ACIT, Sikar V. M/S SORABH CEMENT LIMITED, Sikar

ITA 131/JPR/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5230 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R PARIKH
• Assessee Lawyers: SATISH GUPTA CA DHK
• Keywords: Rejection of books of accounts; Business income
• Section: 37; 6; 10; 2; 11; 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE:SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, J M VK;DJ VIHY LA-@ ITA NO. 131/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 THE ACIT CIRCLE SIKAR CUKE VS. M/S. SORABH CEMENT LTD. KAPIL MANDI, NEEM KA THANA DISTT. SIKAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAKCS 4642 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO.37/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 131/JP/2012) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. SORABH CEMENT LTD. KAPIL MANDI, NEEM KA THANA, DISTT. SIKAR CUKE VS. THE ACIT CIRCLE SIKAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAKCS 4642 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI G.R. PARIKH, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SATISH GUPTA, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13/07/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 03 /08/2016 VKNS'K@ ORDER PER LALIET KUMAR, JM THE REVENUE HAS AN APPEAL AGAINST THE ORDER OF TH E LD. CIT(A)- III, JAIPUR DATED 21-11-2011 FOR THE ASSESSMENT YEAR 200 8-09 AND THE ASSESSEE HAS FILED THE CROSS OBJECTION. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 2 2.1 THE REVENUE HAS RAISED THE SOLITARY GROUND AS UNDER:- THE LD. CIT(A) HAS PERVERSELY IGNORED THE RELEVA NT AND SPECIFIC FACTS DETAILED BY THE AO IN HIS ASSESS MENT ORDER AND HAS RELIED ON IRRELEVANT AND INAPPLICABLE SUBMI SSIONS IN RESTRICTING THE ADDITION OF RS. 1,97,60,233/- TO RS . 5.00 LACS ONLY. 3.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ITS C.O.. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LOWER AUTHORITIES GROSSLY ERRED IN CONFIRMING THE R EJECTION OF BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECT ION 145(3). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LOWER AUTHORITIES GROSSLY ERRED IN CONFIRMING THE T RADING ADDITION OF RS. 5.00 LACS 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LOWER AUTHORITIES GROSSLY ERRED IN CONFIRMING THE A DDITION OF RS. 1.68 LACS BEING SERVICE TAX PAYMENT. 4.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD FILED ITS RETURN OF INCOME ON 29-09-2008 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED CALLING UPON THE ASSESSEE TO FILE THE REPLY. THE AO HAD EXA MINED THE DOCUMENTS FILED BY THE ASSESSEE AND THE AO AFTER CONSIDERING THE DOCUMENTS FILED BY THE ASSESSEE HAS INVOKED THE PROVISION OF SECTION 1 45(3) OF THE ACT AND HELD AS UNDER:- ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 3 .... AS FOUND DURING THE COURSE OF ASSESSMENT PRO CEEDINGS FOUR TYPE OF RAW MATERIAL I.E. CLAY, IRON DUST, COA L DUST AND LINE STONE ARE MIXED TOGETHER AND THE RESULTANT MIX TURE IS CALLED RAW MIXTURE FROM WHICH CLINKER IS OBTAINED. IN THE MANUFACTURE OF CLINKER AND ULTIMATELY THE FINAL PRO DUCT CEMENT, EACH COMPONENT OF RAW MIXTURE HAS A FIXED PERCENTAGE. HOWEVER, AS IS EVIDENT FROM THE TABLE - 1 DIFFERENT COMPONENTS HAVE DIFFERENT PERCENTAGE FOR DIFFERENT MONTHS. THE LARGE VARIATION IN THE PERCENTAGE COMPO SITION OF DIFFERENT RAW MATERIAL FOR DIFFERENT MONTHS FURTHER RENDERS THE RECORDS OF THE ASSESSEE UNRELIABLE. ACCORDINGLY , PROVISION OF SECTION 145(3) OF THE ACT ARE HELD TO BE APPLICABLE AND HENCE INVOKED. AFTER REJECTING THE BOOKS OF ACCOUNT, THE AO VIDE D ETAILED SCIENTIFIC, REASONED AND RATIONAL ORDER HAS DETERMINED THE INCO ME OF THE ASSESSEE AT RS. 1,97,60,223/-. THE OPERATIVE PORTION OF ORDER O F THE AO IS REPRODUCED HEREUNDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3.15 IT MAY NOT BE TOTALLY OUT OF PLACE TO MENTI ON HERE THAT SHREE CEMENT LTD. MANUFACTURER OF CEMENT HAD PUBLISHED IN PAPER ITS AUDITED TRADING RESULT AS ON 31-03-201 0. AS PER THESE PUBLISHED RESULTS, AGAINST SALES OF 363212 LACS EXP ENDITURE ON POWER AND FUEL WAS 61047 LACS I.E. 16.8% OF THE SAL ES. IN THE CASE OF ASSESSEE EXPENDITURE ON POWER AND FUEL IS RS. 3, 03,19,497/- WHICH IS 