M/s Indian Explosives Pvt. Ltd., Kolkata V. DCIT, CIR-11(1), KOLKATA, Kolkata

CO 22/KOL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3716 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: RISHABH MLHOTRA
• Keywords: Rejection of books of accounts; Business income; Search and seizure; Rule of consistency; Avoidance of tax
• Section: 43B; 145; 139

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 58 / KOL / 20 14 & ASSESSMENT YEAR :2008-09 DCIT, CIRCLE-11, P-7, CHOWRINGHEE SQUARE, KOLATA-69 V/S . M/S INDIAN EXPLOSIVES LTD., 10A, LEE ROAD, KOLKATA-20 [ PAN NO.AAACI 6548 N ] /APPELLANT .. / RESPONDENT C.O. NO. 22/KOL/2015 (A/O ITA NO.58/KOL/2014) ASSESSMENT YEAR: 2008-09 M/S INDIAN EXPLOSIVES LTD., 10A, LEE ROAD, KOLKATA-20 [ PAN NO.AAACI 6548 N ] V/S . DCIT, CIRCLE-11, P-7, CHOWRINGHEE SQUARE, KOLATA-69 /CO-OBJECTOR .. / APPELLANT /BY ASSESSEE SHRI KANCHAN KAUSHAL, CA & SHRI RISHABH MLHOTRA, ADVOCATE /BY REVENUE MD. USMAN, CIT-DR /DATE OF HEARING 13-02-2018 /DATE OF PRONOUNCEMENT 27-04-2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA D ATED 28.10.2013 FOR THE ASSESSMENT YEAR 2008-09 AND THE SAME IS BEING DISPO SED OF ALONG WITH CROSS OBJECTION (CO) FILED BY THE ASSESSEE BEING CO NO.22/KOL/2015. ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 2 MD. USMAN, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI KANCHAN KAUSHAL, LD. AUTHORIZED REPRESENTA TIVE AND SHRI RISHABH MALAHOTRA, LD. ADVOCATE BOTH APPEARED ON BEHALF OF ASSESSEE. 2. BOTH APPEAL AND CO ARE HEARD TOGETHER AND BEING DISPOSED OF BY WAY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. FIRST WE TAKE UP REVENUES APPEAL IN ITA NO.58/KOL/ 2014 . 3. REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES AND AS PER LAW OF THE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.110,54, 18,881/- ON ACCOUNT OF SUPPRESSION OF SALE WITHOUT APPRECIATING THE FI NDINGS OF THE AO. 2. THAT ON THE FACTS AND CIRCUMSTANCES AND AS PER L AW OF THE CASE LD. CIT(A) ERRED IN ACCEPTING THE REASONS FOR VARIATION BETWEEN THE AVERAGE COST OF INVENTORIES AND SALE VALUE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN OBSERVING THAT NO MATERIAL HAS BEEN BROUGHT ON RECO RD TO HOLD THAT THERE COULD HAVE BEEN ANY SALE OF STOCK OUTSIDE THE ACCOU NT. SINCE, THE ASSESSING OFFICER HAS NOT DISPUTED THE QUANTITY OF STOCK SOLD, THE OBSERVATION OF LD. CIT(A) IS NOT JUSTIFIED. 4. THAT ON THE FACTS AND CIRCUMSTANCES AND AS PER L AW OF THE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.110,54, 18,881/- ON ACCOUNT OF SUPPRESSION OF SALE SINCE IN THE COURSE OF REMA ND PROCEEDINGS, THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAM THAT CLOSI NG STOCK CONSTITUTES OF EXPLOSIVES OF HIGHER VALUE. 4. GROUND NO.1 TO 4 ARE INTER-RELATED AND THEREFORE BEING TAKEN UP TOGETHER. THE ISSUES RAISED ARE THAT LD. CIT(A) ERR ED IN DELETING THE ADDITION OF 110,54,18,881/- ON ACCOUNT OF SUPPRESSION OF SALE. 5. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A LIMITED COMPANY AND ENGAGED IN BUSINESS OF MANUFACTURING OF COMMERCIAL / BLASTING EXPLOSIVES AND INITIATING EXPLOSIVES, PROVIDING SER VICE OF ROCK-ON-GROUND OPERATIONS AND PURCHASE & SALE OF SAFETY FUSES. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS MANUFACTURED CERTAIN TYPES OF EXPLOSIVES WHICH WERE SOLD TO ITS CUSTOMERS. THE DETAILS OF EXPLOSIVES AN D ITS SALE PRICE SHOWN IN THE PROFIT AND LOSS ACCOUNT STAND AS UNDER:- I) COMMERCIAL/BLASTING EXPLOSIVES RS.20251 PER MT. II) DETONATING FUSES; RS.3498432 PER MILLION MET ERS ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 3 III) DETONATORS RS.17227671 PER MILLION NUMBERS IV) PRIMEX/PETN RS.161253 PER MT. HOWEVER, THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE AVERAGE VALUE OF OPENING STOCK AN D CLOSING STOCK IS HIGHER THAN THE SALE PRICE SHOWN BY THE ASSESSEE. THE AVER AGE VALUE OF OPENING STOCK AND CLOSING STOCK STAND AS UNDER:- VALUE OF OP. STOCK VALUE OF CL. STOCK AVG. VALUE O F STOCK COMMERCIAL/BLASTING EXPLOSIVES RS.29542 MT RS,25062/MT RS.27302/MT DETONATING FUSES RS.4545000/MM RS.4434375/MM RS.448 9687/MM DETONATORS RS.25443252/MN RS.23817012/MN RS.2463013 2/MN PRIMEX/PETN RS.216729/MT RS.215751/MT RS.216240/MT IN VIEW OF ABOVE, THE AO OBSERVED THAT THE ASSESSEE HAS SOLD ITS GOODS AT A PRICE LOWER THAN THE COST. THE NECESSARY DETAILS SH OWING THE DIFFERENCE IN THE SALE-PRICE AND AVERAGE VALUE OF STOCK IS DETAILED A S UNDER:- AVG. VALUE OF STOCK SALE PRICE DIFFERENCE IN PRICE COMMERCIAL/BLASTING EXPLOSIVES RS.27302/MT RS,20251 PER MT RS.7051/ MT DETONATING FUSES RS.4489687/MM RS.3498432/MM RS.991 255/MM DETONATORS RS.24630132/MN RS.17227671/MN RS.7402461 /MN PRIMEX/PETN RS.216240/MT RS.161253/MT RS.54987/MT ON BEING CONFRONTED, THE ASSESSEE SUBMITTED AS UNDE R : AS REGARDS YOUR QUERY RAISED DURING THE COURSE OF H EARING ON 08-12- 2011 ASKING FOR EXPLANATION AS TO WHY SALE PRICE PE R UNIT OF GOODS IS LOWER THAN THAT OF FINISHED GOODS WHILE COMPARING P OINT NO. 14 & 15 OF NOTES TO ACCOUNT : IN THIS REGARD IT MAY PLEASE BE NOTED THAT CLASS OF GOODS AS MENTIONED IN POINT 14 & 15 OF NOTES TO ACCOUNT, COMPRISES BRO AD HEAD OF GOODS MANUFACTURED BY THE COMPANY. IN EACH OF THE HEADS V ARIETIES PRODUCT OF DIFFERENT HEADS AS MANUFACTURED ARE INCLUDED. FOR E XAMPLE, UNDER THE HEAD COMMERCIAL/BLASTING EXPLOSIVES, THE TYPES OF E XPLOSIVES THAT ARE INCLUDED ARE BULK AND PACKAGE EXPLOSIVES. THAT ARE INCLUDED ARE BULK AND PACKAGED EXPLOSIVES. THE TOTAL QUANTITIES OF TH E SAME AS SOLD BY THE COMPANY DURING THE RELEVANT FINANCIAL YEAR AS U NDER:- NATURE OF EXPLOSIVES QUANTITY SOLD (IN TONES) TOTAL SALES VALUE (IN RS) RATE PER TON (IN RS) ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 4 BULK 78856.00 1352838334 17155.81 PACKAGED 35653.63 966134666 27098.27 TOTAL 114509.63 2318973000 20251.34 IT MAY FURTHER BE NOTED THAT SINCE BULK EXPLOSIVES ARE MANUFACTURED IN LIQUID FORM THE SAME CANNOT BE STORED BY THE COMPAN