9911796707
TMI Blog2018 (6) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... d-hoc 10% out of building repair expenses of Rs. 14.47 against 20% made by the AO. c) Rs. 30,000 Ad-hoc 10% out of general expenses of Rs.3.05 Lacs as against 20% made by the AO. Rs.8,62,000 Total Without prejudice to above, the disallowances as sustained are very excessive. 2. That the Ld. CIT(A) has erred on facts and under the law in confirming ad-hoc 10% disallowance of Rs. 17,33,000/- as made by the AO out of total expenditure of Rs.173.30 lacs under the head 'Discount and Rebates'. 2. We first propose to address the issue raised in Revenue's appeal. The relevant facts of the case are that the assessee who was engaged in the business of manufacturing and marketing of spring and spring leaves returned a loss income. The AO in the course of the assessment proceedings made an addition of Rs. 25,60,84,653/- on account of the following facts and reasons set out in the assessment order : "5 A chart comparing scrap generated as %age of finished goods produced in the year under assessment with earlier 3 years has been filed during the assessment proceedings and the same is reproduced as under: Particulars 2009 2008 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these facts and circumstances, 4000.806 Mts of finished goods is considered to have been produced but not accounted for in the books of account. Thus the sale prices is taken as average sale price Rs. 64008.26 per M.T. the working of the sale price is Rs. 256084653/- is as detailed below:- Total sale consideration declared in the printed booklet exclusive of excise duty 45245.30000 less sales to the subsidiary company SFG 171224220 Sale of finished goods 4353305780 Quantity of finished goods 68011.619 Average sale prize 64008.26 per M.T Since the finished good have been produced out of the books. The sale thereof also to be considered out of the books & the expenses relating thereto considered already debited to the Trading, P& L account. Whole of the sale value of Rs. 256084653/- is deemed the income. 3. The assessee carried the issues in appeal before the CIT(A) who considering the submissions deleted the addition vide para 4.4 of his order holding as under : 4.4 Findings;- After going through the facts and submissions as well as various judicial pronouncements on this issue, this Ground is being finalized after making the following observations :- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unexplained scrap available with the appellant and has worked back the corresponding quantity of goods manufactured, though there is no evidence of actual production of corresponding finished goods. The AO has further concluded that all these unaccounted manufactured goods have also been sold in an unaccounted fashion by the appellant. These observations of the AO are not based on any material evidence indicating manufacturing of such additional quantity of finished goods and more importantly there is no evidence to show that there was unaccounted sale of these finished goods made by the appellant during the relevant A.Y. d) The AR of the appellant has very strongly argued that the appellant was a reputed listed company with al statutory books of accounts, supporting bills and vouchers and the AO has neither rejected the books of accounts nor brought any evidences on record before concluding that there was unaccounted manufacturing and sale of finished goods. The arguments have been carefully considered and it is clear that there is no evidence available with the AO to conclude that there was any unaccounted manufacturing of finished .goods and the AO also did not any evidence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had produced 0.4% more scrap during the year under consideration. On account of this the addition on account of excess scrap, has been made. 6. The ld. AR heavily relying upon the impugned order and the written submissions filed before ITAT and also extracted in the impugned order submitted that there is no justification whatsoever to make this adhoc addition. Similarly, there is no valid reason given why the semi finished goods should not be included. It was his submission that the CIT(A) has passed a reasoned speaking order which on facts has not been assailed by the Revenue. Accordingly, it was his submission that the impugned order may be upheld. 7. We have heard the rival submissions and perused the material on record. On going through the peculiar facts and circumstances as have been set out in the earlier part of this order, we find that no justification whatsoever has been given by the AO as to why the value of semi finished goods sold to its sister concern should not be considered in the total production of the yr for the purpose of determining the percentage of scrap generated. There is no material on record on the basis of which the suspicion of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the ld. AR apart from relying upon the precedent available in its own case submitted that herein also an adhoc identical disallowance was made by the AO on suspicions. The reasoning and circumstances, it was stated, was identical to what has been done in the immediately preceding assessment year. For ready reference, the relevant extract from the impugned order is reproduced hereunder : 4 (i)........ ii) During the consideration, while verifying the details of Expenses debited under the head "Discount and Rebates" the Assessee has debited amount Rs 173.30 Lacs under the head "Discounts" given to various parties. The assessee's gross turnover during the year decreased to Rs.51378.17 Lacs from Rs. 54119.34 Lacs shown in the immediate preceding year. Considering the decrease in gross turnover, the corresponding increase in discount and rebate is not-comparable. The assessee could not explain satisfactorily such heavy increase in this expenditure. In order to cover any leakage on account of inadmissible expenses. 10% of the Discounts are disallowed i.e. a sum of Rs. 17.33 lacs is disallowed and added to the assessees income. 12.1 Heavily relying upon the written submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tell the Assessee as to what expenditure the assessee can incur. He relied on the following judgments: * 345 ITR 241, CIT Vs. EKL Appliances Ltd. (Delhi High Court), copy attached as Annexure-I which relied on the following judgments (kindly refer to pages 20-25 of such judgment): * 20 ITR 1, Eastern Investment Ltd. Vs. CIT (Supreme Court) * 65 ITR 381, CIT Vs. Walchand & Co. etc. (Supreme Court) * 115 ITR 519, CIT Vs. Rajendra Prasad Moody (Supreme Court) 12. The Ld. DR argued that while the turnover is increased by 67% the rebates and discounts have increased by 330% hence the disallowance which is in excess to the turnover needs to be disallowed. 13. We have gone through the record placed before us and submissions of both the representatives. 14. There were no findings by the Assessing Officer as to the discrepancy in books of accounts or any other material showing that these expenses debited or not genuine or not verifiable. From the submissions it could be found that the increase in the rebates was due to restructuring of the business of the assessee and the department cannot determine as to what should be the percentage of rebates and discount to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
