M/s. PBM Gelatine P.Ltd., Jalandhar V. The Deputy Commissioner of Income tax, Jalandhar

CO 16/ASR/2010

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9321 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 8 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Rejection of books of accounts
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.311(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN :AABCP3823E DY.COMMR. OF INCOME TAX VS. M/S. P.B.M GELATINE (P) LTD. RANGE-III, JALANDHAR. 524, NEW JAWAHAR NAGAR, JALANDHAR. (APPELLANT) (RESPONDENT) C.O. NO.16(ASR)/2010 (ARISING OUT OF I.T.A. NO.311(ASR)/2010) ASSESSMENT YEAR:2006-07 PAN :AABCP3823E M/S. P.B.M GELATINE (P) LTD. VS. DY.COMMR. OF INCO ME TAX 524, NEW JAWAHAR NAGAR, RANGE-III, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH.AMRIK CHAND, DR ASSESSEE BY:SH.ANIL MIGLANI, ADVOCATE DATE OF HEARING:06/03/2014 DATE OF PRONOUNCEMENT:31/03/2014 ORDER PER BENCH ; ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 2 THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 17.03.2010 FOR THE ASSESSMENT YEA R 2006-07. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE A DDITION OF RS.30,91,874/- (INCLUDING THE ADDITION OF RS.6,13,2 22/- U/S 69C OF THE I.T.ACT, 1961 IN RESPECT OF CLOSING STOCK) M ADE ON ACCOUNT OF UNACCOUNTED PRODUCTION/SALE/CLOSING STOC K OF DPC. 2. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.16,44,636/- MADE ON ACCOUNT OF SUPPRESSION OF YI ELD AND SALE OF DCP. 3. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.73,52,537/- MADE ON ACCOUNT OF LOW YIELD OF GLUE FLAKE/TECHNICAL GELATINE. 4. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.39,75,281/- MADE ON ACCOUNT OF SALE OF GLUE FLAK ES AT LOWER RATE THAN THE SALE RATE OF T.G. 5. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.3,24,000/- MADE ON ACCOUNT OF UNDER INVOICING T HE PURCHASE OF WASTE OSSIEN (WO) 6. THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.18,965/- AGAINST THE ADDITION OF RS.45,388/- MAD E ON ACCOUNT OF TRANSFER OF BONE GRIST ACCOUNT TO BONE M EAL ACCOUNT AT LOWER VALUE. 7. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.47,285/- MADE ON ACCOUNT OF NEGATIVE STOCK OF MT S IN BONE MEAL ACCOUNT. 8. WHILE DELETING THE ABOVE ADDITION LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ADDITIONS UNDER DIFFER ENT HEADS WERE MADE BY THE AO AFTER SEVERAL QUANTITATIVE ANALYSIS OF ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 3 PRODUCTION OF DIFFERENT FINISHED PRODUCTS, CONSUMPT ION OF PRODUCTION OF DIFFERENT RAW MATERIALS. 9. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 10. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEN D OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DI SPOSED OF. 2. THE ASSESSEE HAS ALSO FILED C.O. NO.16(ASR)/2010 RAISING THEREIN FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS GRAVELY ERRED IN SUSTAINING ADDITION OF RS18965 /- OUT OF THE TOTAL ADDITION OF RS.45988/- ( NOT RS.45388/-) WRON GLY MADE BY THE AO ON ACCOUNT OF TRANSFER OF BONE GRIST ACCOUNT TO BONE MEAL ACCOUNT CONSIDERING IT TO BE AT LOWER RATE WHI LE ADMITTING IN PARA 9 AT PAGE 41 OF HIS ORDER THAT IT CALLS FOR NO ADDITION BEING A TRANSFER OF RAW MATERIAL FROM ONE ACCOUNT T O ANOTHER BEING ONLY AN ACCOUNTING ENTRY. IN ANY CASE, NO ADD ITION OUGHT TO HAVE BEEN MADE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GRAVELY ERRED IN UPHOLDING THE ADDITION MADE BY THE AO AT RS.1158027/- IN RESPECT OF CLOSING STOCK OF GLUE FLAKES/TECHNICAL GELATINE MISTAKENLY BY TAKING STOC K FIGURE AT RS.3119803/- AS AGAINST ACTUAL SHOWN AT RS.3586362/ -. A WRONG CONCLUSION WAS REACHED BY THE LD. CIT(A) MIST AKENLY CONSIDERING WRONG FIGURES. THE ADDITION DESERVES TO BE DELETED. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS RIGHTLY DELETED THE OTHER ADDITIONS WRONGLY MAD E BY THE AO AND WHILE DELETING THE ADDITIONS, THE LD. CIT(A) RI GHTLY OBSERVED IN PARA 4.1 THAT CERTAIN PRESUMPTIONS MADE BY THE AO ARE NOT EXACTLY CORRECT. 