Y. THE SAID EXPLOSIVES ARE MANUFACTURED BY THE COMPANY BASED ON ORDER RECEIVED FROM CUSTOMERS ONLY. ACCORDINGLY, THE VALUATION OF INVENTORIES THAT RE DISCLOSED UNDER THE HEAD THE COMMERCIAL/BLASTING E XPLOSIVE COMPRISED OF PACKAGED EXPLOSIVES ONLY. THE DETAILS AS REGARDS VALUATION OF INVENTORY ARE AS UNDER:- NAME OF EXPLOSIVES CLOSING QUANTITY AS AT 31.3.2008 (IN TONES) VALUE OF GOODS (IN RS) RATE PER TON (IN RS) PACKAGED 1812.37 45422000 25062.21 TOTAL 1812.37 45422000 25062.21 ON PERUSAL OF THE SAME, YOUR KINDSELF WILL APPRECIA TE THAT RATE PER TON OF PACKAGED GOODS INVENTORY IS RS.25,062.21 WHEREAS TH E RATE PER TON OF PACKAGED GOODS SOLD IS RS.27098.27 I.E RATE PER TON N OF SOLD QUANTITY IS MUCH HIGHER THAN VALUATION OF FINISHED GOODS. THE S AID FACT HOLD GOOD FOR OTHER CLASSES OF GOODS TOO WHICH COMPRISES OF P RODUCTS OF DIFFERENT GRADES MANUFACTURED BY THE COMPANY. HOWEVER, THE AO DURING THE ASSESSMENT PROCEEDINGS F URTHER OBSERVED CERTAIN OTHER FACTS AS DETAILED UNDER:- A) THE ASSESSEE FAILED TO PRODUCE THE STOCK REGISTE R AND PRODUCTION REGISTER IN SUPPORT OF PROVISION OF SALE OF BULK AN D PACKAGE EXPLOSIVE; B) IN THE AUDITED ACCOUNTS, THERE IS NO BIFURCATION OF COMMERCIAL BLASTING EXPLOSIVE INTO BULK AND PACKAGE EXPLOSIVE; C) NO EXPLANATION WAS OFFERED BY ASSESSEE IN SUPPOR T OF OTHER EXPLOSIVE AS DISCUSSED ABOVE DURING ASSESSMENT PROC EEDINGS; IN VIEW OF ABOVE, AO DISREGARDED THE CONTENTION OF ASSESSEE AND WORKED OUT UNDER-VALUATION OF SALE FOR 110,54,18,881/- AS DETAILED UNDER:- QUANTITY SOLD X DIFFERENCE IN SALE PRICE TOTAL UND ER-VALUATION OF SALE PRICE BULK/COMMERCIAL EXPLOSIVES 114509.63 MT RS.7051/MT RS, 807407401 DETONATING 9.57 NN RS,991255/MM RS 9486315 ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 5 FUSES DETONATORS 37.80 MN RS.7402461/MN RS. 279813025 PRIMEX/PETN 158.44 MT RS.54987/MT RS. 8712140 TOTAL RS.1105418881 THE ABOVE DIFFERENCE FOR 110,54,18,881/- WAS TREATED BY AO AS UNDER REPORTING OF SALES WHICH WAS ADDED TO THE TOTAL INC OME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE BOOKS OF ACCOUNT WERE DULY AUDITED BY THE AUDITORS WHICH WERE ALSO FURNISHED T O THE AO DURING ASSESSMENT PROCEEDINGS. BUT NO INFIRMITY WAS POINTE D OUT BY AO DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO SUBMITTED THAT THE CLOSING STOCK HAS BEEN SHOWN UNDER THE BROAD CATEGORIES, IN FACT, THIS BROAD CATEGORY OF CLOSING STOCK INVOLVES VARIOUS PRODUCTS WHICH RUN O VER 2000 IN NUMBERS WHICH ARE OF DIFFERENT MAKE, DIFFERENT SIZE, DIFFERENT CO ST AND DIFFERENT PRICE / UNIT. DURING THE ASSESSMENT PROCEEDINGS THE AO DID NOT AS K FOR THE DETAILS OF OTHER PRODUCTS. AS SUCH, ASSESSEE FILED THE NECESSARY DET AILS OF COMMERCIAL/ BLASTING EXPLOSIVE IN RESPONSE TO THE ORDER SHEET E NTRY DATED 27.12.2011 VIDE LETTER DATED 29.12.2011 DURING THE ASSESSMENT PROCE EDINGS. AO DID NOT ASK FOR THE DETAILS OF OTHER PRODUCTS AND ACCORDINGLY T HE ORDER WAS PASSED BY ASSESSING OFFICER DATED 30.12.2011. THUS, ORDER HAS BEEN PASSED BY AO WITHOUT GIVING SUFFICIENT OPPORTUNITY TO ASSESSEE. THE AO DURING HIS ASSESSMENT PROCEEDINGS NEVER ASKED FOR THE STOCK RE GISTER AND PRODUCTION REGISTER. THEREFORE THERE IS NO QUESTION OF NON-SUB MISSION OF DETAILS OF COMMERCIAL/ BLASTING EXPLOSIVE. WHATEVER DETAILS TH E AO DEMANDED WAS DULY FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE AO WITHOUT FINDING OUT ANY DEFECT IN THE SUBMISSION OF ASSESSEE HAS HELD THAT ASSESSEE HAS UNDER- REPORTED ITS SALE. AO GROSSLY ERRED IN COMPARING TH E SALE-PRICE WITH THE STOCK PRICE OF THE ASSESSEE. AS SUCH, THERE IS NO BASIS O F MAKING THE COMPARISON BETWEEN TWO AS BOTH TRAVEL ON DIFFERENT LINE OF ACC OUNTING. THE DIFFERENCE AS OBSERVED BY THE AO IN THE PRICE OF VALUATION OF STO CK VIS--VIS SALE-PRICE IS ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 6 MAINLY DUE TO THE PRODUCT MIX. THE ASSESSEE IS DEAL ING IN THE INVENTORIES OF MORE THAN 2000 OF DIFFERENT PRODUCTS MIX, THEREFORE , IT WAS NOT POSSIBLE TO PROVIDE ALL THE DETAILS IN THE AUDITED FINANCIAL ST ATEMENT. THE STOCK HAS BEEN SHOWN AFTER INCLUDING THE EXCISE DUTY WHEREAS SALE-PRICE WAS SHOWN NET OF EXCISE DUTY. THEREFORE, THERE CANN OT BE ANY COMPARISON BETWEEN THE VALUE OF CLOSING STOCK VIS--VIS THE SA LE RICE. THE CLOSING STOCK ARE ALWAYS VALUED EITHER AT COST PRICE OR MARKET PR ICE WHICH IS LOWER WHEREAS SALE-PRICE ARE RECORDED AS PER RATE AT WHICH THE GO ODS WERE SOLD TO THE OUTSIDE PARTIES. THEREFORE, THE BASIS ADOPTED BY TH E AO FOR THE COMPARISON CANNOT BE USED AGAINST ASSESSEE. HAD THERE BEEN ANY SUPPRESSION OF SALES THEN THE AO SHOULD HAVE REJECTED THE BOOKS OF ACCOU NT MAINTAINED BY THE ASSESSEE. BUT THE AO FAILED TO DO SO. ALL THE PRODUCTS MANUFACTURED BY THE ASSESSEE ARE S UBJECTED TO EXCISE DUTY AND NO INFIRMITY IN THE STOCK OF WHATSOEVER HAS BEE N REPORTED / NOTICED BY THE EXCISE DEPARTMENT. ALL THE SALES, PURCHASES, STOCK AND PRODUCTION WERE DULY ACCEPTED BY THE EXCISE DEPARTMENT WITHOUT FINDING O UT ANY INFIRMITY. THE AUDITED FINANCIAL STATEMENT WERE DULY SUBMITTED BEF ORE REGISTRAR OF COMPANIES, SALES TAX AUTHORITIES, EXCISE AUTHORITIES, BANK FIN ANCIAL INSTITUTION AND NO DEFECT OF WHATSOEVER WAS REPORTED BY THE SAID CONCE RNED AUTHORITIES. THE SALES DECLARED BY ASSESSEE HAVE NOT BEEN DISPUTED U NDER SALES TAX ACT / CENTRAL EXCISE ACT. THE SALES WERE MADE MAINLY TO T HE INSTITUTIONAL HOUSES, PUBLIC SECTOR UNDERTAKINGS BY INVITING TENDER. THER EFORE THERE WAS NO SCOPE OF MANIPULATING THE SALE PRICE OF THE PRODUCTS AS OBSE RVED BY THE AO THAT ALL GOODS HAVE BEEN SOLD BY ASSESSEE AT A PRICE HIGHER THAN THE PRICE OF STOCK. ALL THE SALES ARE SUPPORTED ON THE BASIS OF DOCUMEN TARY EVIDENCES. ACCORDINGLY, ASSESSEE HAS EARNED NET PROFIT BEFORE TAX FOR 29.24 CRORES AGAINST THE TOTAL SALE OF 310.09 CRORES. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE AND THE REMAND REPORT OF AO DELETED THE ADDITION MADE BY AO BY OBS ERVING AS UNDER:- 5.1.10 DECISION: ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 7 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE FINDINGS OF THE ASSESSING OFFICER, HIS REMAND REPORTS END THE ARGUMENTS ADVAN CED ON BEHALF OF THE APPELLANT. THE CASE OF THE ASSESSING OFFICER IS THA T DURING THE ACCOUNTING YEAR RELEVANT TO THIS ASSESSMENT YEAR, 78,856 MT OF BULK EXPLOSIVES WAS SOLD @ RS.17,155/- PER, MT. AND PACKAGED EXPLOSIVES OF 35, 653.63 MT @ RS. 27,098/~PER M.T., BUT THE APPELLANT COULD NOT PRODU CE THE STOCK REGISTER AND PRODUCTION REGISTER IN SUPPORT OF PRODUCTION AND SA LE OF BULK AND PACKAGED EXPLOSIVES; SINCE NO SUCH BIFURCATION OF COMMERCIAL /BLASTING EXPLOSIVES HAS BEEN DISCLOSED IN THE AUDITED ACCOUNTS, THE APPELLA NT'S SUBMISSION OF PRODUCTION AND SALE OF TWO DIFFERENT TYPES OF EXPLO SIVE WAS NOT ACCEPTABLE AS AN EXPLANATION FOR THE LOW RATE OF SALE PRICE AS DI SCUSSED BY HIM IN THE ASSESSMENT ORDER; AND THAT NO EXPLANATION WAS FURNI SHED IN SUPPORT OF THE DIFFERENCES NOTICED IN RESPECT OF THE OTHER EXPLOSI VES AS WELL. IT WAS IN THIS BECK-GROUND. THE EXPLANATION OFFERED BY THE APPELLA NT COMPANY WAS NOT ACCEPTED AND THE DIFFERENCES NOTICED IN RESPECT OF THE SALE PRICE AND VALUE OF INVENTORIES OF DIFFERENT TYPES OF EXPLOSIVES WAS WO RKED OUT AND ADDED AS SUPPRESSED SALES TO THE EXTENT OF RS. 110,54,18,881 /-. 5.1.11 IN HIS REMAND REPORT, THE ASSESSING OFFICER HAS OBSERVED THAT ON PERUSAL OF THE DETAILS /DOCUMENTS, IT WAS NOTED THA T THE APPELLANT COMPANY HAD SUBMITTED SAMPLE DAILY BALANCE OF STOCK STATEME NT BUT FAILED TO FURNISH ITEM WISE STOCK REGISTER FOR VARIOUS PRODUCTS. HOWE VER, ON EXAMINATION OF THE SAID STOCK STATEMENT IT WAS FOUND THAT NO DAILY BAL ANCE OF THE STOCK POSITION HAS BEEN DRAWN. ACCORDINGLY, IT COULD NOT BE ASCERT AINED THE POSITION OF BALANCE STOCK ON A PARTICULAR DAY. ACCORDING TO THE ASSESSING OFFICER, SINCE THE QUANTITATIVE ANALYSIS OF VARIOUS KINDS OF DAY T O DAY STOCKS ARE NOT FURNISHED BY THE APPELLANT, THE GENUINENESS OF THE OPENING STOCK AND CLOSING STOCK ITEM-WISE AND QUANTITY-WISE COULD NOT BE SUBS TANTIATED. THE REASON FOR THE ADDITION ON ACCOUNT OF SUPPRESSION OF SALE HAS BEEN CLEARLY STATED IN THE ASSESSMENT ORDER AND THAT AT THIS OCCASION ALSO, TH E APPELLANT COULD NOT SUBSTANTIATE THE CLAIM WITH SUPPORTING DOCUMENTS TH AT SALE WAS NOT SUPPRESSED. 5.1.12 WHEREAS, THE CASE OF THE APPELLANT IS THAT T HE DIFFERENCE IN SALE PRICE AND STOCK PRICE IS PRIMARILY ON ACCOUNT OF DIFFEREN CE IN PRODUCT MIX WHICH FORMS PART OF SALES AND THOSE WHICH FORMED PART OF OPENING/CLOSING STOCK; AND THAT THE TOTAL SALES UNDER THE CLASS- COMMERCIAL/BL ASTING EXPLOSIVES MAINLY CONSTITUTED SALE OF BULK EXPLOSIVES HAVING LOWER SA LE PRICE, WHILE THE OPENING/CLOSING STOCK PRIMARILY CONSTITUTED OF PACK AGED EXPLOSIVES WITH A HIGHER PER UNIT PRICE GIVEN THE NATURE OF PRODUCT W HICH IS WHY THE PER UNIT PRICE OF INVENTORIES THAT ARE DISCLOSED UNDER THE H EAD THE 'COMMERCIAL / BLASTING EXPLOSIVES' WHICH MAINLY COMPRISED OF PACK AGED EXPLOSIVES APPEARED TO BE HIGHER THAN THE AVERAGE SALE PRICE P ER UNIT OF TOTAL SALE - COMMERCIAL/BLASTING EXPLOSIVES WHICH ON ACCOUNT OF INCLUSION OF BULK EXPLOSIVES IN MAJORITY (HAVING LOWER SALE PRICE) AP PEARED TO BE LOWER. THIS EXPLANATION, ACCORDING TO THE APPELLANT, ALSO HELD GOOD FOR OTHER CLASS OF GOODS AS WELL. 5.1.13 NOW, COMING TO THE FINDING OF THE ASSESSING OFFICER THAT THE APPELLANT HAS NOT MAINTAINED/PRODUCED DAY-TO-DAY QUANTITATIVE RECORDS OF OPENING AND ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 8 CLOSING STOCK, AND THEREFORE, THE ITEM-WISE AND QUA NTITY-WISE OPENING AND CLOSING STOCK COULD NOT BE SUBSTANTIATED, WHICH JUS TIFIED THE ADDITION ON ACCOUNT OF SUPPRESSED SALES, I AM AFRAID OF SUCH IN HERENT DEFECTS EXISTED IN THE ACCOUNTS AND, SUCH DEFECTS WARRANTED REJECTION OF BOOKS OF ACCOUNT UNDER SEC.145(3) OF THE ACT THEN, IN SUCH A SITUATION, TH E CASE WOULD HAVE CALLED FOR ESTIMATE OF SALES AND APPLICATION, OF GROSS PROFIT RATE KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES, POST HISTORY AND BUSINESS RESULT S IN OTHER COMPARABLE CASES FOR THE RELEVANT ASSESSMENT YEAR. INSTEAD OF RESORTING TO SUCH AN EXERCISE ARE WITHOUT RECORDING CLEAR FINDING THAT P ROVISO TO SEC. 145 OF THE ACT WAS APPLICABLE IN THIS CASE BECAUSE OF THE INHERENT DEFECTS, THE ASSESSING OFFICER EMBARKED UPON EN EXPEDITION OF ESTIMATING THE VALUE OF SOLES-ON THE BASIS OF THE AVERAGE RATE OF CLOSING STOCK INVENTOR Y AND WORKING OUT THE EXCESS DIFFERENCE WHICH HE TREATED AS SUPPRESSED SA LES, THAT TOO WITHOUT VERIFYING THE EXPLANATION OFFERED BY THE APPELLANT. THE FOLLOWING LEGAL PROPOSITION WILL THROW LIGHT ON THE PRINCIPLE OF VA LUATION OF DOSING STOCK, REJECTION OF BOOKS OF ACCOUNT AND ESTIMATE OF-PROFI TS:. (I) THE ASSESSING OFFICER MUST REFER TO THE INHERE NT DETECT IN THE SYSTEM AND RECORD A CLEAR FINDING THAT THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS SUCH THAT CORRECT PROFI TS CANNOT PRODUCED FROM THE 'BOOKS OF ACCOUNT MAINTAINED BY THE ASSESS EE. IT IS NOT OPEN TO THE ASSESSING OFFICER TO INTERVENE AND SUBSTITUT E A DIFFERENT SYSTEM WHICH COMMENTS TO THE ASSESSING OFFICER FROM THE O NE WHICH IS FOLLOWED BY THE ASSESSEE, ON THE GROUND THAT THE SY STEM WHICH CORN MENDS TO THE ASSESSING OFFICER IS BETTER CIT MRG DARSI CHIT FUNDS(P) LTD. [1985) 155 ITR 442 (AP). (II) IT IS TRUE THAT ACCOUNTING METHOD FOLLOWED BY AN ASSESSEE CONTINUOUSLY FOR A GIVEN PERIOD OF TIME NEEDS TO BE PRESUMED TO BE CORRECT TILL ASSESSING OFFICER COMES TO CONCLUSION FOR REASONS TO BE GIVEN THAT- SAID SYSTEM DOES NOT REFLECT TRUE AND C ORRECT PROFITS-(CIT V. WOODWARD GOVERNOR INDIA (P.) LTD. [2009]179 TAXMAN 326/312 ITR 254(SC.) (III)ADDITIONS TO THE PROFIT OF THE ASSESSEE MADE S OLELY ON THE GROUND THAT IT WAS LOW WITHOUT GIVING A SPECIFIC FINDING T HAT THE ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT AND COMPLETE, OR THAT THE INCOME COULD NOT BE PROPERLY DETERMINED AND DEDUCED FROM THE ACCOUNT ING METHOD EMPLOYED BY THE ASSESSEE, IS NOT JUSTIFIED. THE MER E FACT THAT THERE WAS A LESS RATE OF GROSS PROFIT DECLARED BY AN ASSE SSEE AS COMPARED TO THE PREVIOUS YEAR WOULD NOT BY ITSELF BE SUFFICIENT TO JUSTIFY THE ADDITION ALUMINIUM INDUSTRIES (P.) LTD. V. CIT [1995] 80 T AXMAN 184 (GAUHATI). (IV)THE PROPER PRACTICE IS TO VALUE THE CLOSING STO CK AT COST. THAT WILL ELIMINATE ENTRIES RELATING TO THE SAME STOCK FROM B OTH SIDES OF THE ACCOUNT. TO THIS RULE, CUSTOM RECOGNIZES ONLY ONE E XCEPTIONS AND THAT IS TO VALUE THE STOCK AT MARKET VALUE IF THAT IS LO WER. BUT ON NO PRINCIPLE CAN ONE JUSTIFY THE VALUATION OF THE CLOSING STOCK AT A MARKET VALUE HIGHER THAN COST AS THAT WILL RESULT IN THE TAXATIO N OF NOTIONAL PROFITS ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 9 WHICH THE ASSESSEE HAS NOT REALIZED.