22.74% OF THE DECLARED SALES. WHEN UNACCOU NTED SALES OF RS. 6,37,42,656/- ARE TAKEN INTO ACCOUNT THEN ACTUA L SALES ARE RS. 19,70,54,634/- . THE RATIO OF EXPENDITURE ON POWER BOOKED BY ASSESSEE TO THE ACTUAL TOTAL SALES COMES TO 15.4% WHICH IS QUITE COMPARABLE WITH THAT IN THE CASE OF SHREE CEMENT LT D. THIS COMPARISON IS NOT MADE A BASIS FOR ESTIMATION OF UN RECORDED PRODUCTION AND SALES BUT IT CERTAINLY ADDS TO THE R EASONABLENESS OF THE ESTIMATED PRODUCTION ARRIVED ON THE BASIS OF OT HER REASONS. THE ASSESSEE HAD DIFFERENTIATED ITS CASE FROM THAT OF S HREE CEMENT LTD. VIDE LETTER DATED 21-12-2010 BUT STILL THE FACTS AS MENTIONED ABOVE HAVE THEIR OWN RELEVANCE IN THE CONTEXT. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 4 IN VIEW OF THE FACTS AND REASONS GIVEN ABOVE AND AS CALCULATED IN PARA 3.14 ABOVE, SUPPRESSED PROFIT FR OM SUPPRESSED PRODUCTION AND SALES IS RS. 1,97,60,223/- WHICH IS ADDED TO THE DECLARED INCOME OF THE ASSESSEE. BESIDES THAT THE AO HAS DISALLOWED THE EXPENDITURE IN THE SERVICE TAX TO THE TUNE OF RS. 1.68 LACS. 4.2 THE ASSESSEE FEELING AGGRIEVED BY THE ORDER OF THE AO PREFERRED APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE FILED TH E DOCUMENTS AS WELL AS FILED THE WRITTEN SUBMISSIONS. THE LD. CIT(A) HAS SOUGHT THE REMAND REPORT ON THE SUBMISSIONS FILED BY THE ASSESSEE IN RESPECT OF REJECTION OF BOOKS OF ACCOUNT AND WITH RESPECT TO CRITERIA ADOPT ED FOR WORKING OUT THE SUPPRESSED SALES AND ESTIMATION OF TOTAL INCOME. TH E ASSESSING OFFICER HAS FILED THE REMAND REPORT DATED 20-09-2011 IN RES PECT OF REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT IN RESPECT OF REJECT ION OF BOOKS OF ACCOUNT AS WELL AS AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE REJECTION OF BOOKS OF ACCOUNT. THE FINDING OF THE L D. CIT(A) IS MENTIONED IN PARA 3.3 OF HIS ORDER WHICH IS REPRODUCED AS UND ER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3.3 I HAVE DULY CONSIDERED THE DETAILED OBSERVATI ONS MADE BY THE AO AND THE EXPLANATIONS SUBMITTED BY THE LD. AR IN RESPECT OF THE ISSUE UNDER CONSIDERATION. AS DISCUSSED ABO VE, THE AO HAS ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 5 REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE IN COME U/S 145(3) OF THE ACT, DUE TO VARIOUS DISCREPANCIES AND OMISSI ON FOUND, IN RESPECT OF , THE MAINTENANCE OF BOOKS OF ACCOUNTS O F THE APPELLANT. ON THE BASIS OF SUCH OBSERVATION, HE REACHED TO THE CONCLUSION THAT THE APPELLANT HAS ACTUALLY PRODUCTS TO ITS INSTALLE D CAPACITY OF 66000 MT AND DECLARED ONLY 44186 MT PRODUCTIONS. THUS, HE ESTIMATED THE SUPPRESSION OF PRODUCTION / SALE OF RS. 6,37,42 ,656/- AND FURTHER WORKED OUT THE CORRESPONDING UNDISCLOSED PROFIT OF RS. 1,97,60,223/- THEREON. ON THE OTHER HAND, THE LD. A R SUBMITTED THAT THE ADVERSE OBSERVATION OF THE RELEVANT FACTS/ RECO RDS AND THE ADDITION MADE IN THIS REGARD WAS SIMPLY BASED ON SU RMISES AND CONJECTURE ON HIS PART. IT WAS ALSO POINTED OUT THA T NOT ONLY THE BOOKS OF ACCOUNT ARE MAINTAINED IN PROPER MANNER BU T THEY ARE SUBJECT TO SCRUTINY OF AUDIT, SALES TAX AND EXCISE DEPARTMENT. HE ALSO RELIED UPON THE FACT THAT IN THE CURRENT YEAR THE APPELLANT HAS SHOWN BETTER TRADING RESULT, IN COMPARE TO THE IMME DIATE PREVIOUS YEAR, THEREFORE, EVEN IF SECTION 145(3) IS APPLIED, NO ADDITION IN RESPECT OF THE TRADING RESULT CAN BE MADE, AS STIP ULATED BY THE VARIOUS COURTS / TRIBUNALS. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS PERCEIVED THAT THE DISCREPANCIES /OMISSION, AS POIN TED OUT BY THE AO AND AS DISCUSSED ABOVE, WERE SPECIFIC AND SERIOU S IN NATURE, THEREFORE, THE APPLICATION OF SECTION 145(3) IN THE APPELLANT CASE IS FOUND IN ORDER, THUS UPHELD ACCORDINGLY. 