TMI Blog2013 (8) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... e shortage in the stock of finished goods on the date of search because it is admitted position of fact that in the RG-1 register, only finished goods is entered as production and therefore, the search team was required to take stock of only finished goods for the purpose of comparing the available stock of finished goods as compared to book stock of finished goods. There is no basis of exclusion form opening stock of finished goods as on 16.07.2009 because the production on 14.07.2009 and 15.07.2009 is included in the RG-1 register and the same must be available with the assessee on the date of search i.e. 16.07.2009 in the form of finished goods and the same cannot be explained by availability of unfinished goods on the date of search. The exclusion on account of dispatch on 16.07.209 is also without any basis in the facts of the present case when there is no finding given by CIT(A) that such dispatch on 16.07.2009 is before the inventory taken by the search party. Generally, the search is carried in the morning hours and hence, any dispatch on the date of search cannot be before taking the inventory by the search party and in some cases, there can be such dispatch but then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the form of jumbo roll or parent roll were not given on the date of search or during the assessment proceedings. So it was also claimed that, search party did not take the stock of unfinished roll on floor or jumbo roll or parent roll on machine production, and therefore, the quantity and valuation as per their book records and those inventorised did not match. It was further claimed that there was no shortage in the finished goods because their production process is continuous process and the RG-1 Register entries are made for finished reels quantity only. Unfinished rolls, parent rolls/jumbo rolls cannot be entered in RG-1 Register. Machine production is further processed for finishing and are cut into smaller size reels as per customers' requirements and thereafter only ready goods are entered in RG-1 Register. Machine production paper cannot be sold directly to the market, as this is required to be further finished and rewound into smaller reels as per the size requirement of the customers. Such machine production in the form of unfinished rolls remain lying on floor. The search party had inventorised and seized details of unfinished rolls on the floor as on 13th July, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried the matter in appeal before Ld. CIT(A) who has deleted the entire addition made by the A.O. and now, the revenue is in appeal before us. 5. Ld. D.R. supported the assessment order. He submitted that although ground No.1 raised by the revenue is only in respect of contravention of the provisions of Rule 46A of the I. T. Rules but as per ground No.2 of the revenue, the revenue is disputing the order of Ld. CIT(A) on merit also, as per which he deleted the disallowance/addition made by the A.O. He also submitted that regarding contravention of Rule 46A, the order of Ld. CIT(A) is defective because no remand report was obtained by him from the A.O. Regarding the merit of the order of Ld. CIT(A), as per which, he deleted the addition made by the A.O., it was submitted that the addition was made by the A.O. on valid basis after considering all the facts and Ld. CIT(A) was not justified in deleting the same. He strongly supported the assessment order. 6. As against this, regarding ground No.1 of the revenue, it was submitted by the Ld. A.R. that in the present case, Ld. CIT(A) has granted relief to the assessee by relying upon those evidences which were also placed before the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed/jumbo rolls" which got manufactured on 14/07/09 15/07/09 and duly entered in RG-1 register as stock of those 2 days was totally ignored by the search team while taking the physical stock. Details of such goods produced on 14/07/09 15/07/09 (which formed part of unfinished rolls on the date of search) and recorded in RG-1 register are as under:- Date of Production Reel Nos. ProductionRegister (Pgs. ofP/B) Quantity (Kgs.) RG-1 Register (Pgs. ofP/B) 14/07/09 30581 to 30944 115 to 127 49553 25640 21855 35790 132838 30 34 38 42 15/07/09 30945 to 31307 128 to 140 59596 40344 30094 130034 30 34 43 Further, goods weighing 19,337 kgs were dispatched on 16/07/09 itself and hence, though the same were included in RG-1 register, the same were not there at the time of physical verification of stock. Summary as well as copies of invoices and delivery challan in respect of the said dispatch are placed at Pgs.152 to 162 of P/B. Further, at the time of physical verification of stock, stock upto reel nos. 30635 was taken into account (Pgs.8 9 of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal and hence, there is no violation of Rule 46A of the I T Rules because, we find that the decision of Ld. CIT(A) is by considering the letter dated 29.10.2009 which was submitted by the assessee before the A.O. also and was reproduced by the A.O. on pages 3-5 of the assessment order. Hence, ground No.1 of the revenue is rejected. 