- ALA. FIRM V. ELL [1991] 189 ITR 285 (SE) AS A NORMAL RULE, THE PROFITS SHOULD BE ASCERTAINED BY VALUING THE STOCK-IN- TRADE AT THE BEGINNING AND AT THE END OF THE ACCOUN TING YEAR - P.M. MOHAMMAD MEERAKHAN V. CIT [1969]73 ITR 735 (SC). IN THE CASE OF A.L.A. FIRM V. CIT [1991] 189 ITR 285(SC); CIT V. BRITISH PAINTS INDIA LTD. [1991] 188 ITR 44 (SC) IT HAS BEEN HELD THAT 'IT IS SETTLED LA W THAT THE TRUE TRADING RESULTS OF A BUSINESS FOR AN ACCOUNTING PERIOD CANNOT BE AS CERTAINED WITHOUT TAKING INTO ACCOUNT THE VALUE OF THE STOCK-IN-TRADE REMAIN ING AT THE END OF THE PERIOD. IT HAS BEEN HELD BY THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. DELTA PLANTATION LTD. [1993] 71 TAXMAN 329 THAT WHEN THE CHANGE IS MADE BY AN ASSESSEE IN THE METHOD OF VALUATION OF STOCK, SO AS TO FOLLOW THE METHOD OF STOCK VALUATION ADOPTED BY THE ENTIRE INDUSTRY, THE REVENUE SHOULD NOT REJECT THE METHOD, MERELY BECAUSE THERE WOULD BE LOSS TO T HE REVENUE IN THE YEAR IN WHICH THE METHOD OF STOCK VALUATION WAS CHANGED. WH EN THE ACCOUNTING METHOD IS CHANGED WITH A BONA FIDE INTENTION, THE C HANGE SHOULD BE ACCEPTED BY THE REVENUE - CIT V. ATUL PRODUCTS LTD.[2002] 12 5 TAXMAN 727 (GUJ.). FURTHER, IN CIT V. NAINITAL BANK LTD. [1965] 55 ITR 707 (SE), IT HAS BEEN HELD THAT UNDER SECTION 28(I), LOSS OF STOCK-IN-TRADE IS AN ADMISSIBLE DEDUCTION IN COMPUTING THE PROFITS. IN CIT VS. MAHAN MARBLES (P) LTD. (2013) 354 ITR 23 8 (RAJ). THE RAJASTHAN HIGH COURT HELD WHERE SALES DECLARED BY THE ASSESS EE WAS ACCEPTED BY SALES TAX AUTHORITIES AND AO HAD FAILED TO BRING ON RECORD ANY COGENT MATERIAL TO SHOW QUANTUM OF SALES OUT OF BOOKS OF ACCOUNTS, THEN ADDITION BASED ON ESTIMATED SALES DECLARED BY THE ASSESSEE WAS NOT JU STIFIED. IN ORDER TO FIND OUT WHAT WAS THE REAL PROFIT EARNE D BY THE ASSESSEE THE AUTHORITIES WAS NOT TO MAKE CRUDE GUESS OR NOT TO P ROCEED ARBITRARILY BUT JUDICIALLY IN THE LIGHT OF RELEVANT MATERIALS. IN A SHOK REFACTORIES (P) LTD. VS. CIT (2005) 279 ITR 457(CAL), IT HAS BEEN HELD THAT 'WITHOUT FORMATION OF OPINION THAT THE ACCOUNTS MAINTAINED BY THE ASSESSE E WERE NOT CORRECT OR COMPLETE OR THAT THE INCOME COULD NOT BE DEDUCED FR OM THE BOOKS OF ACCOUNT, ASSESSEE'S BOOKS OF ACCOUNT COULD NOT BE REJECTED O NLY ON THE GROUND THAT THERE WAS NO STOCK REGISTER OR THAT THE DETAILS OF ITEM-WISE STOCK WERE NOT MAINTAINED.' FROM THE MATERIAL PLACED ON RECORD, EVIDENTLY, THE MANUFACTURING AND TRADING ACCOUNTS ARE SUPPORTED WITH QUANTITATIVE DETAILS. T HERE HAS NOT BEEN ANY DEVIATION OF THE METHOD OF ACCOUNTING REGULARLY EMP LOYED BY THE APPELLANT COMPANY. THE EXPLANATION OFFERED BY THE APPELLANT F OR VARIATION BETWEEN THE AVERAGE COST OF INVENTORIES AND SOLE VALUE, IN MY V IEW, IS CONVINCING. ON THE OTHER HAND, THE ASSESSING OFFICER HAS NOT BROUGHT A NY MATERIAL ON RECORD TO HOLD THAT THERE COULD HAVE BEEN ANY SALE STOCK OUTS IDE THE BOOKS OF ACCOUNT, PARTICULARLY WHEN MOST OF THE SALES ARE MADE TO GOV ERNMENT AGENCIES AND PUBLIC SECTOR UNDERTAKINGS ON THE BASIS OF AGREEMEN TS AND INTENTS. IT IS NOT A CASE WHERE THE BOOK RESULTS HAVE BEEN REJECTED, NOR THE PURCHASES, NOR THE SALES DOUBTED. IT IS WELL-SETTLED THAT IF AT ALL TH ERE WERE SALES OUTSIDE BOOKS OF ACCOUNT OR UNRECORDED SALES, ONLY THE MARGIN OF PRO FIT COULD HAVE BEEN ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 10 ASSESSED. IT IS NOT THE CASE OF THE ASSESSING OFFIC ER THAT THE APPELLANT EMPLOYED DIFFERENT STANDARDS IN RAW MATERIAL PURCHA SED AND GOODS PRODUCED FROM THEM AND THEREFORE PROFIT COULD NOT PROPERLY B E DEDUCED FROM METHOD OF ACCOUNTING. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED I N ESTIMATING THE SALES ON THE BASIS OF THE VALUE OF CLOSING STOCK. CONSEQUENTLY, THE ADDITION OF RS.110,54,18,881 MADE ON ACCOUNT OF SUPPRESSED SALE S IS HEREBY DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. THE REVENUE, BEING AGGRIEVED IS IN APPEAL BEFORE US . 7. LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO WHER EAS LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH IS RUNNING PAGES FR OM 1 TO 227 AS WELL AS REVISED PAPER BOOK COMPRISING PAGES 1 TO 70 AND SUB MITTED THAT THE AO FAILED TO APPRECIATE THAT THE VARIOUS CLASS OF GOODS IN RE SPECT OF WHICH THE AVERAGE STOCK PRICE AND SALE PRICE WAS ARRIVED AND ARBITRAR ILY COMPARED DID NOT REPRESENT ONE FINISHED GOOD ITEM IN RESPECT OF WHIC H SUCH ONE TO ONE COMPARISON COULD BE MADE. THE DIFFERENT CLASS OF GO ODS (LIKE COMMERCIAL EXPLOSIVES AND DETONATORS) REPRESENTED BROAD CATEGO RIES. EACH OF THESE CATEGORIES INCLUDED VARIOUS SUB-CLASSES WITH NUMBER OF PRODUCTS UNDER IT, EACH HAVING DIFFERENT COST AND SALE PRICE. HENCE, T HE AVERAGE STOCK PRICE OF A CLASS OF GOODS AND THE AVERAGE SALE PRICE OF SUCH C LASS WAS NOT CAPABLE OF BEING COMPARED ON SUCH THUMB RULE BASIS. THE SAID CLASSES OF GOODS AS SHOWN IN PRODUCT CATAL OGUE ARE AGAIN SUB- DIVIDED IN TO VARIOUS SUB-CLASSES, SIZE WITH DIFFER ENT COST/UNIT WHICH WIDELY FLUCTUATES. THE ABOVE IS FURTHER EXPLAINED BY TAKIN G EXAMPLE OF BULK/PACKAGED EXPLOSIVE CATEGORY WHICH