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TMI Blog2019 (2) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... the finding of Ld. CIT(A). Accordingly, we do not find any reason to interfere in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is dismissed. Addition on account of suppressed production - HELD THAT:- AO observed the difference in the production due to the job work carried out by the assessee during the year. We have already adjudicated the similar ground of the Revenue vide paragraph numbers 9 to 9.4 of this order. The reasoning given in ground No. 1 of the Revenue as discussed above will also be applied to this ground as well with full strength. Therefore, we do not find any infirmity in the order of the Ld.CIT(A). Hence, the ground of appeal of the Revenue is dismissed. Addition on account of lower GP ratio - AO has estimated the gross profit at the rate of 25% - HELD THAT:- If the AO was not satisfied with the gross profit ratio shown by the assessee, then he should have referred the gross profit declared in the earlier and subsequent assessment year. We find that the assessee in earlier years has shown the GP less than 25% of the turnover. The necessary details of the GP ratios. But the AO has not made any reference to the GP ratio declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) dated 07/12/2009 relevant to Assessment Year (AY) 2007- 08. 2. The Revenue has raised following grounds of appeal:- 1. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 1,90,23,678/- made on account of difference of job-work. 2. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 1,60,23,176/- made on account of suppressed production. 3. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 3,52,600/- in respect of low GP. 4. The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 1,07,220/- for undervaluation of closing stock. 5. The Ld.Commissioner of Income tax(A) has erred in law and on facts of the case in directing the AO to verify the contention fo assessee and to modify the assessment order, in contravention of Sec.251 of the I.T.Act, in respect of the following issues: 1) Addition of ₹ 99,800/- being suppressed sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that it had done the job work in the year under consideration on the loan license basis. This fact was duly disclosed in the excise return filed by the assessee. The assessee further submitted that the provisions of the Excise Act require to show the clearance of all the goods manufactured by it for itself or on a job work basis. Thus the assessee only receives the job work charges on the goods manufactured by it on behalf of outside parties which has been duly disclosed in the income tax return. 6. The Ld.CIT(A) after considering the submission of the assessee, deleted the addition made by the AO by observing as under: 6.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. The appellant is a manufacturer of pharmaceutical products. Besides own manufacture, it undertakes manufacture of pharmaceutical products by way of job-work from loan-licensees. The Central Excise Return filed by it shows total value of the products cleared at ₹ 10,20,31,117/-. Out of this ₹ 3,89,96,579/- was the value of own products, and the value of products of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he completely ignored the detailed and repeated explanation offered by the appellant (and reproduced in the assessment as stated earlier in this order). I find the entire approach of the A. O. to be weird and callous. A.O. has not brought on record any material to say that the appellant's contentions are incorrect; or that the loanlicensees are dummies of the appellant. The addition is not at all based on any outside inquires - either with the Central Excise department or with the loan-licensees or with the purchasers of the products. As emerges from the assessment order, the A.O. for the reasons best known to him ignored the facts of the case and the appellant's explanation. He indulged in some fictitious arithmetical exercise to make the addition. In fact the Excise returns filed by the appellant in E.R.-1 (the very basis on which the addition came to be made) show that the appellant is (beside being a manufacturer) engaged in doing job-work of loan-licensees. 6.2.4. In the light of the above discussion, I hold that the addition of ₹ 1,90,23,378/- is entirely unwarranted. It is deleted. This ground of appeal is allowed. 7. Being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in deleting the addition made by the AO for ₹ 1,60,23,176/- on account of suppressed production. 11. The AO during the assessment proceedings found the difference between the production of the goods in the excise records vis-a-vis in the books of accounts of the assessee as detailed under: Production of tablets and capsules shown in excise return 2,87,91,668 nos. Production of tablets and capsules shown in books of accounts 1,32,35,186 nos. Difference 1,55,56,482 nos 11.1. The difference above in the production was determined at ₹ 1,60,23,176/- and the same was added to the total income of the assessee. 12. The aggrieved assessee preferred an appeal to the Ld.CIT(A). The assessee before the Ld. CIT(A) submitted that the difference in the production is arising on account of the job work carried out by it during the year on loan license basis. As such there was no production of the goods which was not recorded in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 25% and determined the gross profit at ₹ 68,30,280/-only. Thus the difference of ₹ 3,52,600/- (68,30,280 64,77,675) on account of low GP ratio was added to the total income of the assessee. 19. The aggrieved assessee preferred an appeal to the Ld.CIT(A) who have deleted the addition made by the AO by observing as under: 11.2. I have considered the submissions made by the A.R. of the appellant and the observations of the assessing officer in the assessment order. A.O. has not mentioend any basis G.P. in comparable cases t estimate G.P. @ 25% as against 23.71% admitted by the appellant. Further it is seen that the G.P. in theimmediately preceding A.Y. 2006-07 was only 22.5% (as against G.P. of 23.71% admitted during the year). Hence, the addition is not sustainable. It is deleted. This ground of appeal is allowed. 20. Being aggrieved by the order of the Ld. CIT(A), Revenue is in appeal before us. Both the Ld. DR and the AR before us vehemently supported the order of the Authorities below as favorable to them. 21. We have heard the rival contentions of both the parties and peruse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Authorities below as favorable to them. 26. We have heard the rival contentions and perused the materials available on record. The accounting standard 2 issued by the ICAI requires the assessee to show closing stock either on cost or market value whichever is less. The AO in the case on hand has rejected the valuation done by the assessee without adducing any reason thereon. The Ld. DR before us has also not brought anything on record contrary to the finding of the Ld.CIT (A). Hence we do not find any reason to disturb the finding of the Ld.CIT (A). Hence the ground of appeal of the Revenue is dismissed. 27. The last issue raised by the Revenue is that the Ld.CIT(A) erred in contravening the provisions of section 251 of the Act by directing the AO to verify the contention of the assessee. 28. The AO during the assessment proceedings has made the disallowance/ addition of the certain items/expenses as detailed under: 1) Addition of ₹ 99,800/- being suppressed sales of injections. 2) Addition of ₹ 28,67,000/- being suppressed sales of ointment. 3) Addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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