TMI Blog2008 (11) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for netting off of interest and including the interest income under the head Income from business or profession while computing deduction under section 80HHC. 5. That the Learned CIT (Appeals) has grossly erred in bringing to tax the total amount of DEPB amounting to Rs. 2,48,52,361 as compared to profit earned on transfer of DEPB amounting to Rs. 1,57,19,207 ignoring statutory provision in this regard. 6. That the Learned CIT (Appeals) has grossly erred in not providing fair and meaningful opportunity to the assessee to represent its case and the written submissions and representations made have either been quoted out of context or completely ignored. 7. That the Learned CIT (Appeals) has grossly erred in confirming the disallowance of Rs. 2 lakhs from out of tour travelling." 2. At the outset of appellate proceedings, the ld. AR for the assessee has not pressed ground Nos. 4, 6 and 7 and accordingly the same are rejected as not pressed. Ground No. 1 is general in nature and hence needs no adjudication from our side. 3. In order to dispose off the instant appeal, the grounds of appeal required to be decided by us, involve only following two issues: "( i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s contention that scrap generation was in respect of in-house production only and not in respect of production by fabricators. Moreover, calculation sheet for scrap had not been prepared on the basis of primary records/registers but has been calculated by using fabricators register and sale invoices and the Assessing Officer, therefore, held that scrap generated and scrap sale has not been properly accounted for. However, no addition in this respect was made but this discrepancy was treated as a defect in the books of account maintained by the assessee. 7. Second, the Assessing Officer after considering the quantitative details of principal items of raw material and quantitative details of principal items of finished goods/WIP and details of GP rates declared during the year under consideration and during the preceding years furnished by the assessee also considering the assessees contention regarding the decline in GP rate compared to assessment year 2003-04 which according to assessee was due to overall escalation in fixed overheads, low labour charges, wages, fuel etc. which could be passed sometime to the customers and that the assessee took a new premises on rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imary manufacturing records; that appellant has not furnished day to day consumption of leather, lining and accessories and due to the lack of information it was not possible for the Assessing Officer to verify the steep fall in gross profit rate for the year under consideration; that the method of valuation as adopted by the appellant was faulty and incapable to disclosing true profit; that the appellant has not accounted for wastage on consumption of 85 per cent of raw material which resulted in suppression of profit in its books of account. 10. Thereafter the CIT(A) held that books of account of the appellant were not reliable and correct profit, and wastage could not be determined on the basis of these defective books of account. In other words the accounts maintained by the appellant firm were incapable of reflecting its true profit. Accordingly, the Assessing Officer was justified in rejecting books of account under section 145(3) on the facts and circumstances of this case. 11. Regarding the trading addition of Rs. 22,93,113 made by the Assessing Officer, the CIT(A) confirmed the order of Assessing Officer by observing as under: "In this case the estimate of gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. That the assessee is a 100 per cent exporter and has been following a same method of valuing closing stock of finished goods consistently at a value derived by reducing estimated project from FOB value of goods to be exported. The method has been followed by the assessee over a number of years and there has been no deviation from it in the current year. The well-settled position of law is that in case the assessee is following a regular method of accounting from which the income of the assessee could be deduced and the revenue has not found any instance of inflated expenditure, unaccounted sales or any material discrepancy in the maintenance of the accounts, the books of account of the assessee cannot be validly rejected. In support of the contention, learned AR for the assessee relied upon in the case of Orissa Cement Ltd. v. IAC [1992] 43 ITD 424 (Delhi), ITO v. Modi Rubber Ltd. [1992] 43 ITD 396 (Delhi), International Forest Co. v. CIT [1975] 101 ITR 721 (J K) and MD. Umer v. CIT [1973] 101 ITR 525 (Pat.). 14. On the other hand, learned DR for the revenue placing strong reliance on the reasoning given in the orders of the tax authorities below to support t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustify the rejection of books of account; and ( xii ) the Assessing Officer in case is able to pinpoint specific defect, omissions or non-genuine entries it would be appropriate for him to consider it sufficient to confine himself in making addition only in respect of those items instead of rejecting the books results and making a lump sum estimated addition by applying a particular rate on a total turnover. 16. Now, coming to the facts of the instant case, we find that undisputedly the tax authorities below have neither pointed out any defect in the purchases or in the expenses from the audited books of account of the assessee, which were supported by bills for purchases and with evidence for each and every expenses. Entire sales were to foreign parties, remittance for which had been received through banking channels in accordance with requirements of FEMA, which have not been doubted nor any instance of inflated purchases or of any transaction of sale outside the books of account have been pointed out in the books of account of the assessee. Hence, in our opinion in case there is neither any instance of inflated expenditure nor any instance of sale out of books except a gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cators to show that the scrap was retained by them. 20. In the instant case neither the assessee nor the tax authorities below have called the fabricators for examination by the Assessing Officer to verify the genuineness of the certificates/confirmations and so it does not stand established from record as to how much scrap was generated in in-house production and as to the quantity of scrap generated from production/manufacture of garments by the fabricators. It is also not established by the fabricators whether retention of scrap by them has been accounted for by them in their records or not. Further, it is also not established by the assessee or examined by the Assessing Officer regarding the value of the sale of scrap from in-house production or from production of outsourced raw material to the fabricators. In these facts, we are of the considered opinion that in order to meet ends of justice to both the parties, we should restore this issue of quantity of generation of scrap and sale thereof from in-house production and generation of scrap from the material outsourced to the fabricators to the file of Assessing Officer to decide the same afresh by affording reasonable oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than Rs. 10 crores, whereas, undisputedly, the turnover of the assessee in the year under consideration was more than Rs. 10 crores. Second, that in the Profit Loss Account, the assessee itself has shown the income from DEPB, as credited in the Profit Loss Account, as Rs. 2,48,52,367 and not Rs. 1,57,19,307 as claimed by the assessee. 26. Hence, in our opinion, the claim of the assessee before us that it has shown the profit from DEPB on accrual basis, whereas, it is to be allowed as per receipt basis and if we consider it on receipt basis it would be Rs. 1,57,19,307 and not at Rs. 2,48,52,367 shown by the assessee in Profit Loss Account, cannot be accepted at this stage, nor the same finds any support from record nor from any case law in support of the contention. Therefore, the contention of the assessee, to our mind having no merits, is liable to be rejected and more so when against the addition made by the tax authorities below on the basis of the receipt of DEPB shown by the assessee in its Profit Loss Account and on the addition made under section 80HHC of the Act and as per amended provisions of section 80HHC of the Act when assessee s turnover is more than Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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