CONSTITUTES MAJORITY OF TH E TOTAL SALES OF THE COMPANY. THE ADDITION HAS BEEN MADE ON PURE SURMISE, ASSUMPT ION AND CONJECTURE WITHOUT BRINGING ANY EVIDENCE ON RECORD ESTABLISHIN G ANY ACT OF ALLEGED SUPPRESSION OF SALES ON THE PART OF THE RESPONDENT AND LIABLE TO BE STUCK DOWN. THE AO WITHOUT CALLING FOR ANY RECORDS FROM THE RES PONDENT MERELY PROCEEDED ON HIS OWN NOTION IN ARRIVING AT THE AVERAGE PER UN IT PRICE OF VARIOUS CLASS OF INVENTORY AS DISCLOSED IN THE NOTES TO ACCOUNTS, AR BITRARILY COMPARING THE SAME ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 11 WITH THE AVERAGE SALE PRICE PER UNIT OF SUCH CLASS OF GOODS AND COMING TO THE CONCLUSION THAT THERE BEING APPARENT DIFFERENCE IN STOCK PRICE AND SALE PRICE, THERE WAS SUPPRESSION OF SALES. IT IS A SETTLED PRI NCIPLE OF LAW THAT SUCH DISALLOWANCE CANNOT BE SUSTAINED AND NEEDS TO BE SU MMARILY DELETED. RELIANCE WAS PLACED ON THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF LALCHAND BHAGAT AMBICA RAM V. CIT (1959) 37 ITR 288 (SC). THE SALES ARE LARGELY MADE BY THE RESPONDENT TO BIG INSTITUTIONAL HOUSES, PUBLIC SECTOR COMPANIES MAJOR PORTION OF WHICH IS O N TENDER SYSTEM WHICH LEAVES NO SCOPE OF MANIPULATION OF SALE. OVER 50% O F THE SALES HAVE BEEN MADE TO PUBLIC SECTOR UNDERTAKINGS LIKE COAL INDIA LIMITED, BASED ON TENDER SYSTEMS. ALL THE SALES HAVE BEEN MADE AS PER CONTRA CT PRICE APPROVED UNDER THE TENDER SYSTEM. HENCE, QUESTION OF SUPPRESSION D OES NOT ARISE. COPY OF SAMPLE CONTRACTS WERE ATTACHED FOR EVIDENCE. RELIAN CE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HON'BLE INCOME TAX AP PELLATE, BANGALORE IN THE CASE OF TELLABS INDIA (P.) LTD V. ACIT (2014) 150 I TD 97 (BANG) AND HON'BLE INCOME TAX APPELLATE TRIBUNAL, DELHI IN THE CASE OF DCIT V. ALCATEL (1993) 47 ITD 275 (DEL) WHEREIN IT WAS OBSERVED THAT WHEN A P ARTY ENTERS INTO AN AGREEMENT WITH THE GOVERNMENT OF INDIA, IT CANNOT B E ALLEGED THAT THE AGREEMENT WAS FOR AVOIDANCE OF TAX. THE BOOKS OF ACCOUNT MAINTAINED HAVE BEEN DULY AUDI TED AND COPIES OF AUDITED ACCOUNTS WERE PLACED ON RECORD BEFORE THE A SSESSING OFFICER. THE AO DID NOT BRING ANY MATERIAL OR EVIDENCE ON RECORD, T O ESTABLISH THAT THE ASSESSEE SUPPRESSED SALES. THE AO DID NOT RECORD AN Y FINDING IN THE ASSESSMENT ORDER FOR REJECTION OF THE BOOK RESULTS WITHIN THE MEANING OF SECTION 145. HENCE, WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE WHICH WAS DULY AUDITED BY THE INDEPENDENT AUDITORS AND WITHOUT BRINGING ANY EVIDENCE ON RECORD, THE ACTION OF THE ASSESSING OFF ICER IN ALLEGING SUPPRESSION OF SALES IS ILLEGAL AND BASELESS. RELIANCE WAS PLACED ON DECISION OF JURISDICTIONAL T RIBUNAL IN THE CASE OF ITO V. SMT. PREMLATA GUPTA [ ITA NO.1662/KOL/2011 ] DATED 21-06-2013 WHEREIN THE AO HAD MADE CERTAIN ADDITIONS TO SALES SINCE TH E CLOSING STOCK WAS VALUED ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 12 HIGHER THAN SALES PRICE. ON APPEAL, BEFORE LD. CIT( A) HELD THAT THE ASSESSEE IS FOLLOWING THE VALUATION POLICY CONSISTENTLY AND THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE AO, ADDITION CANNOT BE MAD E TO SALES. THE ORDER OF THE LD. CIT(A) WAS UPHELD BY THE JURISDICTIONAL ITA T. THE AO FAILED TO APPRECIATE THAT THE VALUE OF INVEN TORY BASED ON WHICH THE AVERAGE STOCK PRICE WAS ARRIVED INCLUDED ELEMENT OF EXCISE DUTY AS PER MANDATORY ACCOUNTING STANDARD - 2 (VALUATION OF INV ENTORY), WHEREAS THE TURNOVER WHICH WAS CONSIDERED TO ARRIVE AT THE AVER AGE SALE PRICE WAS- NET OF EXCISE DUTY. FURTHER, AS PER THE VALUATION RULES, I NVENTORY IS REQUIRED TO BE VALUED AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER, HOWEVER, THE EXCISE DUTY REQUIRED TO BE ADDED TO SUCH VALUE NEED S TO BE BASED ON EXPECTED EX-FACTORY SALE PRICE. THE AO FURTHER FAILED TO APPRECIATE THAT THE MAJOR RAW MATERIALS WHICH GO IN MANUFACTURING OF EXPLOSIVES IS AMMONIUM NITRATE (AN ), THE PRICE OF WHICH IS SUBJECTED TO HUGE FLUCTUATION IN ADDITION TO OTHER RAW MATERIALS WHOSE PRICE ALSO FLUCTUATES. THUS, THE SALE OF GOODS MADE AT A PARTICULAR PRICE MAY NOT BE COMPARABLE TO AVERAGE VALUE OF CLOSING STOCK/OPENIN G STOCK WHOSE VALUATION MAY GET DISPROPORTIONALLY DISTORTED/ CHANGED BECAUS E OF FLUCTUATIONS IN COST OF RAW- MATERIALS AT ANY TIME DURING THE PREVIOUS YEAR . THE AO ERRED IN NOT APPRECIATING THAT VALUATION OF INVENTORY WHICH IS DONE AT THE BEGINNING OF THE YEAR (OPENING STOCK) OR AT THE END OF YEAR (CLOSING STOCK) IS GUIDED BY MANDATORY ACCOUNTING STANDARD-2 AND IS VALUED AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER. WHEREAS TH E SALE PRICE IS FUNCTION OF PLETHORA OF FACTORS SUCH AS MARKET FORCES, NEGOTIAT ED RATE FIXED AS PER SALE AGREEMENT, RELEVANT PRICE FALL CLAUSE IN THE AGREEM ENT, COMPETITION, CONSIDERATION OF VARIOUS RISK INHERENT IN BUSINESS AND OTHER FACTORS. THE EXPLOSIVES BEING A RESTRICTED AND HIGHLY REGULA TED PRODUCT WITH LIMITED MARKET PLAYERS, WITH PRICE BEING FIXED BASED ON TEN DERING SYSTEM, THUS THE QUESTION OF SUPPRESSION OF SALES DOES NOT ARISE. 7.2 IT IS FURTHER SUBMITTED THAT EXPLOSIVES BEING A N EXTREMELY RESTRICTED ITEM, THE PURCHASE AND SALE MADE TO VENDORS ARE HUGELY RE GULATED AND ARE UNDER A ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 13 VALID LICENSE ISSUED BY THE CHIEF COMMISSIONER OF E XPLOSIVES. THE VENDORS ARE GENERALLY BIG INSTITUTIONAL HOUSES WITH WHOM PR ICES ARE FIXED BASED ON TENDER SYSTEM/ RFP ISSUED BY PUBLIC/PRIVATE SECTOR COMPANIES. HENCE, THE QUESTION OF ANY SUPPRESSION OF SALES DOES NOT ARISE . NO DISALLOWANCE OF ANY ALLEGED SUPPRESSION OF SALES HAS BEEN INFLICTED IN THE CASE OF COMPANY IN ANY PAST OR IN FUTURE ASSESSMENTS, EVEN THOUGH THE FACT S AND CIRCUMSTANCES REMAINED THE SAME. THOUGH PRINCIPLE OF RES-JUDICATA DOES NOT APPLY IN INCOME TAX PROCEEDINGS, THE PRINCIPLE OF CONSISTENCY CANNO T BE IGNORED PARTICULARLY IN AN ADJUSTMENT LIKE THE ONE MADE BY THE TAX OFFICER. LD. AR FURTHER STATED THAT THE LD.CIT(A) AFTER DULY