2022 (5) TMI 156

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..... e Ld. CIT(A) also it was explained by the assessee that when the scrap is generated out of stores consumption the same is sold with the permission of District Magistrate after inviting tenders and sale of scrap is shown in the year of sale of scrap in the accounts. CIT(A) has accepted it as a matter of fact that the practice of not showing the amount of scrap in its books in the year of generation but accounts for the same as sale in the year scrap generated is sold, is being followed by the assessee since long. The assessee brought on record a chart of sale made of scrap in last years and subsequent year which revealed that during the financial year 2014-15 it accounted for sale of scrap in its books of account. We are, therefore, of the v .....

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..... are, therefore constraint to decide the appeal ex-parte after hearing the Ld. DR. 4. The assessee is a Co-operative Society engaged in the manufacture and sale of sugar and its by-products. The Ld. AO noticed that the assessee has claimed repair and maintenance of plant and machinery at Rs. 1,81,26,624/-. Income from closing stock of scrap was declared at NIL. The Ld. AO estimated the value of scrap at 10% of the amount of repair and maintenance expenses and added Rs. 18,12,662/- to the income of the assessee. 5. On appeal, the assessee explained to the Ld. CIT(A) that the repair and maintenance for plant and machinery are on account of store consumption of Rs. 1,49,24,424/-, contract jobs at Rs. 21,81,968/- and lubricants grease a .....

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..... ilar facts it has been held by the Ld. CIT(Appeals), Muzaffarnagar (supra) that it would be reasonable to estimate the value of inventory of scrap in such cases @ 10% of the cost of repair and maintenance debited to the profit loss account. The submission of the appellant that it can make sale of scrap only after approval of the Federation Office/District Magistrate, has been considered. However, this sanction/approval is necessary for making sale of scrap. But in order to compute the true, profit of the business it is mandatory to account for the value of inventory of the closing stock including scrap lying with the appellant as the close of the year. It has been further held by the Hon ble ITAT, New Delhi (supra) (Para 8.2) that certain .....

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