TMI Blog2006 (7) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... xplains that the assessee was always valuing its stock of scrap at ₹ 7 per kg. as it contained only non-reusable scrap. - This year, it was valued at ₹ 27 per kg. because for the first lime the closing stock also included the reusable scrap. Thus, considering all the facts and circumstances of the case, we see no justification at all to sustain the addition. - 257 of 2005 - - - Dated:- 26-7-2006 - MADAN B. LOKUR and VIPIN SANGHI JJ. Sanjeev Sabharwal for the appellant. Ajay Vohra with Ms. Kavita Jha for the respondent. JUDGMENT The judgment of the Court was delivered by VIPIN SANGHI J. - This appeal under section 260A of the Income-tax Act, 1961 (the Act), has been preferred by the Revenue against the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice thereby intending to treat the claim of excess scrap generated in the year in question as utilization for unaccounted manufacture and sale of pipes, outside the books. Subsequently, the Assessing Officer on basis of the figures for scrap generation for the last 6 years arrived at the average scrap generation figure of 16.38 per cent. On that basis, the Assessing Officer computed the scrap generation at 71,631 kgs. in the relevant year. Consequently, he worked out the figure of Rs. 30,80,133 as the unaccounted total sales of finished goods. He proceeded to issue a second show-cause notice to the assessee, to show cause as to why an addition of Rs. 30.80 lakhs should not be made. 4. The assessee, in response to the second sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had shown nil scrap generation and that 24.9 per cent. scrap shown for the whole year under consideration was generated only during 4 months of April, June, July and October, 1999. The Assessing Officer rejected the explanation of the assessee as merely self-serving and without any basis. The Assessing Officer also observed that the books of the assessee were not foolproof since the assessee had on its own surrendered/made a disclosure of Rs. 25,07,500 during the survey. 6. The Commissioner of Income-tax (Appeals) confirmed the addition made by the Assessing Officer. As noticed above, on appeal by the assessee before the Tribunal by the impugned order, the Tribunal reversed the orders of the Assessing Officer and the Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. Appreciating the facts in its true perspective, we find that there is much ado about nothing. The whole problem, it appears, is created because of the reporting in absolute terms by the auditors. The auditors did certify the results correctly. But it would have been better appreciated, and it is also expected of them, if they had inserted an explanatory note explaining the reasons of low yield. The Revenue authorities failed to appreciate that hitherto only non-reusable scrap was brought into the books and the yield was arrived at taking into consideration only the non-reusable scrap. The reusable scrap was never brought into the books, nor was it taken into reusable scrap was taken into production. This year the situation was totally d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n at all to sustain the addition. This is more so in the light of the fact that, (a) there was no discrepancy found by the survey party between the physical stock of scrap and the books stock, and (b) there is no material at all to suggest any sales outside the books of account. We reiterate, most of the 'reusable scrap which was brought into the books during the year, was used in the subsequent year which is reflected in a higher yield in that year." 10. We find that the Assessing Officer and the Commissioner of Income-tax (Appeals) did not take into consideration the following admitted facts that were on record. i. The assessee had applied for ISO 9000 certificate in the relevant year. This necessitated the assessee to bring into it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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