CONSIDERING THE ALLEGATION S OF THE AO IN THE ASSESSMENT ORDER, OBSERVATIONS MADE BY THE AO IN TH E REMAND REPORT THE ARGUMENTS ADVANCED BY THE ASSESSEE-COMPANY AND THE EVIDENCE AVAILABLE ON RECORD HELD THAT IT WAS CLEAR FROM THE MATERIAL PLACED ON RECORD, THAT THE MANUFACTURING AND TRADING ACCOUNTS ARE SUPPORTED WI TH QUANTITATIVE DETAILS. THERE HAS NOT BEEN ANY DEVIATION OF THE METHOD OF A CCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE COMPANY. THE EXPLANATION O FFERED BY THE ASSESSEE COMPANY FOR VARIATION BETWEEN THE AVERAGE COST OF INVENTORIES AND SALE VALUE IS CONVINCING. IT WAS ALSO HELD THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO HOLD THAT THERE C OULD HAVE BEEN ANY SALE STOCK OUTSIDE THE BOOKS OF ACCOUNT, PARTICULARLY WH EN MOST OF THE SALES ARE MADE TO GOVERNMENT AGENCIES AND PUBLIC SECTOR UNDER TAKINGS ON THE BASIS OF AGREEMENTS AND INTENTS. IT IS NOT A CASE WHERE THE BOOK RESULTS HAVE BEEN R EJECTED, NOR THE PURCHASES, NOR THE SALES DOUBTED. IT IS WELL-SETTLED THAT IF A T ALL THERE WERE SALES OUTSIDE BOOKS OF ACCOUNT OR UNRECORDED SALES, ONLY THE MARG IN OF PROFIT COULD HAVE BEEN ASSESSED. CONSEQUENTLY, THE ADDITION OF INR 11 0,54,18,881/- MADE ON ACCOUNT OF SUPPRESSED SALES WAS DELETED. IN LIGHT O F THE FACTS STATED, AUTHORITIES CITED AND ARGUMENTS SUBMITTED, THE RESP ONDENT MOST HUMBLY PRAYS THAT THE APPEAL FILED BY THE REVENUE DEPARTMENT MAY KINDLY BE ORDERED TO BE DISMISSED AS THE ORDER OF THE LD. CIT(A) IS BASED O N PROPER APPRECIATION OF ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 14 FACTS AND LAW AND THE ORDER OF THE COMMISSIONER ORD ER. THE LD. AR VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE T HE AO OBSERVED THAT THE VALUE OF THE OPENING STOCK AND CLOSING STOCK FOR TH E YEAR UNDER CONSIDERATION WAS HIGHER THAN THE SALE PRICE DECLARED BY THE ASSE SSEE. ACCORDINGLY THE AO WAS OF THE VIEW THAT NO PRUDENT BUSINESS MAN WILL S ELL THE GOODS AT A PRICE LESS THAN THE COST. ACCORDINGLY THE AO OPINED THAT THE ASSESSEE HAS SUPPRESSED THE SALE TO THE TUNE OF RS.110 CRORES AN D ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 8.1 FROM THE FOREGOING DISCUSSION WE OBSERVE THAT T HE ALLEGATION OF THE AO IS THAT THE ASSESSEE HAS SUPPRESSED THE SALES. THE OBSERVATION OF THE AO WAS BASED ON THE BASIS OF THE DIFFERENCE IN THE VAL UATION OF OPENING & CLOSING STOCK DECLARED BY THE ASSESSEE VIZ-A-VIZ SALE PRICE OF THE PRODUCTS AS OBSERVED FROM THE AUDITED FINANCIAL STATEMENTS. BUT THE AO HAS NOT BROUGHT ANY IOTA OF EVIDENCE SUGGESTING THAT THE ASSESSEE H AS MADE SALE TO ANY PARTY OUTSIDE THE BOOKS OF ACCOUNTS. IN OUR CONSIDERED VI EW THE AO SHOULD HAVE BROUGHT SOME MATERIAL IN SUPPORT OF HIS ALLEGATION OF SUPPRESSED SALE. INDEED THE PRODUCTION OF THE ASSESSEE WAS SUBJECT TO THE E XCISE DUTY AND ACCORDINGLY ALL THE NECESSARY RECORDS WERE DULY MAINTAINED AND NO DEFECT OF WHATSOEVER WAS POINTED OUT IN THE EXCISE RECORDS. EVEN FOR THE SAKE OF ARGUMENT IF IT IS ASSUMED THAT THE ASSESSEE HAS SUPPRESSED SALE IN ITS BOOKS OF ACCOUNTS MEANING HE REBY IT HAS SOLD ITS GOODS AT A PRICE LESS THAN THE COST PRICE THEN THERE SHOU LD HAVE BEEN LOSS IN THE RETURN OF INCOME, BUT ON PERUSAL OF THE ASSESSMENT ORDER WE FIND THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING T OTAL INCOME OF RS. 27.47 CRORES. THUS IN OUR CONSIDERED VIEW THE OBSERVATION OF THE AO IS BASED ON WRONG ASSUMPTIONS OF FACTS. ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 15 WE ALSO NOTE THAT THE ASSESSEE DURING THE APPELLATE PROCEEDINGS HAS DEMONSTRATED ON SAMPLE BASIS THAT IT HAS SOLD ITS P RODUCTS NAMELY BULK & PACKAGE EXPLOSIVE AT A PRICE HIGHER THAN THE COST. THE NECESSARY DETAILS OF BULK & PACKAGE EXPLOSIVE REFLECTING THE COST OF STO CK AND SALE PRICE AS SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) STA NDS AS UNDER:- FOR COMMERCIAL/BLASTING EXPLOSIVES- (I) DIFFERENCE IN PRODUCT MIX. THE TOTAL SALES UNDER THE CLASS-C OMMERCIAL/BLASTING EXPLOSIVES MAJORLY CONSTITUTED SALE OF BULK EXPLOSIVES HAVING LOWER SA LE PRICE, WHILE THE OPENING/CLOSING STOCK PRIMARILY CONSTITUTED OF PACK AGED EXPLOSIVES WITH A HIGHER PER UNIT PRICE. THE CATEGORY-WISE BREAKUP OF SALES AND STOCK POSITION IS EXPLAINED AS UNDER:- SALES BREAK UP- NATURE OF EXPLOSIVES QUANTITY SOLD (IN TONES) TOTAL SALES VALUE (IN RS) (WITHOUT EXCISE DUTY) RTE PER TONNE (IN RS)(WITHOUT EXCISE DUTY) BULK 88,502.38 149,06,14,713 16,843 PACKAGED 26,007.25 82,83,58,172 31,851 OPENING STOCK BREAK UP- NATURE OF EXPLOSIVES OPENING QUANTITY AS AT 1 ST APRIL, 07 (IN TONES) VALUE OF GOODS INCLUDING EXCISE DUTY (IN RS) RATE PER TONNE (IN RS)(WITHOUT EXCISE DUTY) RATE PER TONE (IN RS)(WITHOUT EXCISE DUTY) BULK 170 24,24,426 14,212 11,860 PACKAGED 1,236 3,91,11,815 31,644 26,207 TOTAL 1,406 4,15,36,240 29,530 24,467 CLOSING STOCK BREAK UP- NATURE OF EXPLOSIVES CLOSING QUANTITY AS AT 31ST MARCH, 2008 VALUE OF GOODS INCLUDING EXCISE DUTY RATE PER TONNE (IN RS)(WITHOUT EXCISE DUTY) RATE PER TONE (IN RS)(WITHOUT EXCISE DUTY) BULK 511.20 80,07,812 15,663 13,074 PACKAGED 1301.10 3,74,14,628 28,757 23,090 TOTAL 1812.30 4,54,22,440 25,063 20,264 ON PERUSAL OF THE SAME, IT CAN BE OBSERVED THAT APP ARENT DIFFERENCE IN SALE PRICE [RS.20,251/- PER UNIT) AND STOCK PRICE A S CONSIDERED BY THE ASSESSING OFFICER (OPENING STOCK 29,530/- AND CLOSI NG STOCK RS.25,063/-) IN RESPECT OF COMMERCIAL/BLASTING EXPL OSIVES IS ARISING ON ACCOUNT OF DIFFERENCE IN PRODUCT MIX WHICH FORMS P ART OF SALES AND CLOSING STOCK OF APPELLANT. AS CAN BE OBSERVED THE AVERAGE SALE PRICE PER UNIT OF BULK EXPLOSIVES IS HIGHER THAN OPENING AND CLOSING PER UNIT STOCK PRIC E OF BULK EXPLOSIVES AS CAN BE REFLECTED BY THIS TABLE- COMMERCIAL/BLAST COMPARABLE PRICE PER UNIT AT ACTUA L (WITHOUT EXCISE DUTY) ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 16 EXPLOSIVES OPENING STOCK SALES CLOSING STOCK BULK EXPLOSIVES 11,860 16,843 3,074 SIMILARLY, THE AVERAGE SALE PRICE