4.3 WITH RESPECT TO ESTIMATION OF INCOME, THE LD. C IT(A) HAS PASSED THE ORDER UNDER CHALLENGE BEFORE US BY REVENUE WHEREIN THE LD. CIT(A) HAS HELD AS UNDER:- 3.3.3 AS STATED ABOVE, IT IS NOTEWORTHY TT IN THE CURRENT YEAR THE APPELLANT HAS SHOWN BETTER RES ULT THAN THE PREVIOUS YEAR. THIS CRUCIAL ASPECT HAS BEEN OVERLOO KED BY THE AO, WHILE DRAWING THE ADVERSE VIEW IN RESPECT O F RELIABILITY OF THE BOOKS OF ACCOUNT. IN MY CONSIDER ED OPINION, SINCE THE APPELLANT HAS SHOWN BETTER RESULT IN THE CURRENT YEAR ON HIGHER T.O., THEREFORE, THE OTHER RELATED OMISS ION/ ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 6 SHORTCOMINGS ON THE PART OF THE APPELLANT HAVE BECO ME INSIGNIFICANT AND REDUNDANT, UNDER THE GIVEN CIRCUM STANCES. ACCORDINGLY, THE ADDITION OF RS. 1,97,60,233/- MADE U/S 145(3) ON ACCOUNT OF TRADING RESULTS, IS HELD AS U NTENABLE AND UNWARRANTED IN THE GIVEN SITUATION. HOWEVER, I T IS ALSO FELT THAT THOUGH THE APPELLANT HAS SHOWN SUBSTANTIA L HIGHER PROFIT RATIO (I.E. 8.5%) THEN THE PREVIOUS YEAR (I. E. 4.67%), HOWEVER, AN ADHOC ADDITION OF RS. 5,00,000/- IS FOU ND ESSENTIAL TO BE SUSTAINED, TO TAKE CARE OF ALL THE INCREMENTING ASPECTS AND LEAKAGE OF INCOME, IF ANY, DUE TO THE SHORTCOMINGS IN BOOKS OF ACCOUNTS, AS POINTED OUT B Y THE AO. ACCORDINGLY, THE TRADING ADDITION UPTO RS. 5,00 ,000/- MADE U/S 145(3) IS SUSTAINED AND BALANCE IS TREATED AS DELETED. CONSEQUENTLY, THIS GROUND OF APPEAL IS PAR TLY UPHELD. 4.4 THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) WITH RESPECT TO ESTIMATION OF INCOME AS MENTIONED HEREIN ABOVE AND THE ASSESSEE CHALLENGED THE APPLICATION OF SECTION 145( 3) OF THE ACT BY FILING THE C.O. BEFORE US. 5.1 FIRST WE WOULD LIKE TO DEAL WITH THE C.O. OF TH E ASSESSEE IN WHICH THE LD. AR OF THE ASSESSEE HAS SUBMITTED THE DETAI LED WRITTEN SUBMISSION AS TO THE GROUNDS RAISED IN THE C.O. 5.2 WE HAVE ALSO TAKEN INTO CONSIDERATION THE DETAI LED SUBMISSIONS OF THE ASSESSEE AND SOME OF THE VIEW POINTS OF THE LD. AR OF THE ASSESSEE AS TO GROUND NO. 1 OF THE C.O. IS REPRODUCED HEREUNDER FOR THE SAKE OF CONVENIENCE AND BREVITY:- ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 7 THE ASSESSING OFFICER AT PAGE 3 PARA 1 HAS INVOKE D THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961. THE SO CALLED DEFECTS POINTED OUT BY THE LD ASSESSING OFFI CER FOR REJECTING THE BOOKS OF ACCOUNTS ARE AS FOLLOWS- (I) THE GROSS PROFIT DECLARED BY THE ASSESSEE COMPA NY IS ABNORMALLY LOW. (II) THE VALUE OF PURCHASE OF RAW MATERIAL AS MENTI ONED IN THE STOCK SUMMARY AND AUDIT REPORT DO NOT TALLY WITH TH E BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESEE. (III) AS PER AUDIT REPORT THE DECLARED PRODUCTION O F CEMENT IS 44816 M.T. WHEREAS IN THE RETURN INFORMED ER-1 SUBM ITTED WITH THE EXCISE DEPARTMENT THE PRODUCTION OF CEMENT HAS BEEN SHOWN 45023.79 M.T. (IV) DIFFERENT COMPONENTS OF RAW MIXTURE HAS DIFFER ENT % OF CONSUMPTION FOR DIFFERENT MONTHS. WE SUBMIT THAT THE ASSESSEE COMPANY HAS FOLLOWED TH E MERCANTILE SYSTEM OF ACCOUNTING SINCE BEGINNING AND LD ASSESSING OFFICER HAS NOT MADE ANY ADVERSE COMMENT IN REGARDS TO METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AR E SAME AS MAINTAINED IN THE PAST AND NO ADVERSE FINDING IN THIS REGARD HAS BEEN GIVEN BY THE ASSESSING OFFICER. ALL THE BOOKS OF ACCOUNTS INCLUDING OF CASH BOOK, J OURNAL, LEDGER, STOCK REGISTERS, WAGES REGISTER, SALES BILL S, PURCHASE BILLS, VOUCHERS, SALES TAX RECORDS, EXCISE RECORDS WERE MAINTAINED BY THE ASSESSEE AND WERE ALSO PRODUCED B EFORE THE ASSESSING OFFICER AND THERE IS NO ADVERSE FINDING I N THIS RESPECT. ALL THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSE E WERE COMPLETE AND CORRECT AND NO ADVERSE FINDING HAS BEE N OBSERVED BY THE ASSESSING OFFICER. THE STOCK SUMMARY IS THE RES ULT OF CLERICAL MISTAKE OR MALFUNCTIONING OF SOFTWARE OR HARDWARE O F COMPUTER SYSTEM. ASSESSEE COMPANY IS SUBJECT TO TAX AUDIT UNDER THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND REPORT H AS BEEN FILED AND NO MISTAKE IN TAX AUDIT REPORT HAS BEEN OBSERVE D BY THE ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 8 ASSESSING OFFICER. THE QUANTITATIVE DETAILS IN RESPECT OF ALL THE RAW MATERIAL WERE SUBMITTED AND ARE IN AGREEMENT WITH THE BOOKS OF ACCOUNTS, STOCK SUMMARY SHEET AND COMPANY AUDIT REPORT. ASSESSEE COMPANY IS ALSO SUBJECT TO AUDIT UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND THE REPOR T HAS BEEN FURNISHED AND NO ADVERSE FINDING OBSERVED BY THE AS SESSING OFFICER EXCEPT THE FINDING IN REGARDS TO TYPOGRAPHICAL/ CLE RICAL MISTAKES. THAT ALL PURCHASES, SALES AND EXPENSES ARE 100% VOU CHED AND ARE VERIFIABLE AND LD ASSESSING OFFICER COULD N OT MENTION ANY SINGLE INSTANCE OF ANY UNVOUCHED PURCHASE OR UNVOUC HED SALES AND