the set off of peak amount worked out by the AO at 10,08,444/-. No infirmity in the order of CIT(A) in confirming the addition at 29,95,75/- as against the addition made by the AO at 1,33,16,112/-, therefore, the appeal of the Revenue in respect of Ground No.1 is dismissed. Addition on account under valuation of closing stock - HELD THAT:- As gone through the orders and the findings of the CIT(A) and do not find any reason the interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted, accordingly same is deleted. This Ground of appeal of the assessee is therefore allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... i Bhandar are also given in details. The appellant has broadly reiterated the same argument which here taken before the AO the details of enquiries conducted by the AO and other Authorities are well described in the assessment order. The preponderance of the evidences available in appellants case lead to only one conclusion that the purchases from M/s.Santoshi Bhandar were not made indeed. 6. In view of these findings of the AO, the action for rejection of books of accounts was confirmed. Similarly, the method adopted by the AO for quantification of disallowance for inflation of purchase price and the additions for unaccounted investment for purchase was not found to be scientific. The AO has estimated the inflation purchase price by taking the average cost of purchase from other parties and has worked out the unaccounted investment for purchase @ 20% of total purchases made. In the assessment order, the AO has mentioned that he has adopted the 20% rate for unaccounted investment for purchases in view of the order of the ITAT, Ahmedabad in the case of Vijay Proteins Ltd., vs. ACIT for A.Y. 1991-92 [1996] 55 TTJ (Ahd.). 7. On careful consideration of the ITAT order, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with the pleadings of the ld. counsel for the assessee in this behalf. In our considered opinion following factors need consideration for ascertaining the actual costs of the oil cake used against the fake bills:- (1) As noted above, the assessee company itself was running oil mill. The oil cake thus brought in against the fake bills, could either be of its own generation in oil mill or purchased locally from other parties without billing. The cost of oil cake from its own oil mill or prevalent market rate as reported in the papers could indicate the cost price of such oil cake. Further the quality of oil cake will also vary depending upon the quality of oil seeds used. This factor has to be taken into consideration while ascertaining the costs of the oil cake used; (2) It could also be considered how far the purchase price of oil cake relating to the said fake bills has been inflated to reduce the taxable income. The assessee claimed transportation charges and brokerage on the said purchases from Rajasthan but the same being found nongenuine has been disallowed and the findings given by the lower authorities in this behalf has already been confirmed by us earlier. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king of groundnut oil cake are of the capacity of 75 per kg. The total number of bags comes to 141747. The quantitative details of closing stock filled with the return of income shows rate of old bags at Rs..5 per bag. The saving on account of bags is estimated at Rs..5 per bag. On basis of these parameters, the benefits under various heads are quantified as under:" 9. Therefore, in the light of guidance given by ITAT on the method of working out of quantum of inflation of purchase price in case of bogus supplier the benefit derived by the appellant was worked out as under : " The total purchases during the year is ₹ 27,42,62,952/-. The total purchases from M/s.Santoshi Bhandar is claimed at ₹ 6,65,80,561/- which comes to 24.27% of the total purchases. The benefits under various heads are quantified as under: Nature of benefit Amount of benefit Sales-tax Purchase-tax @2% of ₹ 66580561/- ₹ 1331611/- Transportation 24.27% of total transport expenses debited to P&L A/c. at ₹ 3250009/- Rs. 788978/- Octroi @0.25% of purchases of ₹ 66580561/-. Rs. 166451/- Packing Materials: 141747 bags @ ₹ 5/- per bag. Rs. 708735 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mur, Orissa has been discussed. It was noted by the AO that the Sales Tax Department of Orissa has submitted an information u/s.133(6) of the Act which clearly mentioned that M/s.Santoshi Bhandar's not entitled to deal with Ground Nut Oil Cake for resale in Orissa or in course of interstate trade or commerce and address of this concern is not that which is mentioned by the assessee. The enquiry conducted from DCIT, Berhamur Circle has revealed that M/s.Santoshi Bhandar was being in the business of hardware and not ground nut oil cake or oil cake. The telephone number got printed by the assessee in the bill of M/s.Santoshi Bhandar is also found bogus. The Inspector's report submitted by the DCIT, Berhamur District, Gangam, nor there was any transporter named as Rairba Career at Aska Road Bhrhamur. In view of these facts collected by the AO, the Director of the assessee company Shri Pankaj B.Damani was examined