TaxTMI 
TaxTMI 
2016 (8) TMI 1169
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....ddition made towards excess purchase price paid for ginned cotton on the ground that the Assessing Officer has not specified defects in the books of account of the assessee. 2. Brief facts of the case are that the assessee is engaged in the business of manufacture and sale of cotton yarn. The assessee filed its return of income on 13.09.2009 admitting total loss of Rs. 2,46,81,587/-. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 ["Act" in short]. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee on 31.08.2010. Thereafter, after considering the details furnished by the assessee the assessment was comp....
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....-. The total purchase value of 12 sample purchased: Rs. 2,18,06,575 The total purchase price (100%): Rs. 24,19,48,252 Percentage of sample: 9.013 Excess price paid for total purchase (1485488/9.013) x 100: Rs. 1,64,81,793 On the basis of random sampling as discussed above, out of the total purchase price, the Assessing Officer has worked out the excess purchase price paid by the assessee at Rs. 1,64,81,793/- in comparison to the monthly average price as announced by CAI and same was added to the total income of the assessee. 4. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) held that the estimated disallowance made by the Assessing Officer is not susta....
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....urchase price of various types of ginned cotton [raw material] among 14 mills. After calling the purchase details from the assessee, the Assessing Officer made detailed analysis to arrive the cost price of the ginned cotton and estimated the excess price and added to the total income of the assessee. On appeal, the ld. CIT(A) has observed as under: "4.3 I have considered the submissions of the representative. It is seen that the Assessing Officer had not conducted any enquiry with the actual sellers of cotton regarding excess purchase price of cotton. The methodology adopted by the Assessing Officer by comparing Assessee's purchase price of cotton with the figures of Cotton Association of India (CSI) i.e. contemporaneous market conditi....
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.... / insurance / brokerage etc. iv) Prices have been obtained from the cotton exchange after the event. Circumstances are hardly the same when a buyer makes a commodity purchase on the spot market. In other words, as is true of any commodity market, the prices that prevail in an exchange are the result of speculative efforts by the traders and other stockholders in a market. A spot market on the other hand, is a physical and tangible exchange that enables a buyer to make an informed decision on the spot and the price is then determined considering the various parameters mentioned above. v) A buyer's standing, his credit worthiness, purchase volume, delivery terms and a plethora of other parameters play a role in the price that is ultim....