ANY UNVOUCHED EXPENDITURE. MOREOVER THE QUANTITY OF PURCHASE IS TALLIED FROM THE VALUE OF PURCHASE SHOWN IN THE BOO KS OF ACCOUNTS. ASSESSEE COMPANY IS SUBJECT TO SALES TAX ASSESSMENT AND HAS BEEN ASSESSED ON THE DECLARED SALES AND NO EVAS ION HAS BEEN FOUND BY THEM EVEN AFTER THEIR VISITS TO THE FACTOR Y. ASSESSEE COMPANY IS SUBJECT TO EXCISE ASSESSMENT AN D AUDIT AND ASSESSEE HAS FILED THE EXCISE RETURN TIME TO TIME AND NO SHOW CAUSE NOTICE HAS BEEN RECEIVED BY THE ASSESSEE EVEN AFTER THE EXPIRY OF THREE YEARS. THE AO HAS NOT FOUND ANY PURCHASE OR SALE OUTSIDE THE BOOKS OF ACCOUNTS. THE OBSERVATION OF THE AO THAT T HE GROSS PROFIT DECLARED BY THE ASSESSEE COMPANY IS ABNORMALLY LOW DOES NOT GET ANY SUPPORT EITHER FROM THE ASSESSEES OWN PAST HIS TORY OR FROM ANY COMPARABLE CASE CITED BY THE AO, AS THE AO HAS NOT GIVEN ANY COMPARABLE CASE TO SUPPORT HIS CONTENTION AND THE G .P. DECLARED IS BETTER THAN PRECEDING YEAR. THE A.O. HAS NOT DISCUSSED ANYWHERE IN THE ORDER T HAT HOW THE DECLARED GROSS PROFIT IS LOW AND IS NOT ACCEPTA BLE. MOREOVER THE ASSESSEE IS NOT LEGALLY EXPECTED TO EARN MORE A ND MORE PROFITS WHETHER THE CONDITION OF BUSINESS SUPPORT OR NOT. THE GROSS PROFIT RATE DECLARED WAS 8.5% DURING THE YEAR WHICH IS FAR BETTER FROM THE GROSS PROFIT RATE DECL ARED IN THE IMMEDIATELY PRECEDING YEAR I.E 4.67%( ACTUALLY IT I S 3.66%) EVEN IT IS BETTER FROM 4.67%. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 9 IN THE REMAND REPORT DATED 20/09/2011 LD ACIT SIKAR IN PARA 3.3 AT PAGE 2 OF THIS REPORT HAS MENTIONED THA T ON THIS COUNT THE ASSESSEE HAS MADE A VALID POINT. IN THE SAME PA RA LD ACIT HAS FURTHER SAID THAT THE G.P. RATE DECLARED FOR THE YE AR UNDER CONSIDERATION IS BETTER THAN THE G.P. RATE OF 5.89% IN A.Y. 2009-10, THE G.P. RATE OF 8.5% IN A.Y. 2010-11. LD CIT(A) ALSO AT PARA 3.3.2 AT PAGE 12 OF THE APPE AL ORDER REFERRING THE ABOVE RATES OF G.P. HAS HELD THAT ASS ESSEE HAS SHOWN THE BETTER RESULTS IN THE CURRENT YEAR IN COMPARE T O THE PREVIOUS YEAR WHICH WAS ACCEPTED BY THE DEPARTMENT AS SUCH. HOWEVER IT IS SETTLED LAW THAT ONLY LOWERING OF GRO SS PROFIT CAN NOT BE REASON FOR REJECTION OF BOOKS OF ACCOUNT S. WE RELY ON THE DECISION OF JUDICATIONAL RAJASTHAN HIGH COURT I N THE CASE MALANI RAMJIVAN JAGANNATH VS ACIT REPORTED IN 316 I TR 120 . WE ALSO RELY IN THE CASE OF CIT VS JAS JACK ELEGANCE E XPORTS REPORTED IN 233 CTR 398 DELHI HIGH COURT . THE ANOTHER OBSERVATION NOTED DOWN BY THE LD AO IS IN REGARDS TO DIFFERENCE IN % OF ONE ITEM OF RAW MATER IAL TO TOTAL WEIGHT OF RAW MIX ON MONTHLY BASIS. YOURHONOURS AT THE VERY OUTSET THIS TYPE OF CALCULA TION IS UNLAWFUL WHEN THE ASSESSEE IS MAINTAINING DAY TO DA Y STOCK REGISTER THEREFORE THIS TYPE OF CALCULATION DOES NO T SERVE ANY PURPOSE. IT IS THE RIGHT OF ASSESSEE TO RUN HIS BUS INESS IN HIS WAY ACCORDING TO LAW OF LAND. MOREOVER, THE PROCEDURE OF MIXING IS MANUAL AND IT FULLY DEPENDS ON THE QUALITY OF LIMESTONE IF THE QUALITY OF LIMESTONE IS GOOD THEN THE MIX WILL BE DIFFERENT AND IF THE QUAL ITY OF THE LIMESTONE IS INFERIOR THEN ALSO THE MIX WILL BE DIF FERENT. MOREOVER, THE QUALITY OF COAL IS ALSO IMPORTANT IN MAKING THE RAW MIX. THIS IS ALSO VERIFIABLE FROM THE RECOR DS THAT THE QUALITY OF COKE, LIMESTONE PURCHASES IN THE MONTH OF FEBRUA RY AND MARCH WAS GOOD IN COMPARISON TO THAT OF APRIL, MAY & JUNE . MOREOVER THE CLAY HAS BEEN PURCHASED ONLY IN THE MO NTH OF APRIL, 2007 TO THE EXTENT 1742.580 M.T. THEREAFTER, THERE ARE NO PURCHASES DURING THE YEAR. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 10 IN THE REMAND REPORT DATED 20-09-2011 THE THAN LD A CIT ON THIS POINT SUBMITTED THAT(AT PARA 1 PAGE 3 OF REPOR T) ON PERUSAL OF THE VARIATIONS FOUND DURING ASSESSMENT PROCEEDINGS , IT IS SEEN THAT THE VARIATION IN PERCENTAGE CONSUMPTIONS OF THREE O UT OF FOUR RAW MATERIAL IS MINIMAL VIS DUST, COAL & LINE STONE. IT IS ONLY IN THE CASE OF CLAY THAT SOME MAJOR VARIATIONS HAVE OCCURR ED AND THAT TOO IN DEC 2007 AND JANUARY 2008, PERCENTAGE CONSUMPTIO N HAS INCREASED FROM AN AVERAGE OF 7% TO 13%. HOWEVER DUR ING THE SAME MONTHS, THE PERCENTAGE CONSUMPTION OF LIME STO NE HAS REDUCED FROM AN AVERAGE TO 71% TO 65% THEREBY COMPE NSATING THE HIGHER CONSUMPTION OF CLAY. IN THIS REGARD, IT IS S UBMITTED THAT THE EXPLANATION FURNISHED BY THE ASSESSEE WITH REGARD T O INTERLINKED AND INTERDEPENDENT PERCENTAGE CONSUMPTION OF VARIOU S RAW MATERIALS APPEARS TO BE VALID. 