TMI Blog2012 (7) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... for exemption u/s 10A - Held that:- Section 10A (4) states that the claim to be allowed u/s 10A should be worked out on the basis of total profit to the extent of proportion of export turnover to total turnover of the assessee. In the present case, the export turnover of the assessee is Rs.4,68,34,166/- and domestic turnover has been worked out by the A.O. at Rs.7,52,740/- being the addition made by him on account of alleged sale outside the books. After inclusion of this amount of domestic sale, total turnover comes to Rs.4,75,86,906/-. Total profit from business assessed by the A.O. is Rs.12,24,878 - thus as per the provisions Section 10A(4) the exemption allowable u/s 10A comes to Rs.12,50,503/- and net taxable income stands at Rs.19,375 - direction to AO to recompute the liability - quantum appeal partly in favour of assessee Penalty u/s 271(1)(c) - Held that:- Penalty levy is not justified because the entire addition was made by the A.O. on the basis of assumption without bringing any concrete material on record in support of any outside books sale made by the assessee and hence, penalty is not justified even for this part addition upheld - in favour of assessee. - I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts In grams 24 carats In grams Opening stock 0.00 Sales-Exports 9751.60 Received from gold Pure. Taw Pure Gold 10431,43 Process loss 2161.60 Gold purchase casted items 6727.96 Closing Stock 5519.40 Sales Export goods return 273.60 Total 17432.99 17432.99 From the above table, the A.O. stated that the assessee has issued raw gold of 10431.43 grams and casted items of 24 carats of 6727.96 grams of jewellery. The A.O. noticed from the jewellery manufacturing account that the assessee has exported "jewellery of only 9751.60 grams and has shown closing stock of 5519.40 grams. In the process the assessee has shown process loss of 2161.60 grams as is clear from para-4 of the assessment order. The quantitative analysis prepared by the assessee of raw gold purchase of casted items of manufacturing account shows that the assessee has claimed a process loss of pure gold of 2161.60 grams. The A.O. asked the assessee to submit the reason for such huge loss. The assessee stated that this loss is as per actual weight taken. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his, Ld. D.R. supported the orders of authorities below. He further submitted that process loss is to be allowed only in respect of raw gold purchased by the assessee and not for casted jewellery purchased by the assessee because the same is to be set with the stones only and therefore, there cannot be any process loss for this portion. 7. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgements cited by the Ld. A.R. of the assessee. Regarding the first aspect as to whether the addition made by the A.O. in respect of excess process loss is justified or not, we find that it is noted by the A.O. on page 3 of the assessment order that as per the submission of the assessee, it can be seen that as per the handbook published by the Ministry of Commerce and Industry, Department of Commerce, Government of India, details of manufacturing loss for studded jewellery and articles thereof is 9%. The A.O. has allowed deduction on account of process loss to this extent in respect of raw gold consumed by the assessee and the dispute is with regard to the process loss in respect of casted jewellery purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal consumption is 12.51% whereas, it was 8.30% in assessment year 2006-07 and 10.43% in assessment year 2007-08. Comparing to assessment year 2006-07, the consumption of gold casted items went down in assessment year 2007-08 and the percentage of process loss has gone up. In the present year even the percentage of consumption of gold casted items was almost at par with such percentage in assessment year 2006-07 but percentage of process loss in the present year is more than 1.5 times of the process loss in assessment year 2006- 07. This working goes to show that when the consumption of casted gold items is more in total consumption, the percentage of process loss goes down when we compare the same for assessment year 2006-07 and 2007- 08 but in the present year, even when consumption of gold casted items is at par with such consumption in assessment year 2006-07, the percentage of process loss is very high in the present year as compared to assessment year 2006-07. For this reason, and the reasons discussed prior to this, we are satisfied that the A.O. was justified in making disallowance of excess process loss declared by the assessee. Regarding this contention that the books w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur considered opinion, even after making addition about this alleged sale outside books, the A.O. should have recomputed the exemption allowable to the assessee u/s 10A and in support of this contention, Ld. A.R. has cited various judgements. These judgements support this claim of the assessee. We, therefore, hold that although addition made by the A.O. is justified in respect of excess process loss claimed by the assessee but the assessee is eligible for deduction u/s 10A on the basis of such enhanced profit of the business and thereafter taxable income works out to Rs.19,375/- only as against Rs.7,52,750/- worked out by the A.O. We hold accordingly and the A.O. is directed to assess the income of the assessee as per above discussion. 11. In the result, this appeal of the assessee stands partly allowed. 12. Now, we take up the penalty appeal i.e. I.T.A.No. 778/Ahd/2012. The only grievance of the assessee in this appeal is regarding confirmation of penalty of Rs.2,75,446/- levied by the A.O. u/s 271(1)(c). 13. It is submitted by the Ld. A.R. that penalty is not justified in the facts of the present case and in support of this contention, he placed reliance on the judgement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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