4. THAT THE RESPONDENT BEGS TO ADD OR AMEND ANY GRO UNDS OF CROSS OBJECTIONS BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 4 3. THE ASSESSEE HAS ALSO FILED THE ADDITIONAL GROUN DS IN THE C.O. AS GROUNDS NO. 5 & 6, WHICH ARE REPRODUCED AS UNDER: 5. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE REJE CTION OF BOOKS OF ACCOUNT OF THE ASSESSEEU/S 145(3) OF THE ACT IN PARA 11 OF HIS ORDER ON ACCOUNT OF ALLEGED DISCREPANCY IN CLOSING STOCK, FOR WHICH A SEPARATE GROUNDS IS ALSO TAKEN BY THE ASS ESSEE, WHILE HOLDING THAT AO HAS NOT POINTED OUT ANY SPECIFIC DE FECT IN PURCHASE AND SALE ACCOUNT. 6. THAT THE LD. CIT(A) ERRED IN PARA 6.1 OF HIS ORD ER BY NOT ADMITTING THE DETAIL OF BIFURCATION OF PRODUCTION O F GLUE FLAKES AND TECHNICAL GELATINE FILED DURING THE APPELLATE P ROCEEDINGS CONSIDERING IT TO BE FRESH EVIDENCE UNDER RULE 46A( 1) OF THE I.T. RULES, 1962 WHEREAS FIRSTLY IT IS NOT AN ADDIT IONAL EVIDENCE BUT ONLY DETAIL PREPARED FROM THE BOOKS OF ACCOUNT AND DOCUMENTS FILED BEFORE THE AO AND SECONDLY THE AO NEVER SPECIFICALLY ASKED FOR SUCH BIFURCATION. HOWEVER, T HE LD. CIT(A) HIMSELF CONSIDERED THE SAID DETAIL WHILE DELETING T HE ADDITION IN PARA 6.2 OF THE APPELLATE ORDER. 4. AS REGARDS GROUND NO.1 OF THE REVENUE, THE BRIE F FACTS OF THE CASE ARE THAT THE AO MADE AN ADDITION OF RS.30,91,8 74/- BY CONSIDERING PRODUCTION OF SEMI FINISHED AND FINISHED DCP AND TH EREAFTER CALCULATING THE UNSOLD CLOSING STOCK. THE LD. CIT(A) VIDE PARA 4.1 AT PAGE 36 OF HIS ORDER HAS DELETED THE ADDITION FOR THE REASONS MENTIONED IN THE ORDER. 5. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, MADE THE SIMILAR SUBMISSIONS, AS MADE BEFORE THE LD. CIT(A). ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 5 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE AO HAS MADE A GREAT EFFORT IN ANALYZING THE PRODUCTION AND YIELD IN QUA NTITY AND VALUE OF THE ASSESSEE COMPANY WHILE COMING TO THE CONCLUSION THA T THAT ASSESSEE HAD FABRICATED ITS BOOK RESULTS AND ITS RESULTS WERE, T HEREFORE, NOT RELIABLE. HOWEVER, CERTAIN PRESUMPTIONS MADE BY THE AO, THOUG H BASED ON THE AUDIT REPORT, ARE NOT EXACTLY CORRECT. THE AO HAS CONTEND ED THAT THE PRODUCTION OF SEMI FINISHED DCP WAS ALSO REQUIRED TO BE CONSIDERE D AS PART OF TOTAL PRODUCTION OUT OF RAW MATERIAL AND WHEN THIS WAS CO NSIDERED, THE YIELD IN THE CURRENT ASSESSMENT YEAR WOULD BE MUCH LOWER T HAN THE YIELD IN THE A.Y. 2005-06. ON THE OTHER HAND, THE ASSESSEE HAD CONTEN DED THAT FINISHED DCP INCLUDED PRODUCTION OF THE SEMI FINISHED DCP. FOR T HE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE CHARTS I, II, III AND I V OF THE ASSESSMENT ORDER ARE EXTRACTED AT PAGE 34 & 35 OF CIT(A)S ORDER. THERE IS A MISTAKE IN ONE OF THE HEADINGS IN CHART III, IN AS MUCH AS 175.200 MT,. I S THE PRODUCTION OF SEMI FINISHED DCP AND 252.150 MT. IS THE PRODUCTION OF F INISHED DCP AS PER THE COPY OF THE REPORT IN FORM NO.3CD FOR THE YEAR ENDE D 31.3.2005 PLACED IN THE ASSESSMENT FOLDER. IT MAY BE NOTED IMMEDIATELY FROM CHART NO.1 THAT 197.400 MT OF SEMI FINISHED DCP HAS BEEN TRANSFERRE D TO FINISHED DCP. SIIMILARLY 252.150 MT OF SEMI FINISHED DCP HAVE BEE N TRANSFERRED TO ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 6 FINISHED DCP AS PER CHART III. BOTH THESE FIGURES I MPLY ARE THAT SEMI FINISHED DCP IS AN INTERMEDIATE STAGE OF PRODUCTIO N OF FINISHED DCP. DCP IS NOT PRODUCED DIRECTLY FROM THE RAW MATERIAL BONE GRIST I.E. BG. THERE IS NO EVIDENCE THAT ANY PORTION OF SEMI FINISHED DCP HAS GONE INTO ANYTHING OTHER THAN PRODUCTION OF FINISHED DCP OR THAT FINISHED DC P HAS BEEN PRODUCED INDEPENDENTLY OF THE PRODUCTION OF SEMI FINISHED DC P. THERE IS NO EVIDENCE THAT SEMI FINISHED DCP HAS BEEN SOLD SEPARATELY AND THAT THE FINISHED DCP HAS BEEN PRODUCED FROM ANYTHING