5.3 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW . 5.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. APROPOS GROUND NO. 1 OF THE C. O. OF THE ASSESSEE, IT IS OBSERVED THAT THE AO HAS REJECTED THE BOOKS OF A CCOUNT AND ESTIMATED THE INCOME U/S 145(3) OF THE ACT DUE TO VARIOUS DIS CREPANCIES AND OMISSION IN RESPECT OF MAINTENANCE OF BOOKS OF ACC OUNT OF THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE HAS ACTUALLY PROD UCED ITS INSTALLED CAPACITY AT 66000 MT AND DECLARED ONLY 44186 MT PRO DUCTION. THUS THE AO ESTIMATED THE SUPPRESSION OF PRODUCTION / SALE OF RS. 6,37,656/- AND FURTHER WORKED OUT THE CORRESPONDING UNDISCLOSED PR OFIT OF RS. 1,97,60223/- THEREON. THE LD. AR OF THE ASSESSEE BE FORE THE LD. CIT(A) SUBMITTED THAT THE ADVERSE OBSERVATIONS OF THE AO W ERE BASED ON ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 11 INCORRECT INTERPRETATION AND UNDERSTANDING OF THE R ELEVANT FACTS / RECORDS AND THE ADDITION MADE IN THIS REGARD WAS SIMPLY BAS ED ON THE SURMISES AND CONJECTURES ON HIS PART. HOWEVER, THE LOWER AUT HORITIES CAME TO THE CONCLUSION THAT THERE DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHICH WERE SERIOUS IN NATURE. IN VIEW OF THESE FACT S AND CIRCUMSTANCES OF THE CASE, THE AO APPLIED THE PROVISION SECTION 145( 3) OF THE ACT WHICH WAS UPHELD BY THE LD. CIT(A). IT IS OBSERVED FROM T HE WRITTEN SUBMISSION OF THE ASSESSEE THAT THERE HAS BEEN MISTAKE IN THE STOCK SUMMARY CHART AND IN THE AUDIT REPORT THE VALUE OF RAW MATERIAL I S APPEARING DIFFERENT FROM THE BOOKS OF ACCOUNT. IT WILL BE USEFUL TO NAR RATE THE PROVISION OF SECTION 145(3) OF THE ACT AS UNDER:- (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECT ION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGULAR FOLLOWED BY THE ASSESSEE, THE ASSESSIN G OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTIO N 144] CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF TH E CASE AND CITATIONS, WE FEEL THAT THE LD. CIT(A) HAS RIGHTLY UPHELD THE PROVISIONS OF SECTION 145(3) OF THE ACT IN THE CASE OF THE ASSESSEE WHICH IS SUSTAINED. THUS GROUND NO. 1 OF THE C.O. OF THE ASSESSEE IS DISMISS ED. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 12 6.1 AS REGARDS THE GROUND NO. 3 OF THE ASSESSEE IN ITS C.O., WHEREIN BRIEF FACTS OF THE CASE ARE THAT AS PER SCHEDULE 11 OF THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS . 1,68,000/- AS SERVICE TAX. THE AO CALLED FOR THE DETAILS RECEIPTS OF SERV ICE TAX PAID BY THE ASSESSEE ON THIS AMOUNT BUT THE SAME WERE NOT FILED . THE AO OBSERVED THAT THE ASSESSEE DURING ASSESSMENT PROCEEDINGS STA TED THAT THE SERVICE TAX WAS PAID ON FREIGHT FOR GOODS SENT OUT BUT IT WAS A LSO STATED THAT FREIGHT WAS PAID BY THE CONSIGNEE AND RECEIVED BY TRANSPORT ERS/ TRUCK OWNERS. THE AO OBSERVED THAT SINCE THE ASSESSEE HAD NO INCO ME ON ACCOUNT OF OUTSIDE FREIGHT, EXPENDITURE ON ACCOUNT OF SERVICE TAX ON SUCH RECEIPTS OF THIRD PARTY CANNOT BE EXPENDITURE FOR THE PURPOSE O F ASSESSEE'S BUSINESS. THUS AO DISALLOWED THE AMOUNT OF RS. 1.68 LACS AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 6.2 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE AO BY FOLLOWING OBS ERVATIONS. 4.3 I HAVE EXAMINED THE RELEVANT FACTS AND CIRCUMSTANCES OF THE ISSUE UNDER CONSIDERATION. IN THE LIGHT OF THE ABOVE, I FIND FORCE IN THE CONTENTION OF THE AO THAT SERVICE TAX LIABILITY IN RESPECT OF THE FREIGHT FO R GOODS SENT TO THE APPELLANTS CLIENTS, WERE RELATED TO THEM ONLY AS THE FREIGHT WAS ALSO TO BE PAID BY THE CONSIGNEE TO THE TRANSPORTERS AS SUCH. THE AO HAS RIGHTLY POINTED OU T THAT SINCE THE APPELLANT IS NOT BENEFICIARY OF SUCH TRAN SPORT PAYMENT IN ANY MANNER, THEREFORE, HE HAS NO LIABILI TY TO BEAR THE RESPECTIVE SERVICE TAX LIABILITY. ACCORDINGLY, THE SERVICE ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 13 TAX PAYMENT OF RS. 1,68,000/- IS HELD AS NOT INCURR ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT, THEREFORE, THE SAME IS NOT AN ADMISSIBLE EXPENSES U /S 37 OF THE ACT. CONSEQUENTLY, THIS GROUND OF APPEAL IS REJ ECTED. 