TMI Blog2011 (5) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee stated that the margin of sale during the year was 13.97% compared to 14.10% in the preceding year and that is why the net margin earned decreased by 0.13%.The AO did not accept the contention of the assessee and worked out the margin of sale at 14.83% and held that there was an increase in margin by 0.73% and not decreased as shown by the assessee. The AO further held that month wise consumption of electricity units compared to production of yarn revealed that the assessee had suppressed the production. In the month of July the total consumption of electricity was 71,952 units and the production was 91,031.68 kgs. of yarn whereas in the month of April consumption of 16480 units of electricity resulted in production of only 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that although the AO took the figures of consumption of electricity on the basis of bills for different months, the figure of production was taken by ignoring the billing cycle. The AO practically assumed that the production per unit of electricity had to be the same every month and worked out the suppressed production on this basis. The production was depend upon difference in deniers of yarn processed, its quality, power fluctuation, machinery repairs etc. and rejection of book results on the ground of consumption of electricity units was not in order. The learned Counsel for the assessee relied upon various decisions of Courts such as Hon ble Kerala High Court in the case of St. Teressa Oil Mills 76 ITR 365, Pushpanjali Dyeing Mills 72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecrease in margin on sales during the year by 0.13%. Another reason cited by the AO is that the production in different months of the year does not match with consumption of electricity. The AO has adopted the month of July, 2003 as the base year for computing production in another month of the year and has worked out suppression of production of texturised yarn at 46582.42 kgs. It is seen that the AO has not doubted the purchase of yarn which is the raw material for the appellant s business. As per the details filed by the appellant the total quantity of yearn consumed during the year is 746548 kgs. and the production of texturised yearn is 759448 kgs. The total consumption of oil during the year is 21830 kgs. which would mean that the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sults and making an addition on account of so-called suppression of production is not in order and addition on this account is directed to be deleted. 4. The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below. He ha submitted that the AO ignored the billing cycle of the consumption of electricity and no specific defects have been pointed out in the books of accounts. Production was compared with the month of July only which was without any basis. The AO herself has given benefit of 25% on estimate basis. No defect was found in the excise records and that there was slight fall in the margin of the sales, therefore, addition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city consumption in the month of July cannot be taken as standard for working out production of texturised yarn for the entire year. It appears to be hypothetical calculation of the AO based on no evidence or material. The learned CIT(A) also noted that the AO herself has allowed 25% as variable on account of strike in the moth of April and May and other unknown factors but practically working out of production on the basis of consumption per month would not be justified. Considering the totality of the facts and circumstances noted above and that there was no unreasonable or huge difference in the turnover or profit rate, we do not find any justification to reject the book results of the assessee. The learned CIT(A) was, therefore, justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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