OTHER THAN SEMI FIN ISHED DCP. HENCE, WHILE THE AOS OBSERVATIONS THAT THAT DCP WAS PRODU CED ONLY FROM BONE GRIST IS CORRECT, HIS OBSERVATION THAT SEMI FINISH ED DCP AND FINISHED DCP WERE PRODUCED INDEPENDENTLY AND PRODUCTION OF BOTH HAS TO BE CONSIDERED SEPARATELY TO ARRIVE AT THE YIELD FROM BG AND THE T OTAL YIELD IS NOT CORRECT. WHILE THE AO HAS LAID GREAT STORE BY THE TAX AUDIT REPORT, IT IS SEEN FROM CHART II ABOVE THAT ONLY THE PRODUCTION OF SEMI FIN ISHED DCP HAS BEEN CONSIDERED TO ARRIVE AT THE YIELD FROM THE RAW MATE RIAL. IN CHART NO. IV, THE YIELD IS LOWER AT 22.27% BECAUSE THE TAX AUDITOR HA S CONSIDERED ONLY THE PRODUCTION OF TG/GF WITHOUT CONSIDERING THE PRODUCT ION OF SEMI FINISHED DCP. THIS IS OBVIOUSLY A MISTAKE ON THE PART OF TAX AUDITOR SINCE IN THE SAME REPORT HE HAS ALSO GIVEN THE QUANTITY OF SEMI FINIS HED DCP AND FINISHED DCP ALONG WITH PRODUCTION OF TG AND GF. THE AO AT PAGE 23 OF THE ASSESSMENT ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 7 ORDER HAS MENTIONED THAT THE FIGURES GIVEN BY THE ASSESSEE IN THE REPLY DATED 19.11.2008 WOULD IMPLY THAT ASSESSEE HAS SOLD DCP W ITHOUT PRODUCTION. THIS OBSERVATION OF THE AO IS INCORRECT. ONCE WE CO NSIDER THAT FINISHED DCP IS PRODUCED OUT OF SEMI FINISHED DCP, THE FIGURES I N THE TAX AUDIT REPORT IN FORM NO. 3CD CLARIFY THEMSELVES. SEMI FINISHED DCP HAS BEEN TRANSFERRED TO FINISHED DCP AND THUS, FINISHED DCP HAS BEEN PR ODUCED IN ADDITION TO SEMI FINISHED DCP AND OUT OF IT. THE AO, THEREFORE, OBSERVED THAT THE ASSESSEE HAD SOLD UNACCOUNTED PRODUCTION OF DCP AND HAD UNACCOUNTED PRODUCTION OF DCP IN STOCK ARE, THEREFORE, INCORREC T. THE ADDITION OF RS.30,91,874/- INCLUDING THE ADDITION OF RS.6,13,22 2/- U/S 69C OF THE ACT ON THIS ACCOUNT IS, THUS, FOUND TO BE BASED ON AN INCO RRECT PREMISE THAT FINISHED DCP WAS PRODUCED IN ADDITION TO SEMI FINISHED DCP A ND NOT OUT OF THE SEMI FINISHED DCP. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A0, WHO HAS RIGHTLY DELETED THE ADDITION MADE B Y THE A.O. THUS, GROUND NO.1 OF THE REVENUE IS DISMISSED. 8. AS REGARDS THE ADDITION OF RS.16,44,636/-MADE BY THE AO BY CONSIDERING THE YIELD OF DCP FOR THE YEAR UNDER CON SIDERATION AT 78.68% BEING LOWER THAN EARLIER YEARS, WHICH WAS DELETED B Y THE LD. CIT(A) VIDE PARA 4.2 OF HIS ORDER FOR THE REASONS MENTIONED IN HIS ORDER. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 8 9. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 10. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE ADDITION OF RS.16,44,636/- MADE BY THE AO IS BASED ON THE PRESU MPTION THAT THE YIELD OF SEMI FINISHED AND FINISHED DCP TAKEN TOGETHER WERE LOWER AT 78.68% AS COMPARED TO 98.47% IN ASSESSMENT YEAR 2005-06. HOWE VER, WHEN ONE CONSIDERS THE PRODUCTION OF SEMI FINISHED DCP, WHIC H IS DIRECTLY PRODUCED OUT OF THE BG CONSUMED, THE YIELD IN ASSESSMENT YEA R 2006-07 IS 40% AND THAT IN A.Y. 2005-06 IS 40.37%, WHICH ARE BOTH COM PARABLE. SINCE THESE TWO PRODUCTS I.E. SEMI FINISHED DCP AND FINISHED DC P ARE NOT PRODUCED SEPARATELY AND INDEPENDENTLY, IT IS ONLY THE DIREC T YIELD OF SEMI FINISHED DCP FROM BG WHICH CAN BE COMPARED FROM YEAR TO YEA R AND THESE ARE ALMOST THE SAME IN BOTH THE ASSESSMENT YEARS. UNDER THE CIRCUMSTANCES, THERE IS NO REASON FOR HOLDING THAT THE YIELD OF DC P HAD FALLEN DRASTICALLY IN THE CURRENT ASSESSMENT YEAR AS COMPARED TO THE PREC EDING ASSESSMENT YEAR. THE ADDITION OF RS.16,44,636/- ON ACCOUNT OF LOWER YIELD OF DCP OF BG IS, THEREFORE, RIGHTLY DELETED. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 9 12. AS REGARDS GROUND NO.3, THE AO MADE AN ADDITION OF RS.73,52,537/- BY TAKING YIELD OF TECHNICAL GELATINE @ 30% INSTEAD OF 14.18% SHOWN BY THE ASSESSEE. BY TAKING RATE OF RS.91120.80, THE LD . CIT(A) DELETED THE ADDITION VIDE PARA 5.2 AT PAGE 37 TO 38 FOR THE REA SONS MENTIONED IN THE ORDER. 13. THE LD. DR, RELIED UPON THE ORDER OF THE ASSE SSING OFFICER. 14. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE AO HAS MADE AN ADDITION OF RS.73,52,537/- BY ESTIMATING THE ACTUAL YIELD OF GF/TG FROM BG @ 30% AS AGAINST THE YIELD OF 14% GIVEN BY THE ASSE SSEE. ONE OF THE REASONS FOR HOLDING SO IS THAT THE BONE GRIST GAVE PRODUCTI ON OF GF/TG WHICH WAS MUCH LESS THAN THE CORRESPONDING YIELD IN VALUE O F THE SAME PRODUCT FORM OTHER RAW MATERIAL LIKE BS, WO AND FLUFF. ANOTHER R EASON IS THE MONTHWISE VARIATION IN THE YIELD OF GF/TG WITH RESPECT TO BG AS EXTRACTED IN CHART VII. AS PER THE AO, THE YIELD SHOULD NOT VARY FROM MONTH TO MONTH BECAUSE THE PRICE OF BG WAS ALMOST CONSTANT DURING THE YEAR. IT IS SEEN THAT THE ISSUE OF ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 10 ADDITION BECAUSE OF VARIATION IN THE MONTHLY OUTPUT OF TG CAME UP FOR CONSIDERATION IN ASSESSEES CASE ITSELF IN ITS ASSE SSMENT AND APPEAL FOR A.Y. 2000-01. THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE YIELD OF FINISHED PRODUCT WAS BOUND TO VARY FROM YEAR TO YEA R AND FORM MONTH TO MONTH. IT WAS FURTHER SUBMITTED THAT THE PRODUCTION PROCESS WAS CONTINUOUS ONE AND ASSESSEE HAD FOLLOWED THE SYSTEM OF MONTHLY STOCK TAKING WHERE ONLY PACKED BAGS WERE CONSIDERED AS FINISHED STOCK. DRUM PRODUCTION OR LOOSE MATERIAL WAS NOT TAKEN AS FINISHED STOCK WHIC H HAD RESULTED INTO INSTANCES WHERE DRUM PRODUCTION OF ONE MONTH, BLEND ED IN FACT IN THE NEXT MONTH WERE TAKEN AS PRODUCTION OF THAT MONTH. THIS HAD ALSO RESULTED IN VARIATION OF THE YIELD OF TG. THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION AND ESTIMATED THE ACTUAL YIELD BASED ON THE YIELD FOR THE MONTH OF APRIL, 1999 AND FEB.,2000 TO ARRIVE AT WHAT HE C ONSIDERED WAS THE CORRECT YIELD IN THE PRODUCTION OF GF/TG FROM BG AND MADE A N ADDITION OF RS.10,28,540/- ON THIS ACCOUNT. IN FIRST APPEAL THE LD. CIT(A), JALANDHAR, IN HIS ORDER DATED 10.3.2004 HELD THAT THE AO HAS NOT POINTED OUT ANY DEFECT IN THE MAINTENANCE OF BOOKS OF ACCOUNTS. HE ALSO HELD THAT VARIATION IN CONSUMPTION OF FUEL, WAGES ETC. WAS NOT APPROPRIATE GROUND FOR REJECTION OF BOOKS OF ACCOUNTS BECAUSE IN PROCESS OF MANUFACTUR ING VARIATION HAD TO BE THERE ESPECIALLY WHEN THE RAW MATERIAL CONSUMED BY THE ASSESSEE WAS ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 11 ORGANIC MATERIAL I.E. BONES OF ANIMALS WHICH WERE O F DIFFERENT KINDS. IN A CONTINUOUS PROCESS OF MANUFACTURE, SUCH VARIATION B ASED ON THE YIELD FOR ONE DAY COULD NOT BE A GROUND FOR CONCEALMENT. HE NOTED THAT THE ASSESSEES ACCOUNTS WERE AUDITED. HENCE, THE ADDITION MADE BY THE AO WAS DELETED. ON FURTHER APPEAL BY THE DEPTT, THE ITAT, IN THEIR ORD ER DATED 15.9.2007 IN ITA NO.344(ASR)/2004 NOTED THAT THE ISSUE WAS COVERED B Y THEIR DECISION IN THE CASE OF PUNJAB BONE MILLS, JALANDHAR IN ITA NO.3439 ASR)/2004 DATED 20.4.2007 IN THIS ORDER, THE ITAT HAS HELD THAT MER E VARIATION IN CONSUMPTION OF FUEL, WAGES, COAL DID NOT CONSTITUTE A VALID BASIS FOR REJECTING THE ACCOUNTED VERSION. THE AO HAD NOT POINTED OUT A NY DEFECT IN THE MAINTENANCE OF BOOKS OF ACCOUNT BY THE ASSESSEE AND SYSTEM OF ACCOUNTING HAD BEEN FOLLOWED REGULARLY. THE GP RATE WAS BETTER THAN THE EARLIER YEARS. THE GROUND OF APPEAL TAKEN BY THE DEPTT WAS, THEREF ORE, REJECTED. THUS, IT IS SEEN THAT THE JURISDICTIONAL ITAT HAVE HELD THAT ON LY VARIATION IN THE YIELD, WAGES ETC. COULD NOT BE A VALID GROUND FOR MAKING A N ADDITION ON THE BASIS OF LOWER YIELD UNLESS SOME OTHER DEFECTS WERE POINTED OUT BY THE AO. IN THE PRESENT CASE ALSO NO SUCH DEFECT HAS BEEN MENTIONED . THE MONTH WISE YIELD CAN VARY DUE TO METHOD OF ACCOUNTING OF STOCK OR PR ODUCTION AT THE END OF THE MONTH. AS REGARDS AOS CONTENTION OF LOWER YIE LD OF GF/TG IN VALUE FROM BG IS CONCERNED, THERE IS AN OBVIOUS FLAW IN T HE COMPUTATION MADE BY ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 12 THE AO IN AS MUCH AS HE HAS CONSIDERED ONLY THE VAL