10. Now, we proceed to decide the appeal of the revenue on merit i.e. ground No.2. As per the order of Ld. CIT(A) as per which he deleted the addition made by the A.O. in respect of short stock found by the search party of finished goods in the course of search. But before adjudicating this issue, we would like to consider these submissions made by the Ld. A.R. that since this is the appeal fled by the Revenue, the assessee is not under any obligation to file any paper book or any document before the Tribunal and it is the duty of the revenue to bring evidence on record to point out any defect in the order of Ld. CIT(A). We would like to observe that this argument of the Ld. A.R. is not correct and the same is fallacious. Had this been the case that before the Tribunal, only the appellant has to bring material in support of the grounds raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al paricularly, when the order of Ld. CIT(A) is contradictory with regard to the evidence stated to be the basis of his order and also when no proper basis is indicated by Ld. CIT(A) in support of his decision. Admittedly, there is no control of the assessee on the way, Ld. CIT(A) is writing his order but it is also true that the evidences brought on record by the assessee before the Ld. CIT(A) are very much available with the assessee and the same can be brought on record before the tribunal and even if proper basis is not given by Ld. CIT(A) in support of his decision or where the basis indicated by Ld. CIT(A) in his order is in contradiction of the material available on record, and the correct appreciation of such material is also supporting the decision taken by Ld. CIT(A) and in spite of this, the assessee is not bringing such material on record then, it will be in fitness of things that adverse inference should be drawn by the Tribunal against the failure of the assessee whether intentionally or by negligence or otherwise in bringing such material on record before the Tribunal. We would like to observe that in the present case, in spite of specific query raised by the bench r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not made available before the Tribunal to examine as to whether the basis is true or not and whether contradiction is true or not. 12. Now, we examine the basis of the decision of Ld. CIT(A). This is also being examined as to whether the basis of his decision is in line with the material indicated by him for taking his decision. We find that the decision of Ld. CIT(A) in the present case is contained in para 7 of his order and for the sake of ready reference, the same is reproduced below: "7. I have considered the basis of addition made by the Assessing Officer and also the submission of the appellant along with copies of inventories and reconciliation working filed by the appellant. I am of the considered opinion that the Assessing Officer was, riot justified in making addition of Rs. 40,42,564 on account of shortage in finished goods stock without appreciating the reasons for discrepancy and without appreciating the reconciliation filed by the appellant before him. The physical stock inventory was taken on 16th July, 2009 whereas the stock as per excise Record RG-1 Register as on 16th July, 2009 was taken on 31st July 2009 at the time of operating the prohibitory order. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it cannot be said that the shortage of stock was due to sales outside books. The finished goods bearing Excise Reel No. 30581 to 30944 entered in production on 14* July, 2009 and on 15th July, 2009 in RG-1 Register, was sold in subsequent period after collecting excise duty on the same. So, it cannot be said that the finished goods were sold outside Books. The shortage of finished goods occurred only on account of non- inclusion of unfinished Jumbo Rolls/Parent Rolls lying on the floor which were subsequently trimmed and cut into smaller rolls and entered in RG-1 Register against production of 14th July, 2009 and 15th July, 2009. If the finished stock^ from Excise Reel Number 30636 to 31307 was considered as finished stock as per books on 16th July, 2009, the same were also required to be included in the physical inventory of finished goods prepared on 16th July, 2009. The shortage of stock was only due to this reason which has been successfully reconciled by the appellant as under:- S. No Particulars Quantity in KGS 1 PHYSICALLY VERIFIED BY THE SEARCH PARTY UPTO REEL NO. 30635(Exhibit-4) 438821 2 Less: Physically verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been entered into excise records up to reel no.31307. Thereafter he is saying that in the