TMI Blog2015 (9) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... not major and the books of account of the assessee cannot be rejected on ipse dixit. Apropos scrap generation, there is no evidence at all to show that vendors or sub-vendors returned the scrap which was sold by the appellant outside the books of account. As evident, the job workers had not returned the scrap to the appellant, sub vendors including M/s. Alankar Automobiles (P) Ltd. had shown income from sale of scrap of ₹ 3,30,000/- in its books of account. There being no evidence on the record to suggest that these sub-vendors had ever returned the scrap to assessee, no adverse inference can be drawn against the appellant merely on surmise and conjectures. Apropos trading additions, assessee had furnished quantitative details of raw materials consumed, finished goods produced, scrap generated and burning loss. Consequently there was no justification in the rejection of books of the assessee, therefore no estimation of GP can be resorted to in the given facts and circumstances. The AO's allegation that the job charges paid to sister concerns is in violation of Section 40A(2)(b) was not established by citing any projection of unreasonableness or comparative cases. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of manufacturing and job work charges was not maintained; job work payment to sister concerns were not be cross-verifiable and the reasonableness of the payments was not justified. Excise Register (ER-1), trading account, scrap generation and yield % were not verifiable. Repairs and machinery expenses were based on self made vouchers also were not verifiable. Assessee filed detailed reply contending that the assessee's method of accounting, record keeping and excise compliance was same as in earlier years. Similarly the issues about stock register of consumables and stores; separate trading and manufacturing recorded and job charges were same as in earlier years. Ld. AO however rejected the books of account and above additions was made. It may be mentioned that the addition of ₹ 12,87,984/- was telescoped in the total addition of ₹ 93,94,856/-. Consequently ground no. 2 as raised by the Revenue is included in Ground No. 1. 2.2 Aggrieved, the assessee preferred first appeal where it was contended that books of account were duly audited and supported by records, no specific discrepancies were pointed in the books. Oil and lubricants and consumable stores were other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book was supported before the ld. CIT(A), based thereon ld. CIT(A) and in consideration of various case laws and the submissions, observed that:- (i) The assessee having books of account cannot be rejected on the basis of the issues like stock of oil and lubricants and consumables stores etc. (ii) Similarly, maintaining the consolidated account also cannot be a reason to reject the books of account inasmuch as the assessee has been able to segregate the figures and give break thereof. (iii) The books of account are maintained on a consistent accounting practice in earlier years and no such rejection has been made. The books of account were upheld. (iv) AO rejected the books of account in AY 2006-2007 also. But the Hon'ble ITAT found that these are not major defect; hence the books of account of the assessee cannot be rejected. 2.5 Apropos, alleged discrepancies in respect of scrap generation, the ld. CIT(A) held that :- 3.3 (Page 7) .. In the present case, there is no evidence that vendors or sub-vendors had returned the scrap to the appellant and same was sold by the appellant outside the books of account. In the case of State Bank of Travanco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit. Besides, assessee's gross profit was better than assessment year 2006-07 and 2007-08. In assessment year 2006-07, ITAT dismissing revenue appeal, in assessee's own case upheld the gross profit rate at declared GP of 14.54%. Thus the assessee gross profit is as long as 14.54%. Therefore, the current year gross profit rate at 26.07% cannot be held to be low. 2.7 Aggrieved, Revenue is before us. Ld. DR supported the order of ld. AO on the issues of discrepancies in books of accounts, scrape generation and sale figures and GP addition. 2.8 Ld. Counsel for the assessee contends that: (i) Stock details of oils lubricants and consumables stores cannot be maintained as desired by ld. AO as practically it is not possible to maintain them. These are purchased in limited quantity which is required on daily basis as there storage is risky, their closing stock is minor. These expenses are duly supported by bills and payment made through a/c payee cheques and in any case is revenue in nature. Assessee company has proper internal control system to protect the revenue leakage. This has also been certified by the statutory auditors in their audit report. Without prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular register with relevant entries of goods for job work and return after job work, supported by challans; no adverse finding whatsoever in this behalf. iv) Issue about sister concerns job work The payments of job charges made to sister concerns are supported by their bills made through account payee cheques at the same rates payable to unrelated jobbers, after deducting applicable TDS. The goods are issued for job work through challans and received back also through challans. Ld. AO has not pointed out even single instance where the payment to sister concern is found to be comparably unreasonable. v) Apropos scrap remaining with the Job workers, this trade practice is accepted by the department in previous assessments (Scrutiny assessment for AY 2005-06 and AY 2006-07 AY 2012-13. Therefore there is no justification in AO allegation that sister concerns have been benefited in terms of sec. 40A 2(b). The assessee has neither received scarp from the sister concern nor from the other parties. During the course of assessment proceedings assessee submitted bills of Job charges paid to sister concerns as well as outside parties to justify that rate of job charges pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble ITAT upheld the GP declared by the assessee in books of account. Therefore, the assessee's GP is not lower to the past history of the assessee. The past history does not mean immediate preceding year only but the AO should look into the history of the assessee in past few years. Reliance is placed on: Hon'ble Rajasthan High Court in the case of Malani Ramjivan Jagannath Vs. Assistant Commissioner Of Income Tax (2009) 316 ITR 120 has held as under:- 10. In the face of these undisputed facts and circumstances, the Tribunal in our opinion could not have interfered with the order of CIT(A). In doing so, it had ignored all admitted facts noticed by us above, in the face of which there was no occasion for the AO to have resorted to estimate method. The GP is primarily result of excess of sales over purchases, opening stock, closing stock, the unsold stock at two terminals is only balancing factor. Admittedly out of this four components of trading result, there could not have been any ground for the Revenue to arrive at different result. So far as closing stock is concerned, inventories of existing stock were not found to be incorrect by the AO i.e. that position o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. Ld. CIT (A) by elaborate findings held that:- (i) The assessee's regular books of account cannot be rejected on the basis of the issues like stock of oil and lubricants and consumables stores which constitutes day to day purchases and the stock is comparatively small. Besides such items being inflammable on preponderance of probabilities also can't be stored in huge quantity. (ii) Similarly, maintaining the consolidated trading account of manufacturing and job work also cannot be a reason to reject the books of account inasmuch as they are interconnected. Assessee deals in manufacturing and job working for self and others. (iii) The books of account are maintained on consistent accounting practices in earlier years and no such rejection has been made. The books of account were upheld in earlier years. (iv) AO rejected the books of account in AY 2006-2007 ITAT found that these defects are not major and the books of account of the assessee cannot be rejected on ipse dixit. (v) Apropos scrap generation, there is no evidence at all to show that vendors or sub-vendors returned the scrap which was sold by the appellant outside the books of account. As evident, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so been brought on record to demonstrate in any way that assessee indulged in any sale of scrap outside the books of account. This is further indicated by new Cenvat Credit Rules, which holds that the scrap was not required to be returned to the assessee. The same is referred to by the judgment in the case of M/s Rocket Engineering Corporation Vs. CCE (supra). The assessee further provided evidence from M/s Noble Industries, which has done a job work of 3.56 crores and has shown the income attributable to sales of scrape of ₹ 747109/-, in its books. These facts and observations demonstrate that the assessee did not receive any scrap back from job workers. There being no evidence whatsoever suggesting any unaccounted sales by the assessee, the order of learned CIT(A) on these issues is upheld. This ground of revenue's appeal is dismissed. 8.1 Apropos the second ground, which includes the addition amount of ₹ 1,35,56,787/- relating to concealed sale of scrap, the balance amount to difference shown by the assessee as receivable from SKF and the payable amount in the books of SKF, the assessee has demonstrated that the difference was due to the disputes pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X
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