OF PACKAGED EXPLO SIVES IS HIGHER THAN THE OPENING AND CLOSING STOCK PRICE OF PACKAGED EXP LOSIVES ASS CAN BE REFLECTED BY THIS TABLE:- COMMERCIAL/BLAST EXPLOSIVES COMPARABLE PRICE PER UNIT AT ACTUAL (WITHOUT EXCISE DUTY) OPENING STOCK SALES CLOSING STOCK PACKED EXPLOSIVES 26,207 31,851 23,090 AS CAN BE OBSERVED, THE OPENING/CLOSING INVENTORIES THAT ARE DISCLOSED UNDER THE HEAD COMMERCIAL / BLASTING EXPLOSIVES M AJORLY COMPRISED OF PACKAGED EXPLOSIVES HAVING HIGHER PER UNIT PRICE WH EREAS THE SALES DURING THE YEAR MAJORLY CONSTITUTED OF BULK EXPLOSI VES HAVING LOWER PER UNIT PRICE. HENCE, THE AVERAGE PER UNIT PRICE OF IN VENTORY OF THE GROUP COMMERCIAL / BLASTING EXPLOSIVES APPEARS TO BE HI GHER THAN THE AVERAGE SALE PRICE PER UNIT OF TOTAL SALE COMMERC IAL/BLASTING EXPLOSIVES WHICH ON ACCOUNT OF INCLUSION OF BULK E XPLOSIVES IN MAJORITY (HAVING LOWER SALE PRICE) APPEARS TO BE LOWER. THE SAID APPARENT DIFFERENCE BEING ON ACCOUNT OF PR ODUCT MIX AND NOT ON ACCOUNT OF SUPPRESSION OF SALES, NO ADDITION WAS CALLED FOR. SIMILAR FACTS APPLIES FOR OTHER CLASS OF GOODS FOR WHICH WE WILL FILE DETAILS EXPLANATION/EVIDENCES IN THE COURSE OF APPEAL HEARI NG. DIFFERENCE DUE TO EXCISE DULY ELEMENT WHICH IS INCL UDED IN STOCK BUT NOT INCLUDED IN SALES WHILE REPORTING IN SCHEDULE 20 OF NOTES TO ACCOUNT (PINT NO.14 AND 15) IT MAY FURTHER BE NOTED THAT THE APPARENT PRICE DIF FERENCE IS ALSO ON ACCOUNT OF EXCISE DUTY ELEMENT. THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDER HAS COMPARED THE AVERAGE SALES PRI CE PER UNIT OF TURNOVER (WHICH IS NET OFF OF EXCISE DUTY) WITH AVE RAGE STOCK PRICE OF OPENING AND CLOSING INVENTORY (WHICH IS INCLUSIVE O F EXCISE DUTY) AND ON NOTICING AN APPARENT DIFFERENCE IN BOTH THE PRICES (THE SALE PRICE BEING LOWER THAN THE AVERAGE STOCK PRICE) HAS CONCLUDED T HAT THERE WAS A SUPPRESSION OF SALE. FROM THE ABOVE AN INFERENCE CAN BE DRAWN THAT THE A CTUALLY THE LOSS AS OBSERVED BY THE AO WAS ARISING ON ACCOUNT OF PRODUC T MIX IN THE VALUATION OF STOCK. 8.2 WE ALSO NOTE THAT THERE WAS NO DEFECT WHICH WAS OBSERVED BY THE EXCISE DEPARTMENT CHALLENGING THE PRODUCTION AND SA LES SHOWN BY THE ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 17 ASSESSEE. IN CASE THE ASSESSEE HAS SUPPRESSED THE S ALES IN ITS BOOKS OF ACCOUNTS THEN IN OUR CONSIDERED VIEW THE AO SHOULD HAVE REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT B UT THE AO HAS NOT DONE SO. THEREFORE THE ALLEGATION OF THE AO THAT THE ASSESSE E HAS SUPPRESSED SALE IS NOT SUSTAINABLE. WE ALSO NOTE THAT THE VALUATION OF CLOSING STOCK AN D OPENING STOCK CANNOT BE THE BASIS OF MAKING THE ADDITION IN THE HANDS OF TH E ASSESSEE ON ACCOUNT OF SUPPRESSION OF SALES IN VIEW THE FACT THESE ARE TWO DIFFERENT ACCOUNTING PRINCIPLES AND CANNOT BE COMPARED. IN CASE THE ASSE SSEE HAS DECLARED THE CLOSING STOCK AT A PRICE HIGHER THAN THE COST PRICE OR MARKET PRICE THAN THE PROFIT OF THE ASSESSEE WILL RISE IN UPWARD DIRECTIO N. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND NO DEFECT OF WHA TSOEVER WAS REPORTED IN THE AUDIT REPORT. 8.3 IT IS ALSO OBSERVED THAT THE SALES WERE MADE BY THE ASSESSEE MAINLY TO BIG INSTITUTIONAL HOUSES, PUBLIC SECTOR UNDER TAKIN GS THOUGH TENDER SYSTEM THUS IN SUCH A SCENARIO THERE REMAINS NO SCOPE FOR THE M ANIPULATING SALE PRICE. WE ALSO OBSERVE THAT THE ASSESSEE HAS DECLARED THE VAL UE OF OPENING AND CLOSING STOCK OF THE GOODS AFTER INCLUDING THE ELEMENT OF E XCISE DUTY WHEREAS THE SALE PRICE IS NET OF EXCISE DUTY. THEREFORE BOTH STOCK A ND SALE PRICE CANNOT BE COMPARED FOR THE PURPOSE OF DETERMINING THE SUPPRES SED SALE. IN THIS REGARD WE NOTE FROM POINT NUMBER 14 ANNEXED TO THE AUDITED FINANCIAL STATEMENT SPECIFYING THE TURNOVER NET OF EXCISE DUTY WHICH IS PLACED ON PAGE 28 OF THE PAPER BOOK. 8.4 WE ALSO NOTE THAT THE AO ALLEGED THAT THE ASSES SEE FAILED TO PRODUCE THE STOCK REGISTER SHOWING THE DAILY PRODUCTION BUT IN OUR CONSIDERED THAT CANNOT BE THE BASIS HOLDING THAT THE ASSESSEE HAS S UPPRESSED SALES. THE LD. DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDINGS OF LD. CIT(A) AND ARGUMENTS ADVANCED BY THE LD. AR DURING THE COURSE OF HEARING. IN VIEW OF ABOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT-A. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 18 COMING TO ASSESSEES CO NO.22/KOL/2015 . 10. GROUNDS RAISED BY ASSESSEE IN ITS CO IS REPRODU CED BELOW:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE O F RS.27,92,435/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROVIS ION FOR LEAVE ENCASHMENT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(APPEALS) AS WELL AS THE ASSESSING OFFICER ERRED IN NOT APPRECIATING THAT CLAUSE (F) OF SECTION 43B PROVIDING FOR ALLOWA NCE OF LEAVE ENCASHMENT ON PAYMENT BASIS IS ARBITRARY , UNCONSCI ONABLE AND DE HORS THE SUPREME COURT DECISION IN THE CASE OF BHARAT EA RTH MOVERS, AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF EX IDE INDUSTRIES LIMITED (292 ITR 470) 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASES, THE ALLEGED ADDITION BY ASSESSING OFFICER ON ACCOUNT OF SUPPRES SION OF SALES HAVING ACCEPTED THE BOOKS OF ACCOUNT AND WITHOUT BRINING A NY EVIDENCE IN RESPECT OF SUPPRESSION OF SALES IS ILLEGAL AND ARBI TRARY. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRES SION OF SALES SUFFERS FROM INHERENT ACCOUNTING FALLACY AS THE SAL ES PRICE CAN NEVER BE COMPARED WITH STOCK PRICE ON SUCH THUMB-RULE BASIS. 5. THAT THE RESPONDENT CRAVES LEAVE TO ADD TO AND T O ALTER, AMEND, RESCIND OR MODIFY THE GROUNDS RAISED HEREINABOVE BE FORE OR AT THE TIME OF HEARING OF THE APPEAL. 11. THE FIRST INTER-CONNECTED ISSUE RAISED BY ASSES SEE IN GROUND NO.1 AND 2 IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF AO BY SUSTAINING THE DISALLOWANCE OF 27,92,435/- ON ACCOUNT OF PROVISION FOR LEAVE ENCA SHMENT. 