RG-1 register, production as on 14.07.2009 was entered being reel no.30581 to 30944 i.e. 132838 Kg and production as on 15.07.2009 being reel No.30945-31307 i.e. 130034 Kg. has been entered but these reels were not included in the physical stock inventory prepared on 16.07.2009. Thereafter, he is supporting this finding on this basis that RG-1 register was not under prohibitory order placed on 16.07.2009 and this was seized on 31.07.2009. Thereafter, he is giving the basis of his decision that the shortage of finished goods occurred only on account of non inclusion of unfinished jumbo reel/parent reel lying on the floor which was subsequently cut into small reels and entered into RG-1 register against production on 14.07.2009 and 15.07.2009. This basis given by Ld. CIT(A) in support of his decision is totally contrary to the facts. If some jumbo reels and parent reels lying on the floor on the date of search i.e. on 16.07.2009 were not included in the inventory of finished goods then how such non inclusion in the inventory of finished goods on the date of search can explain the finished goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 being 132838 kg and 130034 kg respectively from the stock as per RG-1 register as on 16.07.2009. We fail to understand the basis of such exclusion form opening stock of finished goods as on 16.07.2009 because the production on 14.07.2009 and 15.07.2009 is included in the RG-1 register and the same must be available with the assessee on the date of search i.e. 16.07.2009 in the form of finished goods and the same cannot be explained by availability of unfinished goods on the date of search. The assessee has also reduced 19337 Kg. on account of dispatch on 16.07.2009 but this is not clear as to whether such dispatch on 16.07.2009 is after the inventory taken by search party on 16.07.2009 or before taking the inventory by the search party on that date. This exclusion on account of such dispatch on 16.07.209 is also without any basis in the facts of the present case when there is no finding given by Ld. CIT(A) that such dispatch on 16.07.2009 is before the inventory taken by the search party. Generally, the search is carried in the morning hours and hence, any dispatch on the date of search cannot be before taking the inventory by the search party and in some cases, there can be such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoice where time of removal is shown as 15.20. Similarly, page 155 is another invoice where time of removal is shown as 15.40. On page 157 is another invoice having time of removal 16.40 and the removal time on page 159 is also 16.40. On page 161, removal time is 17.30. There is no evidence brought on record by Ld. A.R. to show that physical inventory taken by search party was after this time of removal i.e. 17.30 as per page 161 of the paper book. Hence, this argument is also without any basis that the removal on 16.07.2009 by way of despatch is before taking the stock inventory of finished goods by the search party and therefore, this depsatch should be considered as physical stock existing on 16.07.2009. Even if this is a claim of the assessee that inventory was taken by the search party after 17.30 on 16.07.2009 then the production of the assessee on 16.07.2009 should also be added in the opening stock of finished goods as on 16.07.2009 because this is the assessee's own argument that assessee is having continuous process and, therefore, production cannot stop in spite of search and it must have continued throughout the search time i.e. up to 17.30 or up to the time when sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reliable or acceptable because putting the same reel number on a subsequent lot of production and selling the same as per books without including the same in the production quantity as per RG-1 register, cannot be ruled out. Moreover, it is also seen that the assessee's consumption of raw material and production of finished goods quantity are not correlated. Such quantitative details are available on page 176 of the paper book in the form of Annexure 10 to the Tax Audit Report for the current year. As per the same, the consumption of Indian Waste Paper is shown at 8011473 Kg and consumption of imported waste paper had been shown at 38959350 Kg and consumption of colour and chemical had been shown at 380014 Kg. totaling 50770837 Kg. and the production of finished goods had been shown at only 44071468 Kg. and this is clear that the production quantity of finished goods and consumption quantity of raw material is having very wide difference and therefore, there is always a scope of having unaccounted production in such cases which can be sold outside the books. This is also admitted position of fact that in spite of search, physical stock found of the finished goods on the date of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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