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2016 (3) TMI 489 - ITAT AHMEDABAD

2016 (3) TMI 489 - ITAT AHMEDABAD - TMI - Addition made on inflation of purchases of raw material u/s. 69 - Held that:- As decided in assessee's own case CIT(A) has adopted the norms prescribed under the standard input and output ratio of consumption but the assessee-company has clearly demonstrated that it would be better of had it imported the raw material as per the input output norms. The assessee-company has claimed that it has consumed less than what is prescribed under the input output no .....

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8-09. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company stated to be engaged in the business of Manufacturing of Pharmaceuticals & Fine Chemicals. Assessee filed its return of income for A.Y. 2008-09 on 24.09.2008 declaring total income at Rs. Nil after setting off of brought forward business losses of ₹ 80,37,554/- and book profit u/s. 115JB at ₹ 1,28,66,565/-. The case was selected for scrutiny and thereafter the assessment w .....

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n of ₹ 1,93,29,886/- made on account of inflation of purchases of raw material and ₹ 76,35,041/- made u/s. 69 of the Act. 4. During the course of assessment proceedings, A.O noticed that in earlier years, addition was made on account of difference in the actual consumption of raw material and the standard consumption prescribed under Exim Input Output Norms (Duty Exemption Schemes) 2002 to 2007. On perusing the details of variation between actual consumption and the standard consumpt .....

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mission of the Assessee on the issue to be exactly identical to the submissions made by the Assessee in earlier years and after relying on the order of ld. CIT(A) for A.Y. 02-03 made addition of ₹ 2,69,64,927/- on account of deficit/excess consumption of raw materials. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who deleted the addition by holding as under:- 2.3 I have carefully perused the assessment order and the submissions given by the appellant. The i .....

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T(A), Revenue is now in appeal before us. 6. Before us, ld. D.R. relied on the order of A.O. On the other hand ld. A.R. reiterated the submissions made before A.O and ld. CIT(A) and further submitted that on identical issue for A.Y. 05-06 and against the order of ld. CIT(A), Revenue had preferred appeal before Hon'ble Tribunal. Hon'ble Tribunal by a consolidated order for A.Y. 04-05 to 06-07 dated 05.06.2015 had upheld the order of ld. CIT(A). He pointed to the relevant paras of the orde .....

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s on the basis of Standard Input Output ratio of consumption. We find that the Co-ordinate Bench of Tribunal while deciding the appeal in Assessee's own case for A.Y. 04-05 to 06-07 and after relying on the earlier decision of the Coordinate Bench of Tribunal in Assessee's own case for A.Y. 2002-2003 has deleted the addition by holding as under:- 4. Next issue in Revenue's appeal is with regards to addition of ₹ 2,52,05,652/- made on account of deficit/excess consumption of raw .....

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rial and standard consumption prescribed under Exim Input and Output Norms. Assessing Officer asked to furnish details of variation between actual consumption and the standard consumption. As per the details given in Annexure-II to the assessment order, Assessing Officer noticed that there was short consumption of raw material of Rs.l,77,61,653/- and excess consumption of raw materials of ₹ 74,43,999/-. Assessing Officer referred to assessment order of A.Y. 2002- 03 and the statement of Sr .....

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2006 for A.Y. 2002-03 has been annexed before us, wherein vide para 41 &42 has decided similar issue in favour of assessee by observing as under:- "41 First of all, we have gone through the facts narrated by the CIT(A) in para 2.2 which reads as under: "2.2 I have considered the submissions of the appellant, remand report of the AO and facts of the case carefully. From the facts on record, it is clear that the appellant is manufacturing medicines which are being exported. The quali .....

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t of the General Manager (Works) namely Shri R S Sharma who is the in-charge of production was recorded. As he was the in-charge of production his statement would determine the actual consumption of various raw material for the production of particular medicine. The statement has been reproduced in the assessment order on page 10 & 11. He has categorically stated in reply to various questions which have been put-up by the AO that the consumption of raw materials is exactly in accordance to t .....

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ld have been any variation in the consumption of raw material he would have mentioned the same before the AO. Even otherwise for the formulation of medicine the standard input output ratio will have to be adhered to. He has not mentioned in any of the reply to the question that there was any variation between the standard input and output ratio in the consumption of the raw materials. Therefore, his statement who controls the production certifies that the consumption of raw material has been in .....

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ioned by it. Therefore, the consumption of raw material will have to be compared vis a vis the standard input output ratio and there is no justification of giving margin of 10% considering the statement of General Manager. After comparing the standard input and output ratio and actual consumption, it was found that there was a deficiency of certain raw material of ₹ 63,04,605/- and there was excess consumption shown by the appellant of other raw materials as ₹ 1,32,57,449/-. As the d .....

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nput output ratio. Appellant's another argument that it did not have any motive in suppressing the income because most of the income is exempt u/s 80HHC of the I.T. Act is also of no relevance because the income will have to be computed on the basis of accounts and records maintained by the appellant and not on the basis of motive of the appellant and benefit of section 80HHC will be given as per provisions of the Act. The appellant has also not proved with any other evidence that the consum .....

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.2.3 From the facts on record and the above discussion, it is clear that the appellant had shown less consumption of certain input raw material of ₹ 63,04,605/- and the only inference is the same have been purchased from outside the books of account and the same is liable to be added as the investment from undisclosed sources and the appellant has shown more consumption of certain items to the extent of ₹ 1,32,57,449/- which has not been consumed and therefore, the purchased to this .....

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unal's decision, wherein the Tribunal in the case of M/s Gujarat Woolen Felt Mills (supra) has held vide para 5 as under: "5 We have heard the parties and considered the rival submissions. It is true that no records have been maintained by the assessee after carding stage that by itself is not a ground for making addition and treating the production at the carding stage as final. The difference of 11,506 kg is due to wastage in the production approximately 13% of the production and look .....

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egister up to the carding stage is incomplete or partial stage of the material and, the addition made on the basis of such incomplete and partial effect cannot be justified. The CIT(A), in our opinion, was right in allowing the claim of the assessee." 42. It is seen from the above facts as narrated in the order of the CIT(A), which are undisputed, as well as the case law relied on by the learned counsel for the assessee, we are of the view that the CIT(A) has adopted the norms prescribed un .....

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