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TMI Blog2016 (8) TMI 1432X X X X Extracts X X X X X X X X Extracts X X X X ..... n chemical expenses was far more than increase in production. iii. On the Facts and in the/Circumstances of the case, the CIT(A) has erred in law by allowing the relief of Rs. 1,70,996/- out of Rs. 3,12,457/- made by the A.O. on account of scrap generated out of consumption of stores and spares by ignoring the fact that the CIT(A) has himself accepted the amount of scrap at 10% of the amount of consumption of stores and spares in the case of M/s The Ganga Kisan Sahakari Chini Mills Ltd., Moma in A.Y. 2008- 09. iv. The order of the CIT(A) be set aside and that of AO be resorted. 2. The facts in brief of the case are that the assessee company derived its income from manufacturing and trading of paper products. For the year under consideration, the return of income declaring nil income was filed on 30th September, 2008. The case was selected for scrutiny and a notice under Section 143(2) of the Income-tax Act, 1961 (for short "the Act") was issued and served within the stipulated period and the assessment was completed on 29th December, 2009 under Section 143(3) of the Act, making the following three additions (i) Difference in creditors' account, amount Rs. 95,65,382/- (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained that the assessee company made the said payment to M/s. Triveni Engineering and Industries Ltd. on 12th April, 2008 through RTGS and the said creditor had also issued receipt no. 1465 dated 16th April, 2008 for the same amount. Further, the assessee also submitted that M/s. Triveni Engineering and Industries Ltd. in their books of account adjusted an advance of M/s. Bindal Papers i.e. another sister concern and reduced the account balance of the assessee to nil. The assessee company also submitted e-mail received from M/s. Triveni Engineering and Industries Ltd. accepting the receipt of Rs. 96,10,065/- through RTGS from the assessee company on 18.04.2008, which was then, adjusted in the account of M/s. Bindals Papers Ltd. The Assessing Officer did not accept the explanation of the assessee. Learned Commissioner of Income Tax (Appeals) after considering the remand report as well as the rejoinder of the assessee deleted the addition with the observations as under: "The facts of the case and submissions made by the appellant have been carefully considered. It is observed that that the AO had made addition of Rs. 95,65,382/- on the ground that the appellant had shown the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. has also issued the receipt No. 1465 dated 16-04-2008 for the same amount. The difference in figures at Rs. 44,673/-(Rs.96,10,055 - Rs. 95,10,055) is on account of bank charges on transaction made through RTGS. In light of the above facts, it is held that the AO was not justified in making addition of Rs. 95.65,382/-. The same is directed to be deleted. Ground No. 1 is allowed." 4.1 Before us, the learned Sr. Departmental Representative relying on the order of the Assessing Officer, submitted that the learned Commissioner of Income Tax (Appeals) has relied on the e-mail of the creditor and his verbal explanation. According to the learned Sr. Departmental Representative, the assessee has not discharged its onus in terms of section 68 of the Act and therefore the addition must be sustained. 4.2 On the contrary, the learned Authorized Representative of the assessee relying on the order of the learned Commissioner of Income Tax (Appeals) submitted that there was no inconsistency in the ledger accounts of the assessee and the creditors in their respective books of account. He referred to page no. 4 of the assessee's paper book, which is a copy of the account of M/s. Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings. On perusal of the copy of the ledger account of the assessee in the books of account of M/s. Triveni Engineering and Industries Ltd., which is available at page 145 of the assessee's paper book and a copy of the account of M/s. Triveni Engineering and Industries Ltd. in the books of account of the assessee company which is appearing at page no. 4 of the assessee's paper book, we find that the only difference between the two account is adjustment of Rs. 95,65,382/- by M/s. Triveni Engineering Industries Ltd. of the advance of M/s. Bindal Papers i.e. the another sister concern of the assessee company. According to the assessee, it was not aware of such adjustment and, therefore, the amount was shown as outstanding for payment to the said company. The assessee has also shown evidence of payment of Rs. 96,10,055/- to the said creditor against outstanding of Rs. 95,65,382/- in the copy of e-mail produced, and also M/s. Triveni Engineering and Industries Ltd. has accepted the receipt of this payment and stated that the same has been adjusted in the account of M/s. Bindal Paper Ltd. The reason for adjustment of receipt of payment of Rs. 96,10,055/- by M/s. Triveni En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were forwarded to the Assessing Officer for comments. The learned Authorized Representative further submitted that no discrepancy either in the vouchers or bills of the expenses or in inventory, was found by the Assessing Officer and therefore in such circumstances ad-hoc disallowance is not justified, hence the Ld. Commissioner of Income-tax( Appeals) has rightly deleted the addition. 5.3 We have heard the rival submissions and perused the material on record including the details in respect of the expenses filed in the assessee's paper book. The Assessing Officer made addition of Rs. 53,49,958/- out of manufacturing expenses under the head chemical expenses at the rate of 10% of the total expenses of Rs. 5,34,99,583/- on the ground that the assessee company could not explain the increase in chemical expenses as compared to the production. The contention of the assessee before the Assessing Officer was that its books of accounts and other records were in possession of its banker and therefore it could not explain the increase in chemical expenses. Before the learner Commissioner of Income-tax ( Appeals), the assessee submitted that increase in expenses was due to increase in pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5349958.00 out of manufacturing expense under the head of chemical expenses 10% of the total expenses of Rs. 53499583.00, because the appellant company is not able to explain the same at present due to the reason that the account books and other relevant records are in possession of the banker as mentioned in the assessment order. The expenses were increased under the head due to increase in production and rate of chemical. Further there is no addition was made under the same expenditure in the earlier years. All the expenses are fully vouched and verifiable from the books of accounts. The addition which has been made by the Assessing Officer is very excessive and arbitrary. The assessee company had maintained regular books of account and other relevant records in the ordinary course of business and the accounts books of the assessee company were duly audited by the Chartered Accountant. The manufacturing product is subject to excise duty. The stock receipt and consumption register RG 23A part I is regularly maintained by the assessee company. The monthly returns of the same as prescribed by the Excise Department are being filed regularly. The chemicals were purchased from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 2% on the consumption of stores and spares of Rs. 1,70,99,597/- which amounted to Rs. 3,41,992/-. The Assessing Officer after reducing the amount of sale of scrap already declared by the assessee in return of income of Rs. 29,535/- made addition for the balance amount of Rs. 3,12,457/-. The learned Commissioner of Income-tax (Appeals) held that the estimate by the Assessing Officer was a guesswork and not based on the result of any enquiry conducted or some comparable case and therefore he reduced the estimate of sale of scrap to 1% of the stores and spares consumed, which worked out to Rs. 1,70,996/-. 14. The learned Sr. Departmental Representative addressing the ground, submitted that Ld. Commissioner of Income-tax (Appeals) himself has accepted sale of scrap at the rate of 10% of the amount of consumption of stores and spares in another case of M/s Gandaki Kisan Sahakari Chini Mills Ltd in assessment year 2008-09, and therefore the estimation of the rate of 2% in the case of the assessee was justified. 15. The learned Authorized Representative on the other side submitted that no discrepancy in the consumption of the stores and spares was pointed out by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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