TMI Blog2015 (5) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... ains regular books of accounts and the same were duly audited and no discrepancies have been spelled out or could be pointed out by the AO in the books of accounts and the same were not rejected by the AO. In the absence of any adverse material on record to show that any transaction outside books of accounts has taken place and differential sale proceeds have been received no addition can be estimated without rejection of books of account. We also find considerable cogency in the assessee’s counsel contention that molasses is an excisable commodity and no movement of molasses can take place without approval from excise department, the representatives of them are stationed inside the factory premises. In the case under consideration, we find that the AO has made no adverse comment with regard to the books of account. In view of the above the addition made was rightly deleted and we confirm the same - Decided in favour of assessee. Addition on account of credit balance of creditors - CIT(A) deleted addition - Held that:- CIT(A) has rightly observed that the AO has proceeded in ad hoc manner to label all creditors outstanding for more than a year as non-genuine. He has neither spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue has raised the following effective grounds in its Appeal:- (1) Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law in restricting the addition of Rs.l,72,93,100/- to the amount of ₹ 15,24,100/- on the incorrect grounds that (a) parties were not financial institutions and (b) Interest was not claimed in the P L a/c whereas the interest bearing loans were admittedly from state governments ( virtual financial institutions giving loans to assessee) and the assessee has debited entire interest of ₹ 5,42,30,719/- and claimed entire sum in its P L A/c against which Ld. CIT(A) wrongly held that merely ₹ 15,24,100/- were claimed by the assessee in the P L a/c. (2) Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law in deleting the addition of Rs.l,26,04,397/- without appreciating the facts that the addition was made by the A.O. on a/c of difference in sales prices of molasses in view of comparable higher sale price shown by the another assessees of same trend. Reliance is placed on the ratio laid down in following cases: (i) Lal Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutions within the meaning of section 43B(d) and accordingly disallowed a sum of ₹ 1,72,93,001/- u/s. 43B(d) of the Act. The AO make disallowance not on the basis of the interest charged in profit and loss account i.e. ₹ 15,24,100/- but disallowed ₹ 1,72,93,001/- as shown in the balance sheet. In Appeal order Ld. CIT(A) has accepted that the institutions of State Government are not financial institutions as defined in section 43B(d) of the Act. But CIT(A) has confirmed addition of ₹ 15,24,100/- as the amount charged in profit and loss account, u/s. 43B(d) of the Act. The disallowance made for ₹ 15,24,100/- u/s. 43B(d) deserves to be deleted in full. 7. Ground Nos. 5 and 6 of the revenue are general in nature, so we dismiss the same. 8. Ground No.1 of the revenue and the sole ground of the CO preferred by the assessee are in respect of restriction of addition of ₹ 1,72,93,100/- to an amount of ₹ 15,24,100/- being interest payable by assessee. 8.1 We find that during the assessment proceedings, the AO has noted that the assessee had shown interest accrued and due; but not paid to Shakkar Vishesh Nidhi Govt. of U.P. to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative Sugar Factories Federation and Shakkar Vishesh Nidhi. He further submitted that during the year under consideration respondent has debited a sum of ₹ 15,24,100/- as interest in its profit loss account on loan from Shakkar Vishesh Nidhi as appearing in schedule 'P'; that as per AO a total sum of ₹ 1,72,93,100/- was remaining unpaid on U.P. Government institutions. He further submitted that the interest of ₹ 1,72,93,100/- was never debited to profit loss account as observed by CIT(A) in his appeal order in para 2.2 and also submitted that section 43B(d) talks about interest payable on any loan borrowing from any public financial institutions in accordance with the terms conditions. The explanation 4 defines the term public financial institutions as defined in section 4A of the Companies Act 1956. These loans have been provided by U.P. Government to clear the outstanding cane dues of farmers and even in the remand report AO has not rebutted the above facts. It was further submitted that in the case of the Baghpat Co-operative Sugar Mills Ltd. which is also a unit of U.P. Government like that of the assessee, it has been held by CIT(A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed for statistical purpose, in the aforesaid manner. 9. With regard ground no. 2 and 3 raised by the Revenue are concerned, we find that the AO made addition of ₹ 1,36,04,397/- made on account of difference in sales price of molasses. The AO had valued the average rate of sale of molasses at ₹ 435.83 per quintal in place of ₹ 373.09 shown by the assessee. The AO had compared the selling rate of the appellant with that of another unit namely Baghpat Cooperative Sugar Mills Ltd (BCSML). We find that the in the assessment order, the AO noted that the assessee was engaged in the business of production and trading of sugar. The assessee was asked to explain why the closing stock of products and the by products should not be taken at the value shown by another entity BCSML. The AO noted that this concern as well as the assessee are in the same business, and are situated in the similar area and are controlled by the U.P. Govt. In the assessment proceeding we take note that AO made a comparative study and has given a chart specifying quantitative production and rate of sale of sugar, bagasse, molasses and press cake of the assessee, BCSML and another concern, SBEC S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is product of a concern throughout the year or was the rate variable and the AO has adopted an average rate. The ld CIT(A) rightly observed that the point which has not been appreciated by the AO is that any product could have variable rate of sales depending upon the quality of the product, the geographical area in which the product is marketed, the time when sales have been effected etc. Molasses can be put to diverse uses such as an input in the chemical industry, for making of ethanol, for the manufacture of potable liquor etc. Further he rightly observed that the pricing also depends on whether sales have been effected in the crushing season when the prices are low or in the period of deficiency when prices are high. Ld CIT(A) has rightly observed that if there is a significant difference in the rate of sale between one concern and another can be the starting point of investigations and the AO would be competent to ascertain whether there is a case of under invoicing by examining the sale vouchers and conducting appropriate enquiries with regard to the purchasers. The ld CIT(A) has rightly held that it is not open for the AO to summarily adopt the sale price of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion that molasses is an excisable commodity and no movement of molasses can take place without approval from excise department, the representatives of them are stationed inside the factory premises. In the case under consideration, we find that the AO has made no adverse comment with regard to the books of account. In view of the above the addition made was rightly deleted and we confirm the same. We also find that AO has made similar addition of ₹ 2,00,764/- made on account of difference in the sale price of bagasse. For the same reasons stated above he rightly deleted this addition also. In the background of the aforesaid discussions, we do not find any infirmity in the well reasoned findings of the ld. CIT(A) with respect of ground no. 2 and 3, hence, we uphold the same. In the result, the ground No. 2 3 raised by the Revenue are rejected. 11. With regard ground no. 4 raised by the Revenue regarding addition of ₹ 10,54,351/- on account of credit balance of creditors is concerned, we find that the in the assessment order, the AO noted that there were creditors to the extent of the amount indicated above, which were outstanding for more than one year. It was sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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