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2014 (12) TMI 1353 - ITAT RAIPURAddition on account of suppressed sales - GP on the suppressed sales - HELD THAT:- The assessee had maintained regular books of account and the AO had not come across any unaccounted purchase or suppressed sales. Only on the basis of power consumption, no addition could be made or sustained. It is a known fact that several factors affect the consumption of electricity-like loss of heat, poor quality of raw material inputs, poor workmanship/supervisory skills, presence of moisture, contents and fluctuation in the electricity supply. Most of the above factors are beyond management’s control and explanation cannot be pinpointed to any single reason. It is also a fact that the assessee was not manufacturing one item. Therefore, arithmetical formula should not have been applied for arriving at a conclusion. In our opinion, the FAA was fully justified in holding that the assessee had explained the variation in power consumption citing cogent reasons. The cases referred by the AR also support the views taken by us - FAA does not suffer from any legal infirmity. Upholding his order, we decide first ground of appeal against the AO. Disallowance u/s. 40A(2)(b) - HELD THAT:- Selective study of the transactions in the year concerned is not appropriate for arriving at a definite conclusion. He should have considered the average price for the whole year before making the disallowance. FAA has given a categorical finding of fact that in certain months, the average prices of goods/material purchased from the sister concern of the assessee was less or equal to the market rate. We have also taken note of the fact that the assessee has purchased the goods on credit from its sister concern. AO has not brought on record comparable cases to justify the disallowance. In our opinion, the provisions of section 40A(2)(b) can be invoked in special circumstances where considering the market rate of goods/services, the AO arrives at a conclusion that the price charged by the assessee was at variance to the market rate. In the case before us, the AO has not brought on record any facts which prove that he had undertaken such an exercise. In the present case no evidence whatsoever was brought on record by the AO to prove that the justification assigned for making payment to the sister concern was false and the same was not proved to have been made for extra commercial considerations. For all the reasons mentioned above, the impugned disallowance, made on mere hypothetical estimations, cannot be endorsed
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