TMI Blog2019 (9) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted sales. On the other hand, the ld.CIT(A) has appreciated the facts in right perspective and no addition is called for on this issue - Decided in favour of assessee. Addition of power and fuel expenses - assessee was not following proper method of accounting and claiming the expenses as per its benefits - HELD THAT:- AO has not given any reasons for making such a huge disallowance without going into the reasons. Neither any bogus claims have been proved nor it was proved why those store items were to be transferred to CWIP R D expenses and those were not the revenue expenditures. Merely some items in the preceding year were debited to the CWIP - R D expenses do not indicate that the same nature of expenditures have been incurred in the year under consideration also. ' Since there was no question on the genuineness of the expenditures and hence there allowability cannot be doubted. When the appellant himself bonafidely transferred some stores and spares expenses to CWIP R D in the preceding year than in the year under consideration with the same bonafides he has not transferred the same because those were not required to do so. It was the onus on the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alent to the immediately preceding year. On the basis of this calculation, he worked out the estimated sales at ₹ 41,01,09,077/- and compared it with sales shown by the assessee at ₹ 37,96,30,697/-. The difference of ₹ 3,04,78,393/- was treated as sales outside the books of accounts. On this exercise, the ld.AO has made an addition of ₹ 3,04,78,393/-. 5. Dissatisfied with the addition, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has re-appreciated the facts and deleted the addition by recording the following finding: 3.3. I have considered the facts of the case and submission made by the appellant. The AO has made the addition of ₹ 3,04,78,393/- by estimating the sales suppression. It has been observed that the appellant had the consumption of material of ₹ 32,88,66,469/- as against the sales of ₹ 37,96,30,697/- and the material consumption to sales ratio calculated at 0.866 in the year under consideration. While the material consumption to sale ratio was at 0.802.in the immediately preceding year. Thus the AO concluded that the material consumption to sale ratio was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading result should be the same over the years and there was no scope for any variation which could happen due to various reasons beyond the control. It was also submitted that even the working of the material consumption ratio made by the A.O. for both the years was highly vague/incorrect as the AO has completely ignored the fact that raw material consumption also include the consumption made for work-in-progress and finished goods closing stock. The AO totally assumed that whatever consumption was shown was for sales only and he has ignored the increase/decrease in the closing stock of semi-finished and finished-goods while arriving at the material consumption ratio. So the working itself was completely wrong. He has worked out the material consumption ratio for the year under consideration at 0.848 for the year under consideration as against the same ratio in the immediately preceding year at 0.835. Thus, there was the slight increase in the material consumption ratio by 1.3% (0.848 - 0.835) in the year under consideration of which detailed working is as under:- FY 2009-10 FY 2008-2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 296 ITR (AT) 125 whereby it has been pointed out that pre- conditions for estimating business income of the assessee was that the books of accounts should have been found to be unreliable or otherwise not capable of proving the assesses income. Without this first step the fact that gross profit is low cannot by itself be a ground for taking a view that it is open to the AO to make good the alleged deficiency in gross profit. Further he has relied upon the judgment of Hon'ble Delhi High Court in the case of GIT Vs. Paradise Holidays (2010) 325 ITR 13 whereby it has been held that if accounts which are regularly maintained in the course of business and are duly omitted free from any clarification by the auditors should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. Thus onus is upon the revenue to show that either the books of accounts maintained by the assessee were incorrect or incomplete or that the method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom. Further Hon'ble ITAT, Ahmedabad Bench in the case of Siddhi Enterprises Vs. Department of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 6,00,000/- is confirmed. Thus the appellant gets the part relief on this issue. Ground of appellant is partly allowed. 6. The ld.DR relied upon the order of the ld.AO, whereas the ld.counsel for the assessee relied upon order of the CIT(A) as well as submissions made before the ld.CIT(A) which have been reproduced by the ld.CIT(A) in para-3.2 of the impugned order. 7. We have duly considered rival submissions and gone through the record carefully. It is trite to say that the sales could be estimated if the books of accounts of the assessee are rejected. In this connection we would like to make reference to section 145(3) of the Income Tax Act, 1961, which reads as under: 145. (1) Income chargeable under the head Profits and gains of business or profession or Income from other sources shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. ( 2) The Central Government may notify in the Official Gazette from time to time [accounting standards] to be followed by any class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduce true income from the accounts. The assessee has also pleaded that it is a sick company, facing acute shortage of funds and its loan account with consortium of bankers also became NPA; banks have filed recovery suit and they have also assigned the debt of the company in favour of the Asset Reconstruction Company i.e. Asrec India Ltd. The AO has only compared certain figures of raw-material vis- -vis output without comprehending other aspects for consumption of other material as well as achievement of sales. Some of the item may be lying in the closing stock or in semi-finished products. All sorts of such aspects have not been considered by the ld.AO while estimating unaccounted sales. On the other hand, the ld.CIT(A) has appreciated the facts in right perspective and no addition is called for on this issue. We uphold the order of the ld.CIT(A) on this issue, and ground of appeal of the Revenue is rejected. 8. In the next ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of ₹ 23,76,828/-. 9. The above disallowance was made by the AO out power and fuel expenses of ₹ 73,44,543/- simp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and estimation of AO. In view of above facts of the case it is humbly preyed that the entire addition of ₹ 23,76,828/-made by AO be deleted. 4.3. The appellant filed further written submission dtd. 27.06.2013 as under:- 2.0 Disallowance of Power Fuel Exp.of ₹ 23, 76,828/- 2.1 The next ground of appeal relates to the addition totaling to ₹ 23,75,525/-by way of disallowance of Power Fuel Exp. We have given the full details of the Power Fuel Exp. and stated that in FY 2008-09, the appellant has spend total ₹ 1201 585 3/- towards Power Fuel and Stores Spares Exp. and in FY 2009-10, the said exp. was ₹ 1,06,88,775/-. In F.Y.2008-09, out of total exp.₹ 12015853/-, the appellant company has transferred ₹ 2994274/- in Other Consumable Stores ( R. D.) Exp. which was capitalized and therefore exp. actually debited to P. .L.A/c was ₹ 9021579/- [ 12015853-2994274]. Thus, there was a reduction in overall exp. but the AO has not considered the fact in a positive manner and simply disallowed the actual amount spent on Gas other fuel of ₹ 23,76,828/- without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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