TMI Blog2016 (4) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged variations with respect to month-wise consumption of raw material vis-ŕ-vis finished products and the same were disbelieved by the Assessing Officer without finding any fault therein. The rejection of books of accounts by the Assessing Officer is inconsistent with the requirement of section 145(3) of the Act, thereby, we affirm the stand of the ld. Commissioner of Income Tax (Appeals) in deleting the impugned addition - Decided in favour of assessee - ITA NO.1639/MUM/2014 - - - Dated:- 21-3-2016 - Shri Joginder Singh, Judicial Member and Shri Rajendra, Accountant Member For The Revenue : Shri M. Murli-DR For The Assessee : Shri Subhash S. Shetty and Shri R. N. Vasani ORDER Per Joginder Singh (Judicial Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'the CIT(A)') dated 29.07.2011, which in turn has arisen from the order passed ~y the Assessing Officer u/s. 143(3)(ii) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') dated 07.12.2010 pertaining to the assessment year 2008-09. 2. First, we shall take up the, appeal of the Revenue, wherein, the following three Grounds of appeal have been preferred:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the reasons for rejection of books of accounts u/s.145(3) of the Act, are riot correct, without appreciating the facts of the case . . 2. On the fads and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the respective months of the immediately preceding assessment year of 2006-07. The Assessing Officer also required the assessee to produce day-to-day item Wise consumption of raw material and production with the consumption of electricity, in units; Labour in number etc. 'In response, assessee company explained that it was using various raw materials for manufacturing of variety of chemicals and it was explained that, the finished products are manufactured, according to the requirements of the user industry, which may vary from product to product and buyer to buyer and, therefore it was not possible to give the break-up of each item}an~ quantity of material used for the specific finished products. The Assessing Officer examined the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer had passed the assessment order merely on assumptions, guesswork and surmises because the Assessing Officer had not found any discrepancy' in quantitative records furnished. The variation in production in certain months vis-a-vis consumption of raw materials was explained to be on account a large number of finished goods being manufactured, which required different concentration of raw materials. Assessee also explained that in comparison to the immediate preceding .assessment year, there was no increase in the ratio of consumption of raw material to the sales and that there was no fall in the Gross Profit rate. On facts, it was asserted by the assessee that the Assessing Officer had not found any defects in the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer to reject the, books of account, in our view, do not justify an inference that the books of account of the assessee were either incorrect or incomplete. 10. Notably, the first reason advanced by the Assessing Officer was that there was a variation in production in certain months vis-a-vis consumption of raw materials. In our considered opinion, such variation can at best be an indication to investigate the issue further but such a variation by itself cannot be conclusive of incorrectness of the accounts. Moreover, the assessee company had explained before the Assessing Officer the reasons for such variation. Such explanation has also been noted by the CIT(A) in para 3.1 of his order which to the effect that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture paints in the months of May 2007 to December 2007 but such a project was abandoned, which resulted in heavy overhead expenses. It was for this reason the net profit for the year under consideration was low in comparison to the immediate preceding year, though there was no decline in the Gross Profit ratio. The aforesaid explanation rendered by assessee has been glossed over by the Assessing Officer without finding any fault in it. Notably, assessee had referred to statutory records maintained including the stock registers etc, prescribed under the excise laws and such material has not been commented adversely by the Assessing Officer. The variation in the month-wise figures of consumption of. raw materials,' vis-a-vis the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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