6.3 NOW THE ASSESSEE IS BEFORE US THROUGH C.O. IN W HICH THE LD. AR OF THE ASSESSEE MAINLY CONTENDS THAT THE LD. CIT(A) HA S WRONGLY DISALLOWED THE EXPENDITURE OF RS. 1,68,000/- TOWARDS SERVICE TAX. THE LD. AR CONTENDS THAT THE SERVICE TAX HAD BEEN ON THE FREIG HT PAYMENT AS PER THE PROVISIONS OF FINANCE ACT, 1994. 6.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE AO HAS RIGHTL Y OBSERVED THAT SINCE THE ASSESSEE IS NOT BENEFICIARY OF SUCH TRANSPORT P AYMENT IN ANY MANNER, THEREFORE, THE ASSESSEE HAS NO LIABILITY TO BEAR TH E RESPECTIVE SERVICE TAX LIABILITY. ACCORDINGLY, THE SERVICE TAX PAYMENT OF RS. 1.68 LACS WAS HELD AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS PURPOSES OF THE ASSESSEE AND THE SAME WAS CONSIDERE D AS INADMISSIBLE U/S 37 OF THE ACT WHICH HAS ALSO BEEN SUSTAINED BY THE LD. CIT(A) ALSO. IN VIEW OF THE ABOVE DELIBERATIONS, WE FEEL THAT THE L D. CIT(A) HAS RIGHTLY SUSTAINED THE ADDITION. THUS GROUND NO. 3 OF THE C. O. OF THE ASSESSEE IS DISMISSED. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 14 7.1 NOW WE WILL DEAL WITH THE ISSUE OF ESTIMATION OF INCOME ARRIVED AT AFTER REJECTING THE BOOKS OF ACCOUNT. IN THIS REGAR D, THE LD. CIT(A) HAS ESTIMATED THE INCOME OF THE ASSESSEE ON THE BASIS O F PROFIT DECLARED IN THE PREVIOUS YEAR I.E. ASSESSMENT YEAR 4.67% FOR THE AS SESSMENT YEAR 2007-08 WHEREIN THE GROSS PROFIT RATE WAS SHOWN AT 8.5%. TH E LD. AR OF THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE REMAND REPO RT SUBMITTED BY THE AO WHEREIN SPECIFIC ATTENTION WAS DRAWN TO PARAGRAP H 3.5 AND 3.6 OF THE REMAND REPORT WHICH IS REPRODUCED AS UNDER:- 3.5 AS REGARDS THE DIFFERENCE IN PRODUCTION FIGUR E OF 44816 MT AS PER AUDIT REPORT AND 45023MT AS PER MON THLY RETURNS OF PRODUCTION, THE ASSESSEE HAS EXPLAINED ALONGWITH EVIDENCES THAT BY MISTAKE, CLOSING STOCK OF CEMENT OF FEBRUARY MONTH OF 207 MT WAS INCLUDED IN PRODUCTION OF MARCH , WHICH RESULTED IN REFLECTION OF EXCESS PRODUCTION AS PER EXCISE RECORDS. THE EVIDENCES PRODUCED BY THE ASSESSEE IN SUPPORT O F SUCH SUBMISSION APPEAR TO BE VERIFIABLE AND HENCE ARE RE QUIRED TO BE CONSIDERED ACCORDINGLY 3.6 AS REGARDS THE DIFFERENCE IN THE VALUE OF VARI OUS RAW MATERIALS AS PER THE TRADING ACCOUNT AND AS SHOWN I N THE STOCK SUMMARY, THE ASSESSEE HAS CONTENDED THAT THERE IS N O DIFFERENCE IN THE QUANTITY OF ANY OF THE 7 RAW MATERIALS. THE QUA NTITY OF OPENING STOCK, QUANTITY OF PURCHASE, QUANTITY OF CONSUMPTIO N AND THE QUANTITY OF CLOSING STOCK OF EACH OF THE 7 RAW MATE RIALS FULLY TALLIES BETWEEN THE AUDIT REPORT AND THE TRADING ACCOUNT. I N SUPPORT OF THE SAME, THE ASSESSEE PRODUCED COPIES OF THE PURCHASE ACCOUNTS OF ALL ITEMS OF RAW MATERIAL PROVING THE FACT THAT THE QUA NTITY AND VALUE OF RAW MATERIALS IN THE BOOKS OF ACCOUNT WERE VERIF IABLE FROM THE PURCHASE BILLS. NO MISTAKE OR VARIATIONS HAVE BEEN FOUND IN SUCH QUANTITY DETAILS. THE DIFFERENCE IN THE VALUE OF TH E RAW MATERIALS HAS BEEN ATTRIBUTED TO A CLERICAL MISTAKE. IT IS AL SO REQUIRED TO BE CONSIDERED THAT WHEN NO DIFFERENCE IN QUANTITY OF C ONSUMPTION OF ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 15 RAW MATERIAL IS FOUND AND THE PURCHASE VALUE OF EAC H OF THE RAW MATERIAL IS FULLY VERIFIABLE FROM THE PURCHASE BILL S, ANY VARIATION IN THE VALUE THEREOF MAY HAVE BEEN THE RESULT OF A CLE RICAL MISTAKE WHICH WAS OVERLOOKED AT THE TIME OF FILING OF RETUR N OF INCOME. ANOTHER ISSUE OF DEBATE WOULD BE THAT THE MISTAKE C OMMITTED BY THE ASSESSEE HAS RESULTED IN EXCESS PROFITS HAVING BEEN DISCLOSED. 7.2 ON THE OTHER, THE LD. DR HAS SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) IS BEREFT OF ANY REASONING AND RELIANCE OF PREVIOUS YEAR PROFIT RATIO OF 4.67% IS WITHOUT ANY BASIS. 7.2.1 THE CASE OF THE ASSESSEE WAS H EARD ON 1-06-2016. HOWEVER, THE CASE WAS REFIXED FOR ARGUMENTS AND CLA RIFICATION AS TO THE CAPACITY OF THE CEMENT PLANT IN VIEW OF CERTIFICATE FILED BY THE ASSESSEE AT PAGE 1 OF THE PAPER BOOK AND ALSO DECLARATION FILED ALONGWITH THE BALANCE SHEET. ACCORDINGLY, THE MATTER WAS RE-FIXED FOR HEA RING. THE LD. AR ON 13-07-2016 WAS SUBMITTED THAT THE CERTIFICATE WAS I SSUED BY THE AGENCY ON THE BASIS OF STATUTORY REQUIREMENT AS SMALL SCAL E INDUSTRIES REQUIRED REGISTRATION UNDER THE ACT. THEREFORE, THE DECLARA TION WAS REQUIRED. 