TMI Blog2016 (8) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... on shall vary with the area of the crop as well as the picking of the crop. Moreover, the rate varies with the payment schedule of the mills. Admittedly, the assessee purchased the raw materials on credit basis and made the payment on account payee cheques. For working out the price of ginned cotton, the Assessing Officer has taken the price declared by the Cotton Association of India, which is not applicable to the assessee since the CAI price quoted is for ready money cash price, whereas, the assessee has purchased the materials on credit basis. In the appellate order, the ld. CIT(A) has given a detailed findings over the methodology adopted by the Assessing Officer for estimating the disallowance, which cannot be sustainable, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee the assessment was completed under section 143(3) of the Act by determining the loss at ₹ 72,11,697/-. 3. In the assessment order, the Assessing Officer has noticed that there was considerable variation in the purchase of price of various types of ginned cotton (raw materials) among 14 mills. Hence, the assessee was asked to furnish the purchase details. Assessing Officer made a comparative analysis in order to verify whether the cost of purchase of ginned cotton was in tune with the (average) cost of ginned cotton announced/published by the Cotton Association of India (CAI), Mumbai. He made a detailed analysis showing various types of ginned cotton purchased with date, month and year, total amount of purchase, per kg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, the ld. CIT(A) held that the estimated disallowance made by the Assessing Officer is not sustainable as it was not established by the Assessing Officer with reference to specific defects in the books of accounts maintained by the assessee. 5. On being aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that the addition was made on account of excess purchase price of ginned cotton after verifying the average cost of ginned cotton published by the CAI and comparing the price paid by the assessee in respect of 12 random samples purchased, wherein, the Assessing Officer has identified that in 12 samples purchases, the assessee has paid in excess of the price published by the CAI. Therefore, the ld. DR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase price of cotton with the figures of Cotton Association of India (CSI) i.e. contemporaneous market conditions is fraught with risk and inherent chance of getting false (meaningless) results for the following reasons:- i) Different textile mills produce different counts of yarn -some coarse and some fine. Needless to say, cotton consumption will be dependent on the count mix and the staple length of cotton and strength (referred to as CSP) sold by the particular mill. Naturally the price paid for cotton depends on the variety chosen staple length, colour, moisture content etc. ii) Apart from the count mix, the cotton variety purchased will determine price. iii) a) Purchases from the cotton exchange (CAI) are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ultimately paid. An efficient buyer will consider a mix of these factors and ultimately choose the optimal quality of cotton at the best available price for these parameters. vi) Commercial expediency must be decided from business man's point of view. In the case of CIT Vs. Sales Magnesite Pvt. Ltd.[1995] 214 ITR Page 1 (Bombay), Hon'ble Bombay High Court held as under :- The question whether it was necessary commercially expedient or not is a question that has to be decided from the point of view of the businessman and not by the subjective standard o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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