on oath 01.03.2000 of which relevant extract of statement has been reproduced by the AO at page 10 & 11 of the assessment order from which it is evident the Director of the company was not able to explain the purchases from Santoshi Bhandar. The reply was totally misleading an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on record and considered the relevant facts. The perusal of the assessment order reveals that the AO found that the books of accounts maintained by the assessee were defective as the AO found that the production register of SEGN on 11.05.1997 entry has been erased, similarly, entry dated 12.05.1997, 13.05.1997 were also erased. Further, the production register also revealed that as against 10000 kg of SEGN raw oil of which production was shown of 9500 kg which was prima-facie unbelievable, because in normal course production cannot be in round figure which is major defect of books of accounts maintained by the assessee. Further, the AO also noticed that register maintained by the assessee are defective on which rewriting and re-indicating is appearing. Further the Annexure 3CD4 & 3CD5 were also not satisfied by the auditors, signature on these Annexure are bearing of P.B.Damani on behalf of the company whereas in audit and its Annexures signature for the Director Shri S.P.Damani along with Shri P.P.Damani wee appearing. Further, the production of electricity consumed by the assessee is more as shown in the books of accounts which evident from the penalty of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 7,88,978/-. Similarly octroi @ 2.05 of purchase of ₹ 6,65,80,561/- was calculated at ₹ 1,66,451/- and packing material considered for 5 per pack at ₹ 7,08,735/-. Accordingly the CIT(A) has quantified investment on purchases price at ₹ 29,95,775/- considered the same for addition as unexplained expenditure as against the amount of ₹ 20,30,568/- computed by the AO. The CIT(A) further observed that in view of decision of ITAT in the case of Vijay Proteins Ltd., for AY 1991-92 where the peak amount of purchase at ₹ 10,08,844/- on 10.05.1997 is less than the confirmed addition, hence, the total addition was confirmed at ₹ 29,95,775/- and balance addition out of ₹ 1,33,16,116/- was deleted. We find that these findings of the CIT(A) are correct as the CIT(A) has considered its findings by following the decision of Tribunal in the case of Vijay Proteins Ltd., (Supra) and allowed the set off of peak amount worked out by the AO at ₹ 10,08,444/-. In the light of these facts, we do not find any infirmity in the order of CIT(A) in confirming the addition at ₹ 29,95,75/- as against the addition made by the AO at ₹ 1,33,16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on under valuation stock in ground nut cake was enhanced from ₹ 41,382/- to ₹ 45,520/- and the stock of Haxin of ₹ 29,413/- was confirmed. In view of these facts the total addition on account of under valuation of closing stock was reduced from 2,27,66,485/- to ₹ 5,61,588/-. 18. Being aggrieved, the Revenue has filed this appeal against the deletion of closing stock of ₹ 22,04,897/- out of ₹ 27,66,485/-. The ld.CIT-DR has heavily relied upon the orders of the AO. 19. Per contra, the ld.Counsel for the assessee supported the order of the CIT(A). 20. We have heard the rival submissions and perused the material on record. It is seen that the AO held that some of the items of closing stock have been valued at a price lower than cost and accordingly worked out under valuation of closing stock at ₹ 27,66,485/- and made addition to the total income. However, in appeal the assessee has claimed that the AO has not considered the goods received in Gunny Bags were including cost of Gunny Bags. The assessee follows the practice of increasing the quantity of Gunny Bags thereby including the same in the stock of Gunny Bags, therefore stock va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Depreciation. 22. The ld.CIT-DR has relied on the AO whereas the ld.Counsel for the assessee has supported the order of the CIT(A). 23. We have considered the facts and find that the CIT(A) has correctly deleted the said addition, therefore no interference is required, accordingly, this Ground of appeal is therefore dismissed. 24. In the result, appeal of the Revenue in respect of Ground No.1 to 3 are accordingly dismissed. Cross Objection No.457/Rjt/2005 AY1998-99 by Assessee: 25. Ground No.1 to 3 relates to increasing addition on account of investment in purchase price at ₹ 29,95,775/-. 26. We have heard the rival submissions and perused the material on record and find that this ground in cross objection has been covered by the Ground No.1 of the appeal of the Revenue which we have dismissed, therefore in the light of findings given therein, these grounds of appeal 1 to 3 of the assessee are accordingly dismissed. 27. Ground No.4 of the assessee relates to confirming total addition of ₹ 5,61,588/- on account of under valuation of stock. 28. We have heard the rival submissions and find that this ground of assessee is covered by the Ground No.2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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