UE OF GF/TG FROM THE BG PURCHASED WITHOUT ACCOUNTING FOR THE VALUE OF D CP PRODUCED FROM BG. ADMITTEDLY, BONE GRIST YIELDS BOTH DCP AS WELL AS GF/TG. IN THE COMPUTATION OF VALUE YIELD MADE BY THE AO OF THE A SSTT. ORDER, THE AO HAS CONSIDERED ONLY THE PRODUCTION OF GF/TG TO HOLD THA T THE YIELD OF GF/TG FROM BG WAS LOWER AS PER THE UNIT VALUE DERIVED FR OM BG WAS LOWER. IF ONE CONSIDERS ALSO THE VALUE OF DCP PRODUCED FROM BG, T HE FIGURE OF VALUE OF PRODUCTION WOULD ENTIRELY DIFFERENT. AN ILLUSTRATIV E CHART OF THE VALUE OF PRODUCTION BY INCLUDING THE VALUE OF DCP PRODUCED F ROM BG IS GIVEN BELOW: BONE SINEWS BONE GRIST BONE FLUFF WASTE OSSEIN COST OF 1MT OF RAW MATERIAL 6179 9011 3447 24125 PRODUCTION 280KG GF 145TG 80KG GF 500KG TG DCP NIL 400 KG. DCP NIL NIL SALE PRICE 280@RS.50 145@ RS.91,400 @ RS.16592 80@ RS.50 500@ RS.91 TOTAL REALISATION 14000 19831 4000 45500 THUS, THE AOS CONTENTION THAT THE VALUE OF YIELD I N VALUE FROM BG WAS LOWER AS COMPARED TO THE OTHER RAW MATERIALS IS FOU ND TO BE INCORRECT SINCE ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 13 BG YIELDS NOT ONLY GF/TG BUT ALSO DCP. THE AO HAS M ADE HIS CALCULATIONS OF LOWER VALUE YIELD FROM BG ON THE BASIS OF ONLY T HE YIELD OF GF/TG WITHOUT CONSIDERING THE VALUE OF DCP PRODUCED AND S OLD FROM BG. THE CONTENTION OF THE AO I.E. LOWER VALUE YIELD FORM BG IS THUS FOUND TO BE INCORRECT AND THE SAME VALUE YIELD PER RUPEE OF BG IS ALMOST THE SAME AS THAT OF OTHER RAW MATERIAL , AND IN FACT MORE THAN FROM SOME OTHER RAW MATERIALS. THE OTHER REASON I.E. THE MONTHLY VARIATION IS YIEL D IS FOUND TO BE NOT GOOD REASON FOR MAKING THE ADDITION AS HELD BY THE ITAT IN ASSESSEES OWN CASE IN A.Y. 2000-01. MOREOVER, NO DEFECT IN THE PURCHAS E OR SALES HAD BEEN POINTED OUT IN THE BOOKS OF ACCOUNT. THEREFORE, TH ERE IS NO REASON TO SUSTAIN THE ADDITION OF RS.73,52,537/- MADE BY THE A.O. ACC ORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RI GHTLY DELETED THE ADDITION SO MADE BY THE A.O. THUS, GROUND NO.3 OF THE REVENU E IS DISMISSED. 16. AS REGARDS GROUND NO.4, THE AO MADE AN ADDITION OF RS.39,75,281/- BY CONSIDERING THE SALE RATE AT HIGHER SALE PRICE, WHICH WAS DELETED BY THE LD. CIT(A) VIDE PARA 6 TO 6.2 OF HIS ORDER FOR THE REASONS MENTIONED THEREIN. 17. THE LD. DR, RELIED UPON THE ORDER OF THE ASSES SING OFFICER. 14. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 14 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE AO HAS MADE AN ADDITION OF RS.39,75,281/- BY HOLDING THAT THE SALE OF GF SHOULD BE TAKEN AT THE SAME RATE AS THAT OF TG. HE ALSO MADE AN ADDITI ON OF RS.11,58,027/- IN THE CLOSING STOCK, CONTESTED IN GROUND NO.7 BY HOLD ING THAT THE SAME SHOULD BE VALUED AT THE RATE APPLICABLE TO TG AND NOT TO GF. ONE OF THE MAIN REASONS FOR THESE ADDITIONS IS THAT THE STOCK REGIS TER MAINTAINED BY THE ASSESSEE DID NOT SEPARATELY SHOW THE PRODUCTION OF GF/TG AND IT WAS NOT POSSIBLE TO ACCEPT OR VERIFY THE CONTENTION OF ASSE SSEE REGARDING SEPARATE PRODUCTION OF GF/TG. THE AOS CONTENTION THAT THE A SSESSEE HAD NOT MAINTAINED SEPARATE BIFURCATION OF GF AND TG IS FOU ND TO BE CORRECT. WHEN THESE TWO PRODUCTS ARE MANUFACTURED SEPARATELY, EV EN THOUGH THE SAME PROCESS AND HAVE DIFFERENT SALE PRICES, HAVE DIFFER ENT COLOURS AND PROPERTIES, THESE SHOULD HAVE NORMALLY BEEN REFLECTED SEPARATEL Y IN THE PRODUCTION REGISTER AS WELL AS IN THE CLOSING STOCK. IT IS ALS O CONTENDED BY THE ASSESSEE THAT THE RAW MATERIAL FOR PRODUCTION OF TG WAS DIFF ERENT FROM THE RAW MATERIAL FOR PRODUCTION OF GF. THIS IS ALSO THE MOR E REASON THAT SEPARATE PRODUCTION DETAILS OF GF & TG SHOULD HAVE BEEN MAIN TAINED AND THERE DOES NOT APPEAR TO BE ANY NEED TO GROUP THESE ITEMS TOG ETHER. THE ASSESSEES CONTENTION THAT THESE WERE GROUPED TOGETHER FOR THE SAKE OF CONVENIENCE ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 15 DOES NOT APPEAR TO BE VERY CONVINCING IN