TMI Blog1991 (11) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Rs. 22,01,626 giving G.P. rate of 17.09 per cent. The ITO adopted G.P. rate of 29.9 per cent on the basis of reasons recorded in the asst. yr. 1983-84 and thereby made an addition of Rs. 1,49,970 and Rs. 2,82,070 in asst. yrs. 1984-85 and 1985-86 respectively. The CIT(A) held that the G.P. should be worked out by applying the rate of 20 per cent for both these years. The Revenue has preferred appeals against the relief granted in all these three years and the assessee has submitted cross appeals for asst. yrs. 1984-85 and 1985-86 against the part amount of addition in G.P. which was sustained by the CIT(A). 3. The learned Sr. Deptl. Representative contended that the CIT(A) ought to have confirmed the entire amount of addition made by the ITO in the declared trading results in all the years under consideration. The G.P. rate declared by the assessee itself was 29.57 per cent and 30.22 per cent in the immediately preceding two years. The assessee has not maintained day-to-day consumption records from which the consumption of raw material purchased by the assessee could be verified. The assessee has not been able to establish any link between the input of raw material, its con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale proceeds are received through bank or by cheques/drafts. Sales are made to established suppliers. The correctness of purchase and sales has not been disputed by the ITO. No instances of sales outside the books of either the raw material or finished products have also pointed out. Whatever records, which possible can be maintained in an industry like this with regard to financial transactions and quantitative details, have been maintained. The consumption register and production register have been maintained in strict compliance with statutory import regulations which is periodically audited by Chartered Accountants. Such certificates given by the auditors are regularly filed with MMTC in compliance with the import regulations. The correctness of the declared results were accepted by the IAC in the proceedings under s. 144A for asst. yr. 1982-83. The various defects pointed out by the ITO in the assessment order are not the real defects in the books or quantitative records but the additions have been made only on account of the fact that the G.P. in the years under consideration has declined as compared to the preceding year. It was explained before the ITO that the normal rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this amount for the purpose of comparing the G.P. rate as compared to the G.P. rate of the previous year, the adjusted gross profit rate works out to 29.60 per cent as compared to 29.91 per cent in asst. yr. 1982-83. A copy of this chart was supplied to the Deptl. Representative with a view to verify the correctness thereof. The Sr. Deptl. Representative did not dispute the correctness of the figures mentioned in this chart. The adjusted gross profit rate worked out after taking into consideration the rise in price of nickel consumed and rise in selling rates of finished products for the subsequent two years asst. yrs. 1984-85 and 1985-86 comes to 27.66 per cent and 29.23 per cent respectively. The working shown in the chart clearly reveal that the decline in G.P. rate in the years under consideration as compared to asst. yr. 1982-83 was mainly on account of the higher average cost of nickel (metal) consumed which was not being adequately matched by a corresponding rise in the average sale prices of finished products. The other factors which could justify for some more decline are factors like normal variations in yield of finished products from the raw material consumed, increa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.2 82-83 8,40,327 2,51,382 29.9 83-84 8,94,130 1,70,989 19.1 84-85 13,62,111 2,63,764 19.3 85-86 22,01,626 3,76,216 17.3 The adjusted G.P. rate, as stated hereinabove, worked out after giving effect of difference arising on account of rise in average cost of nickel and corresponding rise in average sale price of finished products comes to 29.91 per cent, 29.60 per cent, 27.66 per cent and 29.23 per cent in asst. yrs. 1982-83 to 1985-86 respectively. Such small variations in the declared G.P. are bound to take place from year to year depending on various other facts like small variations in the yield, rise in cost of other material, etc., and do not warrant any suspicion or disbelief, particularly when the correctness of the declared trading/manufacturing results are supported by regular, correct and complete books of account as well as by the stock records. 5.2 The other objection of the ITO was that no direct nexus between the input of raw material on a particular day with the production of finished goods could be established by the assessee by day-to-day records. In this rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue's appeal for asst. yrs. 1984-85 and 1985-86 is that the CIT(A) has erred in holding that the provisions of s. 43B are not applicable when the sales-tax remaining unpaid at the end of the year is paid within the statutory time allowed under the Sales-tax Act. It has been further contended that the CIT(A) has erred in directing the ITO to very whether the assessee has paid the unpaid sales-tax within the time allowed under Sales-tax Act and if so to allow the same as deduction. 6.1. It was common contention of the learned representatives that this matter is clearly covered in favour of the assessee by the decision of Tribunal in the case of Chandulal Venichand vs. ITO (1991) 40 TTJ (Ahd) 358 : (1991) 38 ITO 138 (Ahd). The Department wants to keep the matter alive. 6.2. In view of the detailed reasons given by the Tribunal in its order in the case of Chandulal Venichand the findings given by the CIT(A) are confirmed. 7. In assessee's appeal for asst. yr. 1984-85, the remaining grounds relate to levy of interest under s. 217 and disallowance of Rs. 1,548 made out of sundry expenses. The CIT(A) directed the ITO to recompute the interest under s. 217 after giving effect t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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