TMI Blog2010 (5) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, is arbitrary and without any basis - the additions made by the Assessing Officer in these seven assessment years, including the four assessment years where the CIT(A) has enhancement the assessment deserves to be deleted. - IT APPEAL NOS. 1317-1319, 1370, 1419-1420 (AHD.) OF 2004 AND 818 (AHD.) OF 2006 - - - Dated:- 7-5-2010 - SHRI N.S.SAINI, ACCOUNTANT MEMBER J. AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER J. Assessee by : - Shri A.C. Shah, AR Respondent by: - Shri C.K. Mishra, SR-DR O R D E R PER Mahavir Singh Judicial Member:- These seven appeals 4 appeals by the assessee and 3 appeals by Revenue are arising out of the order of Commissioner of Income-tax (Appeals)-II, Ahmedabad in appeal Nos.CIT(A)VII/Wd.3(4)/104-107/03-04 dated 05-03-2004; appeal Nos. CIT(A) VII/Wd.3(4)/108, 103/03-04 i.e. dated 13-02-2004 and 11-02- 2004 and appeal No. CIT(A)VII/Wd.3(4)12/05-06 dated 03-01-2006. The assessments were framed by the ITO Ward-3(4), Ahmedabad u/s.143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) vide his orders dated 28-03-2003. 2. The first common issue in four appeals of the assessee in regarding assumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mung dal to the extent of 1.5% and the AO carried out an exercise of sample milling as under:- Working as per survey: Input kept (mung) No of bags x Net weight in one bag in kg. 20 x 100 = 2000 kg. Production of mung dal: Wastage found : Dust 39,340 kg Kuma (mung chuni) 1,34,000 kg 1,74,340 kg. Less: Weight of 5 bags (bandan) in which Dust and Kuma filed in 1 kg per bag 5,000 kg. Net Weight 1,69,340 kg Input (mung dal) 2000.00 kg. Reply to Q. No.33 Cheni waste, dust 169.34 kg 1,830.66 kg Therefore, yield = 91.54% sastage = 8.46% Working as per assessee: Mung fed into machine (after cleaning the machine) 2000.00 kg. Less: Mung left out in the machine 138.66 kg Net mung processed 1861.34 kg Mung dal produced (as per Q.No.33 of the statement) 1692.00 kg 90.90% Kuma chuni, waste, dust, stone etc: Kuma 135.00 7.00% Dust, waste, stone etc. 39.34 2.10% 174.34 Less: Weight of 5 Bardans 5.00 169.34 kg. 1861.34 100% Mung dal left in machine = 138.66 kg Fotri (kumar or chuni) = 135.00 kg Dust, wastage, stone etc. = 34.34 kg = 308.00 Mung dal = 1692.00 kg = 2000.00 kg Therefore, yield = 90.90% bi-product/wastage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out as under:- 1.29% on total consumption as worked out in this order i.e. 72176.82 quintals x 1.29% = 931.08 Average price of mung dal (Sales / quantity (160807010 / 65974.37) Rs.2437.42 Total value of 1.29% difference (Rs.2437.42 x 931.08) Rs.22,69,433/- Less: Production on account of proportionate Sale price of kurma/fotri Average price of kurma/fotri (sales/quantity (31,39,962 / 5615.10 Rs.559.20) Total value of suppressed production of mung dal Replaced as kurma (i.e. 931.08 qts. X Rs.550.20) Rs.5,20,660/- Therefore suppressed production of mung dal (Rs.2269.433 5,20,660) Rs.17,48,773/- 9.1 It is, therefore apparent from the records and investigations that the assessee has suppressed that the assessee has suppressed production of mung dal to the extent of Rs.17,48,773/-. Accordingly, this amount is added to the total income. This suppression is further supported by the fact that the actual weight of the raw material pu9rchased and pu9t to processing has not been recorded in the relevant books, the shortages in weight are not recorded in the registers of the time of entering the purchases, but only a claim made at the time of making the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals by the assessee, the CIT(A) also enhanced the addition vide para-3.5 and 3.6 of his appellate order as under:- 3.5 The contentions raised as mentioned in para 3.4 above, have been considered. The fact that the appellant firm had purchased new machinery during the assessment year 99-2000 may have improved the manufacturing process as claimed by the ld. counsel. The appellant firm had also employed a technical person to supervise over the manufacturing process. I agree with the ld. counsel that these steps would have improved the production process and as a result the wastage would have been lower as compared to the proceeding assessment years. The assessment years under consideration in this appeal did not involve the new machinery and the technical person and therefore, the process wastage which has been fixed for A.Y. 99-2000 and 2000-01 may not be appropriated for the assessment years under appeal Some adjustment is therefore, called for on account of these two factors which are not available for the assessment years under appeal and which may have lead to improvement in the manufacturing process in the subsequent assessment years. However, I do not agree with the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee, Shri A.C. Shah stated that the assessee s issue is squarely covered in favour of the assessee and against the Revenue by the decision of this Tribunal in the case ITO v. M/s. Jay Industries ITA No.528/Ahd/2006 for assessment year 2002-03 vide order dated 25-09-2009, wherein the assessee was engaged in the same line of business and facts also identical and issues arising out of same survey operation carried out on 04-02-2002 by the Department u/s.133A of the Act. He stated that the facts being exactly identical, the issue is squarely covered. 7. After hearing the rival contentions and going through the case records, we find that at the time of survey the sample processing was carried out and according to the sample processing, the bi-products consists of chuni, dust, waste, etc. which comes to 8.46% and the books of account reflected the waste and bi-products at 10%. We find from the facts that out of 100 kg. of mug the production of mugdal is 90 kg. and bi-product is 10 kg, which is called kurma or chuni . Kurma is bi-product and not a waste or process loss. Kurma is sold in open market and sale proceed has already been credited by the assessee in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts of assessee and has to consider the following questions:- (i) Whether the assessee has regularly employed a method of accounting? (ii) Even if regular adoption of a method of accounting is there, whether the annual profits can properly be deduced from the method employed? (iii) Whether the accounts are correctly maintained? (iv) Whether the accounts maintained are complete in the sense that there is no significant omission therein? In that event, if the Assessing Officer s finding on all four counts is in the affirmative, the assessee s profit are to be computed on the basis of these accounts. We find that the first proviso to Sec. 145(1), or section 145(2), can be invoked only if and where the elements attracting either of those provisions are found to exist. A clear finding to that effect, along with the materials on which such finding is based, has to be made out and given by the Assessing Officer. No assessment under the first proviso to section 145(1) or under section 145(2) can be sustained if the Assessing Officer has not considered and recorded a finding against the assessee as to whether he has been regularly employing a method of accounting or whether his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and 2000-01 the CIT (A) has deleted such addition vide his order dated 05-12-2003 in assessee s case. It seems that the Revenue has not challenged the orders of the CIT (A) in appeal before the Tribunal relating to AY 1999-2000 and 2000-01. Thus, considering the entire facts and circumstances of the present case, we do not see any valid ground for interfering with the order of the CIT(A). We find that the CIT (A) has passed a well reasoned order after appreciating the facts of the case as well as materials available on record. We do not see any reason for disagreeing with the CIT(A). In that view of the matter, we uphold the order of the CIT(A) and dismiss the appeal of the Revenue. 9. In view of the facts of the present case that the Assessing Officer has not rejected the book results of the assessee in all the seven assessment years and there was no defects pointed out by the Assessing Officer, the estimation made by the AO and consequently enhancement made by the CIT(A) in four assessment years, is arbitrary and without any basis. Even otherwise, the Tribunal in the similar placed facts in another case, emanating out the same survey, confirmed the book results declared on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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