LIGHT OF T HESE FACTS. THE ASSESSEE HAS SUBMITTED DETAILS OF PRODUCTION OF GF AND TG SE PARATELY . HOWEVER, THESE WERE NOT FILED DURING THE COURSE OF ASSESSME NT PROCEEDINGS EVEN THOUGH THE AO HAD RAISED SPECIFIC QUERIES IN THIS R EGARD AND CANNOT BE ADMITTED AS EVIDENCE AT THIS STAGE SINCE THE CONDIT IONS OF RULE 46A(1) OF THE I.T. RULES, 1962 ARE NOT SATISFIED IN THIS REGARD. NEVERTHELESS, THE FACT REMAINS THAT THE ASSESSEE HAS MENTIONED BOTH THE IT EMS GF AND TG IN THE STOCK REGISTER INDICATING THAT THESE WERE DIFFERENT ITEMS GROUPED TOGETHER. THE ASSESSEE HAD ALSO SUBMITTED COPIES OF BILLS AND PURCHASE ORDERS BEFORE THE AO SHOWING THAT DIFFERENT SALE RATES WERE APPLI CABLE TO GLUE OF DIFFERENT STRENGTH, EVEN THOUGH IN MOST OF THE PURCHASE ORDER S THE TERMS TECHNICAL GLUE HAS BEEN USED EVEN FOR GLUE OF LOWER GEL STRE NGTH WHICH HAS BEEN CATEGORIZED AS GF BY THE ASSESSEE. THE AO HAS NOT M ADE ANY INQUIRY TO DISPROVE THE ASSESSEES CONTENTION THAT GF AND TG O F DIFFERENT STRENGTH WERE SOLD AT DIFFERENT SALE RATES. THERE IS DIFFERENCE I N SALE RATE EVEN BETWEEN TG OF 400 GEL STRENGTH AND TG OF 350 GEL STRENGTH AS P ER COPY OF BILL IT IS NOT SHOWN THAT ANY OF THESE TRANSACTIONS WERE WITH RELA TED PARTIES OR THAT ANY OF THE SALES MADE BY THE ASSESSEE WERE VERIFIABLE. COP IES OF INVOICES SUBMITTED BEFORE THE AO IN THIS REGARD HAVE NOT BEEN REBUTTED BY THE AO. THE ASSESSEES CONTENTION, THEREFORE, THAT GF AND TG WE RE DIFFERENT QUALITY ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 16 PRODUCTS SOLD AT DIFFERENT RATES CANNOT BE REJECTED IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY BROUGHT ON RECORD BY THE A O THE AO HAS PRESUMED THAT ALL THE PRODUCTS UNDER THE GF/TG CATEGORY HAVE BEEN SOLD AT THE HIGHER RATE OF TG AND THAT SALES IN THE GARB OF GF WERE UN DER INVOICED. THE LD. CIT(A) OBSERVED THAT IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THESE SALES TO UNRELATED PARTIES WERE UNDER INVOICED AND THE FA CTUAL DIFFERENCE IN STRENGTH OF THE TWO PRODUCTS, THE ASSESSEES VERSIO N RECORDED IN ITS REGULAR BOOKS OF ACCOUNT CANNOT BE REJECTED. THE ADDITION O F RS.39,75,281/- MADE BY THE AO IS, THEREFORE, RIGHTLY DELETED. 15.1. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED TH E ADDITION SO MADE BY THE AO. THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 16. IN GROUND NO.5 THE REVENUE HAS AGITATED THE DE LETION OF ADDITION OF RS.3,24,000/- MADE ON ACCOUNT OF UNDER INVOICING TH E PURCHASE OF WASTE OSSIEN. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAS MADE AN ADDITION OF RS.3,24,000/- BY CONSIDERING THE PURCHASE RATE WAST E OSSIEN OF 25% INSTEAD OF RS.15,000/- AS DECLARED IN SALE BILLS OF THE SEL LING PARTY, WHICH WAS DELETED BY THE LD. CIT(A) IN PARA 8 OF HIS ORDER. 17. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 17 18. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND, ORDER RELIED UPON SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE ORDE R OF THE LD. CIT(A). 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE AO HAS REJECTED THE ASSESSEES EXPLANATION THAT WO PURCHASING EARLIER MONTHS WAS OF DIFFERENT QUALITY THAN WO PURCHASED IN DEC., 2005 BY NOTING T HAT THE OVERALL YIELD OF GF/TG FROM WO WAS 50% AS CLAIMED TO BE THE OVERALL YIELD FROM WO, WHICH IMPLIED THAT THE CLAIM REGARDING BETTER QUAL ITY WO PURCHASED EARLIER WAS INCORRECT. WHILE THE EXPLANATION GIVEN BY THE ASSESSEE DOES NOT APPEAR TO BE BACKED STRICTLY BY PRODUCTION RESULTS, THEREF ORE, SECTION 69C OF THE ACT CANNOT BE APPLIED TO MAKE THE IMPUGNED ADDITION. SE CTION 69C IS INVOKED WHEN THE ASSESSEE IS FOUND TO HAVE INCURRED ANY EXP ENDITURE AND OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR THE EXPLANATION OFFERED BY HIS IS UNSATISFACTORY. THE SINE QUO NON, THUS, F OR MAKING ADDITION U/S 69C IS THAT THE ASSESSEE SHOULD HAVE INCURRED EXPENDITU RE WHOSE SOURCE WAS NOT KNOWN OR DECLARED. IN