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE WOULD LIKE TO STATE THAT TH E LD. CIT(A) ONCE HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT THEN THE E STIMATION OF INCOME SHOULD BE BASED ON SCIENTIFIC, REASONABLE AND APPRO PRIATE METHOD AND SHOULD NOT BE BASED ON PREVIOUS YEAR GROSS PROFIT I .E. 4.67.%. ADMITTEDLY ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 16 THE CASE OF THE ASSESSEE BEFORE US AND BEFORE LD. C IT(A) WAS THAT INSTALLED CAPACITY OF CEMENT PLANT WAS AT 66000 MT. THIS IS CLEAR FORM THE NOTES AND ACCOUNTING POLICY OF 2007-08 WHEREIN THE QUANTI TATIVE DETAILS, LICENSED CAPACITY AND INSTALLED CAPACITY WAS MENTIO NED AT 66000 MT WHEREAS ASSESSEE HAS FILED A CERTIFICATE SHOWING AS SESSED CAPACITY OF PLANT AST 52722MT. THUS THERE IS AN INHERENT CONTRADICTIO N IN THE SUBMISSION OF THE ASSESSEE BEFORE THE AO AND THE LD. CIT(A). WE N OTICED THAT AS PER CERTIFICATE DATED 2-5-2011(BASED ON ENTREPRENEUR ME MORANDUM DATED 31- 07-2007), THE ASSESSED CAPACITY OF THE CEMENT PLANT WAS MENTIONED AS 52722 MT WHEREAS AS PER NOTES AND ACCOUNTING POLIC Y DATED 01-07- 2008, THE LICENSED CAPACITY WAS MENTIONED AS 66000 MT AND INSTALLED CAPACITY AS 66000 MT. HOWEVER, THE EARLIER DOCUMENT DATED 31-03-2007 MERELY SHOWS THE ASSESSED CAPACITY AT 52722 MT. (EV EN AS PER WRITTEN SUBMISSION OF THE ASSESSEE, THE LETTER ISSUED BY TH E DISTT. INDUSTRIES CENTRE (FOR SHORT DIC), SIKAR ,IT WAS INSPECTED ON 31-03 -2011 AGAINST THE ENTREPRENEUR MEMORANDUM DATED 31-03-2007 WHEREIN TH E ASSESSED CAPACITY WAS SHOWN AT 52722 MT). IN OUR VIEW, NOT ES AND ACCOUNTING POLICY WERE DATED 01-07-2008 WHEREAS ENTREPRENEUR M EMORANDUM WAS DATED 31-03-2007. THEREFORE, THE CAPACITY MENTIONED IN THE NOTES SHALL BE GUIDING ELEMENT INSTEAD OF ENTREPRENEUR MEMORAN DUM DATED 31-03- ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 17 2007. THE INSTALLED CAPACITY OF PLANT WAS THE BASIS OF MAKING THE ADDITION BY THE AO. IN OUR VIEW, THE REMAND REPORT WAS CALLE D BY THE LD. CIT(A) ON THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEF ORE HIM. THEREFORE, THE AO WHILE FILING THE REMAND REPORT HAS NO MECHANISM TO VERIFY THE FACTUAL ASPECTS SUBMITTED BY THE ASSESSEE . HIS WHOLE REMAND REPORT WAS IN PURSUANCE AND IN RESPONSE TO THE WRITTEN SUBMISSION OF THE ASSESSEE. FOR THE PURPOSE, THE REMAND REPORT RECORD IS AS UNDER:- THE APPELLANT VIDE ITS WRITTEN SUBMISSION BEFORE YOUR KIND HONOUR HAS DISPUTED THE REASONS FOR REJECTING THE BOOKS OF ACCOUNTS AND HAS ALSO DISPUTED THE CRITERION ADO PTED FOR WORKING OUT THE SUPPRESSED SALE AND ESTIMATION OF T HE TOTAL INCOME. THE COMMENTS ON EACH OF SUCH SUBMISSION OF THE APPELLANT ARE DEALT WITH SEPARATELY. IT IS ALSO THE CASE OF THE ASSESSEE BEFORE US THAT THE ASSESSEE HAS BEEN FILING MONTHLY EXCISE RETURN FOR THE PERIOD FROM AP RIL 2007 TO MARCH 2008 AND IN THE REMAND REPORT THE AO IN PARA 3.3 HA S MENTIONED THAT EVIDENCES PRODUCED BY THE ASSESSEE IN SUPPORT OF SU CH SUBMISSIONS APPEAR TO BE VERIFIABLE AND HENCE ARE REQUIRED TO BE CONSIDERED . IN OUR VIEW THE WORD APPEAR TO BE VERIFIABLE MEANS THAT RECORD CAN BE VERIFIED. THIS OBSERVATION OF THE AO WHILE DEALING WITH REMAND REPORT HAS NOT BEEN CONSIDERED BY THE LD. CIT(A) AND DESPI TE THAT BOOKS OF ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 18 ACCOUNTS HAVE BEEN REJECTED BY THE LD. CIT(A). THER EFORE, ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND NO CONCLUSION HAS BEEN MENTIONED BY THE AO IN THE REMAND REPORT WITH RESPECT TO EXCISE RECORD, THEN CONCLUSION IN FAVOUR OF THE ASSESSEE CANNOT BE DRAW N BY THE LD. CIT(A). WE WOULD LIKE TO PRODUCE THE PARA 4.3 IN RESPONSE T O ESTIMATION OF INCOME SUBMITTED BY THE AO AT PAGE 451 OF THE WRIT TEN SUBMISSION WHICH IS AS UNDER:- 4.3 AS REGARDS POINT (B), THE ASSESSEE HAS VERY FORCEFULLY POINTED OUT THE ABSENCE OF ANY SHOW CAUS E NOTICE AND THE COMPLETE ABSENCE OF ANY REASONS FOR ISSUING SHOW CAUSE NOTICE BY THE EXCISE DEPARTMENT. THE ASSESSEE HAS STRONGLY OBJECTED TO THE CONCLUSION MADE BY THE AO ON THE BASIS OF PARTIAL INFORMATION THAT EXCISE DEPARTMENT WAS PROPOSING TO ISSUE SHOW CAUSE NOTICE WHEN NO SHOW C