12. THE ASSESSEE DURING THE YEAR HAS CREDITED PROVI SION FOR LEAVE ENCASHMENT FOR 40,47,930/- ONLY. THE ASSESSEE BEFORE FILING THE IN COME TAX RETURN HAS PAID A SUM OF 12,55,495/- ON ACCOUNT OF LEAVE ENCASHMENT ONLY. HOWEVER, AO TREATED THE BALANCE AMOUNT OF LEAVE ENC ASHMENT FOR 27,92,435/- AS PROVISION WHICH IS NOT LIABLE FOR DE DUCTION U/S 43B OF THE ACT. ACCORDINGLY, AO DISALLOWED THE SAME AND ADDED TO TH E TOTAL INCOME OF ASSESSEE. 13. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 5.2.3 DECISION: ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 19 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSIONS PUT FORTH ON BEHALF OF THE APPELLANT COMPANY. AS PER PROVISIONS OF SEC. 43B(F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN LIEU OF ANY LEAVE AT THE CREDIT OF THE EMPLOYEE SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SU M WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGU LARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SE CTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON O R BEFORE THE DUE DATE APPLICABLE IN THE CASE FOR FURNISHING THE RETU RN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PR EVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORE SAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN NOW, AS PER THE PROVISIONS OF SECTION 43B(F), THE A PPELLANT COMPANY IS ENTITLED FOR DEDUCTION IN RESPECT OF AN AMOUNT OF R S.12,55,495/- ONLY, WHICH HAS BEEN PAID BEFORE THE DUE DATE APPLICABLE IN THE CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYM ENT IS FURNISHED BY THE ASSESSEE ALONG WITH SUCH RETURN. THE ASSESSING OFFICER HAS, IN HIS REMAND REPORT, SUBMITTED THAT THE CASE OF EXIDE IND USTRIES CITED SUPRA IS SUB JUDICE BEFORE THE SUPREME COURT. THE APPELLANT HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO SUPPORT ITS CASE WITH THE VIEW TAKEN BY THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT., PARTICULARLY WHEN THE PROVISIONS OF SECTION 4 3B(F) HAS BEEN BROUGHT ON STATUTE BY FINANCE ACT, 2001 W.E.F. 1.4. 2002, AFTER THE DECISION OF THE APEX COURT IN THAT CASE. HAVING REG ARD TO THE FACTS, I AM OF THE VIEW THAT THE DEDUCTION FOR PROVISION MADE U NDER THE LEAVE ENCASHMENT SCHEME IS ALLOWABLE FOR AN AMOUNT OF RS. 12,55,495/- ONLY, WHICH HAS BEEN PAID BEFORE THE DUE DATE APPLICABLE IN THE CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 OF THE ACT. THIS MEETS THE ALTERNATIVE SUBMISSIONS AS MADE BY THE APPELLANT. THE DISALLOWANCE TO THE EXTENT OF RS.27, 92,435/- IS SUSTAINED AND THE APPELLANT GETS A RELIEF OF RS.12,55,495/- O N THIS GROUND. THE ASSESSEE, BEING AGGRIEVED WITH SUCH ORDER OF LD . CIT(A) HAS NOW COME IN CO BEFORE US. 14. LD AR FOR THE ASSESSEE BEFORE US SUBMITTED THAT THE PROVISION CREATED FOR LEAVE ENCASHMENT IS ALLOWABLE BY THE JUDGMENT O F HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428/112 TAXMAN 61 EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (2007) 164 TAXMAN 9 (CAL) ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 20 ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF AU THORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE AND THE CASE LAW CITED BY LD. AR FOR THE ASSESSEE. AT THE OUTSET, IT WAS OBSERVED THAT ASSESSEE HAS CLAIMED E XPENSES TOWARDS LEAVE ENCASHMENT FOR 27,92,435/- ON ACCRUAL BASIS. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT THE DEDUCTION ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT WAS CLAIMED ON THE JUDGMENT OF JURISDICT IONAL HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. VS. UNION OF INDIA (2007) 292 ITR 470 (CAL). IN THIS REGARD, LD. AR FRANKLY ACCEPTED THAT THE JUDGM ENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA) HAS BEEN STAYED BY THE HON'BLE APEX COURT VIDE ORDER DATED 08.05.2009 AND THE RELEVANT EXTRACT IS REPRODUCED BELOW:- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APP EALS, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHI CH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTERE ST DEMAND AS OF DATE IS CONCERNED, IT WOULD BE OPEN TO THE DEPARTMENT TO RE COVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD, D URING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON TH E STATUE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RE TURNS. FURTHER, LD. AR FOR THE ASSESSEE PRAYED THAT THE MA TTER CAN BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICA TION IN TERMS OF DECISION OF HON'BLE APEX COURT. LD. DR FOR THE REVENUE AGREED T O THE SUBMISSION OF LD. AR. 16. IN VIEW OF THE ABOVE PROPOSITION, WE ARE INCLIN ED TO RESTORE THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO AWAIT FO R THE DECISION OF HON'BLE APEX COURT AND DECIDE ACCORDINGLY. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 17. THE ASSESSEE IN GROUNDS NO. 3 & 4 OF ITS CO SUP PORTED THE ORDER OF LD. CIT(A) REVERSING THE ORDER OF AO ON ACCOUNT OF SUP PRESSION OF SALES. ITA NO.58/KOL/2014 & CO 22/KOL/2015 A.Y. 2008-0 9 DCIT CIR.11 KOL. VS. M/S INDIANI EXPLOSIVES LTD. PAG E 21 18. AT THE TIME OF HEARING, LD. AR FOR THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) FOR REVERSING THE ORDER OF AO ON ACCOUNT OF SUPPRESSION OF SALES. HENCE, WE DISMISS THE ISSUE OF ASSESSEES CO IS BEI NG INFRUCTUOUS. THIS GROUND OF ASSESSEES CO IS DISMISSED AS INFRUCTUOUS . 19. LAST GROUND IN ASSESSEES CO IS DISMISSED AS GE NERAL IN NATURE. 20. IN THE RESULT, ASSESSEES CO IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 21. IN COMBINE RESULT, APPEAL OF REVENUE IS DISMISSED A ND THAT OF ASSESSEES CO IS PARTLY ALLOWED FOR STATISTICAL PUR POSE. ORDER PRONOUNCED IN THE OPEN COURT 27 /04/2018 SD/- SD/- (( ) ( ) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S *- 27 / 04 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S INDIAN EXPLOSIVE LTD., 10A, LEE ROAD, KOLKATA-20 2. /REVENUE-DCIT, CIRCLE-11, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 3. 5 6 / CONCERNED CIT KOLKATA 4. 6- / CIT (A) KOLKATA 5. 9 ((5, 5, / DR, ITAT, KOLKATA 6. > / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 5,