THE CASE OF THE ASSESSEE, IT HAD SUBMITTED COPY OF PURCHASE BILL FROM THE RELEVANT PARTY FROM WHOM PUR CHASES WERE MADE AS WELL AS CORRESPONDENCE FROM THAT PARTY. THERE IS NO EVIDENCE THAT THE ASSESSEE ACTUALLY PAID ANY AMOUNT OVER AND ABOVE TH E SUM OF RS.1,99,800/- ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 18 DEBITED IN BOOKS OF ACCOUNTS AND AS PER THE BILL RA ISED BY THE PARTY FROM WHOM THE GOODS WERE PURCHASED. THE AOS ADDITION IS BASED ON PRESUMPTION THAT THE ASSESSEE MUST HAVE PAID THE HI GHER AMOUNT. HOWEVER, THE PRESUMPTION CANNOT TAKE PLACE OF FINDING OF FAC T OF HAVING INCURRED THE UNRECORDED EXPENDITURE FOR THE PURPOSE OF INVOKING SECTION 69C OF THE ACT. SINCE NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SUP PORT THE PRESUMPTION OF HAVING PAID RS.3,24,000/- IN CASH FOR PURCHASE OF W O IN DEC., 2005, THE ADDITION U/S 69C OF THE ACT IS RIGHTLY DELETED. 19.1 IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED TH E ADDITION SO MADE BY THE AO. THUS, GROUND NO.5 OF THE REVENUE IS DISMISSE D. 20. AS REGARDS GROUND NO.6 OF THE REVENUE AND GROUN D NO.1 OF THE ASSESSEE IN THE C.O., THE BRIEF FACTS ARE THAT THE A.O. MADE AN ADDITION OF RS.45988/- BY TAKING 10.700 MTS OF BONE GRIST TRANS FERRED TO BONE MEAL ACCOUNT AT RATE OF RS.3771.02 AGAINST THE AVERAGE R ATE OF BONE GRIST PURCHASED AT RS.8069.02.. THE LD. CIT(A) DELETED TH E ADDITION OF RS.27023/- AND SUSTAINED THE ADDITION OF RS.18965/ - VIDE PARA 9 OF HIS ORDER. 21. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 19 22. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE ORDE R OF THE LD. CIT(A). 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT THE TRANSFER EVEN AT THE LOWER VALUE DOES NOT CALL FOR ANY ADDITION. THE AS SESSEE HAS TRANSFERRED ONE ITEM OF RAW MATERIAL TO ANOTHER ITEM OF RAW MATERIA L AT THE RATE APPLICABLE TO THE SECOND RAW MATERIAL. THIS IS ONLY AN ACCOUNTING ENTRY AND HAS NO OVERALL EFFECT ON THE EXPENDITURE OF THE ASSESSEE. THE ACCO UNTS OF FIRST RAW MATERIAL GETS REDUCED BY THE TRANSFERRED SUM AND THAT OF SEC OND RAW MATERIAL INCREASES BY THE SAME SUM WITHOUT HAVING ANY EFFECT OF THE OVERALL PURCHASES/EXPENDITURE BY THE ASSESSEE. THE TOTAL ST OCK OF BONE MEAL IN THE CLOSING STOCK IS ONLY 3.440 MT AGAINST THE TRANSFER RED AMOUNT OF 10.700 MT. HENCE, IF AT ALL, THE EFFECT CAN BE LIMITED TO THE VALUE OF CLOSING STOCK OF BONE MEAL HOLDING IT TO BE ACTUALLY THE STOCK OF BO NE GRIST. THE ASSESSEES EXPLANATION THAT THE TRANSFER WAS UNDERTAKEN BECAUS E SOME BONE MILLS CAME OUT OF BONE GRIST DUE TO HANDLING IN THE PRODUCTION PROCESS APPEARS TO BE REASONABLE. HOWEVER, SINCE MATERIAL HAS BEEN TRAN SFERRED FROM BONE GRIST TO BONE MEAL ACCOUNT, THE COST INCURRED FOR PURCHAS E AND ACQUISITION OF BONE GRIST SHOULD HAVE BEEN APPLIED FOR VALUING THE CLO SING STOCK OF BONE MEAL OF ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 20 3.400 MT SHOULD BE VALUED AT THE RATE APPLICABLE TO BONE GRIST OF RS.8,078/- PMT WHICH WOULD GIVE THE VALUE OF THE BONE MEAL IN THE CLOSING STOCK. AN ADDITION OF RS.18,965/- IS THEREFORE RIGHTLY SUSTAI NED OUT OF THE ADDITION OF RS.45,988/- MADE BY THE A.O. 23.1 IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED TH E ADDITION SO MADE BY THE AO. THUS, GROUND NO.6 OF THE REVENUE IS DISMISSE D. 24. AS REGARDS GROUND NO.7, THE BRIE FACTS OF THE C ASE ARE THAT THE A.O. MADE AN ADDITION OF RS. 47,285/- BY CONSIDERING BON E MEAL AS DEFICIT FOR THE YEAR UNDER CONSIDERATION, WHICH WAS DELETED BY THE LD. CIT(A) IN PARA 10 FOR THE REASONS MENTIONED IN HIS ORDER. 25. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESS ING OFFICER. 26. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE ORDE R OF THE LD. CIT(A). 27. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT IN ASSESSEES EXPLANATION, THERE WAS NO NEGATIVE STOCK OF BONE MEAL, WHICH WAS TRANSFERRED FROM BONE GRIST ACCOUNT AND THE SAME HAS NOT BEEN REBUTTED B Y THE AO, THOUGH THE EXPLANATION WAS SUBMITTED DURING THE ASSESSMENT PRO CEEDINGS AND, IN FACT, HAS RESULTED IN AN ADDITION WICK HAS BEEN CONTESTED IN GROUND NO.5 OF APPEAL ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 21 ADJUDICATED ABOVE. IN THE CHART NO.X ON PAGE 18 & 1 9 OF ASSTT. ORDER, THE AO HAS GIVEN EFFECT OF TRANSFER OF 10.700 MT OF BONE M EAL FROM THE BONE GRIST ACCOUNT IN THE MONTH OF MARCH, 2006 ONLY ON 31.3.20 06 WHEREAS THE ASSESSEE HAD PRODUCED THE STOCK REGISTER BEFORE THE AO WHICH SHOWED TRANSFER FROM BG TO BONE MEAL IN THE MONTHS OF SEPT ., TO NOV., 2005 AS WELL AS IN MARCH, 2006. ONCE THESE TRANSFERS ARE TAKEN I NTO ACCOUNT, NO NEGATIVE STOCK REMAINS. UNDER THE CIRCUMSTANCES, THERE IS NO SCOPE FOR MAKING ADDITION ON ACCOUNT OF NEGATIVE STOCK IN THE BONE M EAL ACCOUNT. 27.1. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION SO MAD E BY THE AO. THUS, GROUND NO.7 OF THE REVENUE IS DISMISSED. 28. AS REGARDS GROUND NO.2 OF THE C.O. OF THE ASSES SEE, THE AO MADE AN ADDITION OF RS.11,58,027/- BY INCREASING THE VALUE OF CLOSING STOCK OF GLUE/TG BY TAKING THE SALE PRICE OF TG REDUCED THE AVERAGE G.P. RATE THEREFROM. 28.1. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A. O AND SUSTAINED THE ADDITION OF RS.31,19,830/-. 29. THE LD. COUNSEL FOR THE ASSESSEE, RELIED UPON T HE SUBMISSIONS MADE BEFORE THE A.O. AND THE LD. DR RELIED UPON THE ORDE R OF THE LD. CIT(A). ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 22 30. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT IN THE ABSENCE OF PARTICULARS OF THE ACTUAL PRODUCTION OF GF AND TG A ND BIFURCATION OF GF AND TG IN THE CLOSING STOCK, IT WAS NOT PRACTICAL TO AP PLY THE CLOSING STOCK RATE OF THE LOWER VALUE PRODUCTS TO DETERMINE THE VALUE OF THE CLOSING STOCK. THE ASSESSEE HAS VALUED THE CLOSING STOCK AT THE AVERAG E RATE OF PRODUCTION OF GF AND TG WITHOUT APPLYING THE APPLICABLE RATES FOR EA CH OF THESE TWO COMPONENTS. AS PER THE DETAILS FURNISHED ON PAGE 22 TO 24 OF THE PAPER BOOK, THE VALUE OF CLOSING STOCK WORKS OUT TO RS.34 ,29,755/- AS AGAINST THE DECLARED VALUE OF RS.31,19,803/-, IF THE SEPARATE C OSTS OF EACH ITEM ARE APPLIED TO SEPARATE QUANTITIES OF EACH ITEM SHOWN I N THE CLOSING STOCK AS PER THE FRESH DOCUMENTS. THIS ITSELF INDICATES THAT IF THE CORRECT VALUATION HAD BEEN DONE BY THE ASSESSEE ITSELF TAKING INTO THE A CCOUNT THE QUANTITY OF GF AND TG RESPECTIVELY ALONGWITH THEIR RESPECTIVE COS T OF PRODUCTION, THE VALUE OF THE CLOSING STOCK OF GF AND TG WOULD HAVE BEEN H IGHER THAN THAT DECLARED BY THE ASSESSEE. HOWEVER, IN THE ABSENCE O F BIFURCATION OF STOCK BETWEEN GF AND TG IN THE CLOSING STOCK, INSPITE OF QUERIES RAISED IN THIS REGARD BY THE AO, THE LD. CIT(A) WAS JUSTIFIED IN C ONFIRMING THE ACTION OF THE AO IN VALUING THE CLOSING STOCK OF GF/TG AT THE HIGHER RATES AND IN MAKING THE IMPUGNED ADDITION OF RS.11,58,027/- TO T HE CLOSING STOCK. ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 23 ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF T HE LD. CIT(A) AND THE SAME IS UPHELD. HENCE, GROUND NO.2 OF THE C.O. OF T HE ASSESSEE IS DISMISSED. 31. GROUNDS NO. 3 & 4 OF THE C.O. ARE GENERAL IN N ATURE, THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 32. AS REGARDS GROUNDS NO. 5 & 6, THE LD. COUNSEL F OR THE ASSESSEE DID NOT ARGUE ANYTHING AND WE TREAT THE SAME AS NOT PRESSE D AND DISMISS THE SAME BEING NOT PRESSED. 33. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO. 311(ASR)/2010 IS DISMISSED AND C.O. NO.16(ASR)/2010 OF THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MARCH, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31ST MARCH, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. PBM GELATINE PVT.LTD. JALANDHAR. 2. THE DCIT, R-III, JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, ITA NO.311(ASR)/2010 C.O.NO.16(ASR)/2010 24