AUSE NOTICE HAS BEEN RECEIVED TILL THE DATE OF ASSESSMEN T ORDER. THE ASSESSEE HAS ALSO POINTED OUT THAT THE AO HAS H IMSELF MENTIONED IN THE ASSESSMENT ORDER THAT EXCISE DEPAR TMENT HAS NOT BEEN ABLE TO FURNISH ANY DETAILS OF SO CALL ED SHOW CAUSE NOTICE. THE CONTENTIONS OF THE ASSESSEE ARE V ERIFIABLE FROM PARA 3.5 ON PAGE 6 OF THE ASSESSMENT ORDER. THE AO WHILE FILING THE REPLY OF THE REMAND REPORT IN RESPECT OF PRORATA ESTIMATION OF PRODUCTION, SALES ON THE BASIS OF UNR ECORDED QUANTITY OF RAW MATERIAL PURCHASED HAS MENTIONED AS UNDER:- 4.4 AS REGARDS POINT , THE ASSESSEE HAS SUBMITTE D THAT THE LD. AO HAS CHOSEN TO ADOPT ONLY SUCH VARIATIONS WHI CH SUITED THE PURPOSE OF MAKING THE PREDETERMINED ADDITION. THE A SSESSEE FORCEFULLY SUBMITTED THAT WHILE VARIATIONS IN VALUE OF RAW MATERIALS ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 19 IN STOCK SUMMARY SHEET WHICH WERE BARE MINIMUM WERE TAKEN COGNIZANCE OF , NO COGNIZANCE WAS TAKEN OF THE ABSE NCE OF ANY VARIATION IN THE QUANTITY AND VALUE OF PACKING MATE RIAL, LIME STONE, CLINKER PURCHASED FROM OUT SIDE AND WAGES. THE SUBM ISSION OF THE ASSESSEE SUGGEST THAT THESE WERE ALSO IMPORTANT COM PONENTS OF THE PRODUCTION AND HENCE MINOR VARIATION IN THE VALUE O F SOME OF THE COMPONENTS ALONE COULD NOT HAVE LED TO DEFINITE CON CLUSION REGARDING SUPPRESSED PRODUCTION/ SALES. DETAILED COMMENTS IN THIS REGARD HAVE BEEN OFFERED AT PARA3.4 ABOVE AND THE ABSENCE OF VARIATION IN QUANT ITY/ VALUE OF PACKING MATERIAL, LIME STONE, CLINKER PURCHASED FRO M OUTSIDE AND WAGES DESERVES TO BE CONSIDERED. THE LD. CIT(A) HOWEVER, DESPITE THE SCIENTIFIC REAS ONING RECORDED BY THE AO IN ASSESSMENT ORDER AND THE RESPONSE GIVEN BY TH E AO TO THE WRITTEN SUBMISSION IN REMAND PROCEEDINGS HAVE WRONGLY ARRIV ED AT ADHOC ADDITION OF RS. 5.00 LACS. IN OUR VIEW, THE PREVIOU S HISTORY OF THE ASSESSEE CANNOT BE CONSIDERED AS PLANT HAS JUST STARTED AS P ER SUBMISSION OF THE ASSESSEE AFTER OCT. 2006 AND THEREFORE, THE PRODUCT ION STARTED IN THE ASSESSMENT YEAR 2006-07 AND THE GROSS PROFIT DECLIN ED CANNOT FORM BASIS FOR ARRIVING AT ESTIMATION OF INCOME BY THE LD. CIT (A). IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT PROPER TO REM AND THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO CONSIDER AND DECIDE THE ISSUE AFRESH. THE ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 20 RECORDS AVAILABLE WITH HIM NAMELY ASSESSMENT RECOR D AND THE REMAND REPORT SUBMITTED IN PURSUANCE TO THE WRITTEN SUBMIS SION FILED BY THE ASSESSEE MAY BE CONSIDERED BY HIM IN ARRIVING AT FR ESH CONCLUSION ON THE ISSUE . WE HAVE NOTICED THAT THE LD. CIT(A) WHILE C OMING TO THE CONCLUSION IN RESPECT OF ESTIMATION OF INCOME HAS NOT RELIED ON THE REMAND REPORT SUBMITTED BY THE AO AND HAVE BASED HI S FINDINGS ON THE BASIS OF GROSS PROFIT OF PREVIOUS YEAR AND MADE ADH OC ADDITION OF RS. 5.00 LACS OF WHICH THERE IS NO BASIS. WE EXPECT THE LD. CIT(A) TO DEAL WITH THREADBARE FINDING OF THE AO AND GIVE RATIONAL AND SCIENTIFIC REASONING NEGATING THE FINDING OF THE AO, IF SO REQUIRED . TH E LD. CIT(A) IS FREE TO CALL AFRESH REMAND REPORT DEALING WITH EACH AND EVE RY ASPECT AND REASONING FOR ACCEPTING OR NOT AGREEING WITH THE CO NTENTION OF THE ASSESSEE AND THEREAFTER APPLY HIS MIND AFRESH TO CO ME TO CONCLUSION WITH RESPECT TO ESTIMATION OF INCOME. THE LD. CIT(A) MAY ALSO CALL FOR THE RECORD FROM THE EXCISE DEPTT. TO THIS EFFECT IN CAS E OF NEED. THE ASSESSEE WILL PROVIDE ALL THE INFORMATION AND DOCUMENTS AS M AY BE SOUGHT BY THE LD. CIT(A) WHILE ADJUDICATING THE ISSUE OF ESTIMATI ON OF INCOME. IN THE LIGHT OF THE ABOVE, THE APPEAL OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES AND THE GROUND NO. 2 OF THE C.O. OF THE ASSESSEE IS DISMISSED. ITA NO. 131/JP/2012 THE ACIT, CIRCLE, SIKAR M/S. SORABH CEMENT LTD., SI KAR . 21 8.0 IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03 /08/20 16. SD/- SD/- HKKXPUN YFYR DQEKJ (BHAGCHAND ) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03 /08/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE- SIKAR, SIKAR 2. IZR;FKHZ@ THE RESPONDENT- M/S. SORABH CEMENT LTD., SIKAR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 131/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR