DCIT, Jaipur V. PREMIUM BARS (P) LTD, Jaipur

ITA 143/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2180 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH CHAND KULHARI
• Assessee Lawyers: MANISH AGARWAL CA DHK
• Keywords: Rejection of books of accounts; Business income; Retraction; Reassessment proceedings
• Section: 143(3); 147

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 HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA- @ ITA NO. 143/JP/2017 FU/KZKJ.K O'KZ @ ASSESSMENT YEAR : 2010-11 D.C.I.T., CIRCLE-2, JAIPUR. CUKE VS. M/S PREMIUM BARS (P) LTD., 402, 37-38, NIDHI KAMAL TOWER, AJMER ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADCP 2240 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 06/JP/2017 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 143/JP/2017) FU/KZKJ.K O'KZ @ ASSESSMENT YEAR 2010-11 M/S PREMIUM BARS (P) LTD., 402, 37-38, NIDHI KAMAL TOWER, AJMER ROAD, JAIPUR. CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AADCP 2240 B IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI JAGDISH CHAND KULHARI (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL (CA). LQUOKBZ DH RKJH[K @ DATE OF HEARING : 23/01/2018 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/01/2018 VKNS'K@ ORDER PER: KUL BHARAT, J.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 09/12/2016 OF THE LD. CIT (A)-I, JAI PUR PERTAINING TO THE ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 2 ASSESSMENT YEAR 2010-11. EFFECTIVE GROUNDS OF APPEA L AS WELL AS C.O. ARE AS UNDER:- GROUND IN REVENUE APPEAL. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTI NG THE TRADING ADDITION OF RS. 52,35,630/- TO RS. 20,11,527/- WHILE UPHOLDING REJECTION OF BOOKS OF ACCOUNT MADE BY THE A.O.. GROUND IN ASSESSEES CROSS OBJECTION (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING TRADING ADDIT ION TO THE TUNE OF RS. 20,11,527/- MADE BY LD. A.O. APPELLANT PRAYS ADDITION CONFIRMED BY LD. CIT(A) MAY PLEASE BE DELETED. 2. THE REVENUES APPEALS AND ASSESSEES C.O. ARE BEI NG HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMM ON ORDER IS BEING PASSED. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SURV EY OPERATION WAS CARRIED OUT BY THE DEPARTMENT OF CENTRAL EXCISE AT THE FACTORY PREMISES OF THE ASSESSEE ON 23/12/2009. THE EXCISE AUTHORITIES FOUND THAT TMT BARS VALUING OF RS. 52,35,630/- WAS NOT RECORDED IN THE B OOKS OF ACCOUNT. THE CASE OF THE ASSESSEE WAS REOPENED AND ASSESSMENT U/S 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE AC T) WAS FRAMED VIDE ORDER DATED 25/3/2013 THEREBY THE ASSESSING OFFICER MADE ADDITION OF RS. 52,35,630/- AND ADDED BACK IN THE INCOME OF THE ASS ESSEE. ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 3 4. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO AFTER C ONSIDERING THE SUBMISSIONS, PARTLY ALLOWED THE APPEAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITION OF 20,11,527/ - AGAINST THE ADDITION OF RS. 52,35,360/- MADE BY THE ASSESSING OFFICER. 5. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN CROSS OBJECTION BEFORE THE ITAT. 6. FIRSTLY WE TAKE ASSESSEES CROSS OBJECTION IN C.O . NO. 06/JP/2017. IN THE ASSESSEES C.O. THE ISSUE INVOLVED IS CONFI RMING THE TRADING ADDITION OF RS. 20,11,527/-. WHILE PLEADING ON BEHA LF OF THE ASSESSEE, THE LD AR OF THE ASSESSEE HAS REITERATED THE SUBMISSION S AS MADE IN THE WRITTEN SUBMISSIONS. HE FURTHER SUBMITTED AS UNDER: IN DEPARTMENTAL GROUND DELETION OF ADDITION OF RS. 32,24,103/- GIVEN BY ID. CIT(A) IS CHALLENGED AND IN CO, THE ASSESSEE HAS CH ALLENGED THE CONFIRMATION OF ADDITION OF RS. 20,11,527/- MADE BY ID. CIT(A) B Y APPLYING GP RATE OF 3.20% AFTER UPHOLDING THE APPLICATION OF PROVISION OF SEC TION 145(3) OF THE INCOME TAX ACT, 1961 WHICH INCLUDES THE ADDITION OF RS. 10 ,74,819/- MADE BY ID. CIT(A) (THOUGH NO SEPARATE ADDITION IS MADE AND TEL ESCOPED THE SAME AGAINST THE TRADING ADDITION). AS SUBMITTED ABOVE, A SURVEY WAS CONDUCTED BY DGCEI ON 23.12.2009 DURING WHICH STATEMENT OF ITS AUTHORIZED SIGNATORY SHRI AR UN KUMAR SINGH WAS RECORDED BY ADOPTING COERCIVE MEASURES AND A PANCHN AMA WAS MADE, ALLEGING SHORTAGE OF INPUT OF 250.04 MT OF M.S. I NGOTS AND EXCESS STOCK OF ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 4 202.995 MT OF FINISHED GOODS MS TMT BAR VALUED AT R S. 52,35,630/- (APB 23) AND THE SAID QUANTITY OF GOOD WAS CONFISCATED BY TH E DGCEI OFFICIALS. IMMEDIATELY ON THE VERY NEXT DATE OF SURVEY, ASSESS EE VIDE LETTER DT. 24.12.2009 HAS MADE RETRACTION (APB 25). SINCE NO I TEMWISE LIST OF STOCK FOUND WAS GIVEN A REQUEST WAS MADE BY THE ASSESSEE TO THE DGCEI OFFICIALS TO TAKE THE PRINT OUTS OF SUCH LISTS FROM THE WEIGHING MACHINE THUS ON 22/01/2010 DATA OF THE MACHINE WAS RETRIEVED IN THE PRESENCE OF EXCISE OFFICIALS (APB 24) WHEN IT WAS FOUND FROM THE MEMOR Y THAT ITEM-WISE ACTUAL PHYSICAL WEIGHMENT WAS NOT DONE AS NO SUCH DATA IS AVAILABLE IN THE MACHINE. THE ASSESSEE COMPANY IMMEDIATELY SUBMITTED THESE FA CTS SUPPORTED WITH DOCUMENTARY EVIDENCES TO THE CONCERNED OFFICIALS BU T THE ADDITIONAL COMMISSIONER OF THE CENTRAL EXCISE COMMISSIONERATE -I PASSED THE ORDER BY DISCARDING THE SUBMISSIONS AND EVIDENCES FILED BY T HE ASSESSEE. AGGRIEVED WITH SAME THE ASSESSEE COMPANY FILED THE APPEAL U/S 35 OF THE CENTRAL EXCISE ACT ON 12.10.2011 WITH COMMISSIONER CUSTOMS AND CEN TRAL EXCISE (APPEALS-1) WHO THOUGH UPHELD THE DUTY ON SHORTAGE AND ALSO ON EXCESS STOCK OF FINISHED GOODS BUT, ACCEPTED THE EXPLANATION FOR CASH FOUND AND SEIZED AT RESIDENCE OF THE DIRECTOR OF ASSESSEE AND FURTHER HELD THAT THE RE WAS NO SUFFICIENT MATERIAL ON RECORD TO ESTABLISH CLANDESTINE REMOVAL AND CLEA RANCE BY THE APPELLANT ON THIS COUNT AND HE DECLINED TO UPHOLD THE ORDER TO LOWER AUTHORITIES ON THIS ISSUE (APB 149). THE ASSESSEE COMPANY HAS FURTHER F ILED APPEAL WITH CESTAT, NEW DELHI AND THE SAME IS PENDING FOR ADJUDICATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 147 / 143(3) OF THE INCOME TAX ACT, 1961 THE ACTUAL FACTS ALONGWITH DOCUMENTAR Y EVIDENCES WERE BROUGHT TO THE KNOWLEDGE OF THE TD. AO VIDE LETTER DT. 3.3. 2015 (APB 31- 40) WITHOUT APPRECIATING THE SAME HAD MADE THE ADDITION OF RS. 52,35,630/- BY INVOKING THE PROVISION OF SECTION 145(3) ALLEGING THE SAME A S EXCESS STOCK. WHILE MAKING THE ADDITION ID. AO HAD ALSO FAILED TO APPRE CIATE THE FACT THAT STOCK OF RAW MATERIAL OF ALMOST SIMILAR QUANTITY WAS FOUND S HORT DURING THE COURSE OF ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 5 SURVEY AND SIMPLY PROCEEDED ON THE INFORMATION RECE IVED FROM CENTRAL EXCISE DEPARTMENT AND VIEW TAKEN BY THE ADDITIONAL COMMISS IONER OF THE CENTRAL EXCISE COMMISSIONERATE-I (ACCEC-I) THAT THE ASSESSE E WAS INVOLVED IN CLANDESTINE REMOVAL OF GOODS FROM THE FACTORY WITHO UT PAYMENT OF EXCISE DUTY. THE ID. AO FURTHER DID NOT AT ALL APPRECIATE THE FACT THAT ALLEGATION OF THE ACCEC-I, WITH RESPECT TO CLANDESTINE REMOVAL OF GOO DS WAS SPECIFICALLY DECIDED BY THE LD. COMMISSIONER (APPEALS)- EXCISE I N FAVOUR OF THE ASSESEE (APB 149) IT IS SUBMITTED THAT THE SAID SHORTAGE / EXCESS OF THE GOODS WAS ALLEGED WITHOUT ACTUAL WEIGHMENT OF GOODS (APB 18-23) WHICH IS EVIDENT FROM THE FACT THAT EACH AND EVERY PIECE OF MS INGOT AVAILABLE CAR RIES SAME WEIGHT I.E. 115 KG EACH AND EACH PIECE OF MS BILLETS CARRIES WEIGHT OF 1500 KG (APB 23). THE OFFICERS ALSO SEIZED THE ELECTRONIC WEIGHING MACHIN E OF THE FACTORY WHICH WAS USED TO WEIGH THE GOODS IN THE FACTORY. THE DATA OF THE SAID WEIGHING MACHINES WAS RETRIEVED BY THE CENTRAL EXCISE OFFICE RS ON 22/01/2010 BEFORE THE AUTHORIZED REPRESENTATIVES OF THE ASSESSEE COMP ANY AND NO RECORDS OF WEIGHMENT OF INPUTS AND FINISHED GOODS WERE FOUND A ND CONSEQUENTLY NOT MADE AVAILABLE TO THE ASSESSEE AND AS SUCH THE ALLE GED SHORTAGE / EXCESS OF THE INPUT AND FINISHED GOODS AS PER PANCHNAMA DATED 23/12/2009 WERE NOT SUPPORTED BY ACTUAL WEIGHMENT SLIPS WHICH FURTHER E STABLISHED THAT STOCK STATED IN THE SAID PANCHNAMA DATED 23.12.2009 IS NO T ACTUAL AND CORRECT. THE SURVEY OFFICIALS SUPPLIED THE COPY OF ABOVE PANCHNA MA DATED 23.12.2009 TO THE AUTHORIZED SIGNATORY OF THE ASSESSEE BUT DID NO T SUPPLY THE COPIES OF THE WEIGHING SLIPS IN SUPPORT OF THEIR CLAIM THAT BOTH INPUT (MS INGOTS) AND FINISHED GOODS (TMT) BARS WERE ACTUALLY WEIGHED IN THE FACTORY PREMISES BEFORE ASCERTAINING SHORTAGE / EXCESS OF INPUT AND FINISHED GOODS. VERY NEXT DAY OF SEIZURE AND CONFISCATION OF GOODS IN THE FACTORY PREMISES THE DIRECTOR OF THE ASSESSEE COMPANY SHRI ARUN JAIN MAD E A PROTEST TO THE DGCEI ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 6 OFFICE, JAIPUR AGAINST THE INCORRECT ALLEGATION OF SHORTAGE OF RAW MATERIAL AND EXCESS OF FINISHED GOODS OBSERVED ON 23.12.2009 (AP B 25). IN VIEW OF THE ABOVE FACTUAL POSITION STATED IN THE FOREGOING PARAS IT IS HUMBLY SUBMITTED THAT THE FINDINGS OF THE ADJUDICATING AUT HORITY THAT MR. ARUN KUMAR SINGH (AUTHORIZED SIGNATORY AT THE FACTORY OF THE A SSESSEE) ADMITTED THE CORRECTNESS OF THE PANCHNAMA DATED 23.12.2009 OR MR . ARUN JAIN, DIRECTOR ADMITTED THE EXCESS STOCK OF 202.955 MT HAVE NO LEG S TO STAND. FURTHER IT IS ALSO IMPORTANT TO NOTE THAT THE SURVEY OFFICERS NEV ER PROVIDED THE WEIGHMENT SLIPS IN SUPPORT OF THEIR CLAIM THAT EACH AND EVERY PIECE WAS WEIGHED AND ALSO THE RECORDS OF ACTUAL WEIGHMENT WAS NEVER FOUND IN THE MEMORY OF WEIGHING MACHINE WHICH WAS SEIZED BY THEM IN THE FACTORY PRE MISES OF THE ASSESSEE COMPANY AND AS SUCH THESE FACTS ALONE ARE SUFFICIEN T TO ESTABLISH THAT ALLEGATION OF SHORTAGE AND EXCESS OF THE STOCK AS P ER PANCHNAMA DATED 23.12.2009 ARE NOT BASED UPON ANY ACTUAL FINDING. T HUS, IF THE FACTS MENTIONED IN THE PANCHNAMA ITSELF WERE NOT TRUE, TH E SAME CANNOT BE MADE TRUE BY OBTAINING THE STATEMENT OF DIRECTOR OR AUTH ORIZED SIGNATORY OF THE ASSESSEE COMPANY. IN VIEW OF ABOVE POSITION THAT PROPER AND ACTUAL WE IGHMENT OF GOODS WAS NOT DONE BY THE CENTRAL EXCISE STAFF AND WEIGHT OF VARI OUS PIECES / BUNDLES OF INGOTS AND MS BARS WAS RECORDED MERELY ON ESTIMATIO N AND MORE PARTICULARLY SCRAP WAS NOT AT ALL WEIGHED (THOUGH ITS WEIGHT SO TO BE TAKEN ON MERE ESTIMATED BASIS IS HIGHLY SUBJECTED TO VARIATION) A ND THEREFORE SHORTAGE OF RAW MATERIAL SO SHOWN BY EXCISE AUTHORITY IS NOT AT ALL RELIABLE. SIMILAR IS THE POSITION OF FINISHED GOODS. IN THIS REGARD IT IS TO REITERATE THAT IMMEDIATE PROTEST WAS MADE WITHIN 24 HOURS BY THE ASSESSEE CO MPANY VIDE LETTERS DATED 24/12/2009 TO THE CONCERNED AUTHORITIES WITH REGARD TO ILLEGAL/UNCORROBORATED FINDING OF SHORTAGE / EXCESS OF INPUT / FINISHED GOODS ON 23.12.2009. IN VIEW OF THESE FACTS THE ALLEGATIO N OF ID. AO OF EXCESS/ ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 7 SHORTAGE OF STOCK IS NOT BASED UPON CORRECT FACTS A ND NOT CORROBORATED WITH ANY MATERIAL OR FINDING BROUGHT ON RECORD DURING TH E REASSESSMENT PROCEEDINGS. IT IS SUBMITTED THAT THE SURVEY OFFICIALS HAD FRAME D THE CHARGE THAT THE SHORTAGE OF 250.04 MT OF RAW MATERIAL WAS ON ACCOUN T OF CLANDESTINE REMOVAL AND CLEARANCE BY THE ASSESSEE COMPANY AND THE CASH AMOUNT OF RS. 22.50 LACS SEIZED FROM THE RESIDENCE OF SHRI ARUN JAIN WAS ALL EGED AS OUT OF THE SALE PROCEEDS OF SUCH CLANDESTINE REMOVAL OF STOCK. THIS ALLEGATION WAS PROVED INCORRECT AND THE CASH SEIZED FROM THE RESIDENCE OF THE DIRECTOR WAS HELD FULLY EXPLAINED BY THE COMMISSIONER (A)- EXCISE AS WELL A S THE ID. AO, WHO DID NOT MAKE ANY ADDITION ON THIS ACCOUNT. IT IS THUS SUBMI TTED THAT WHEN THE COMMISSIONER, CUSTOMS AND CENTRAL EXCISE (APPEALS-I ) HAS CLEARLY MENTIONED IN HIS ORDER THAT THERE WAS NO CLANDESTINE REMOVAL AND CLEARANCE OF STOCK BY THE ASSESSEE COMPANY, IT MEANS THAT THE STOCK WAS E ITHER LYING WITH THE ASSESSEE COMPANY OR USED IN THE PRODUCTION OF MS BA RS. HOWEVER, THE ID. CIT(A) HAS HELD IN THE APPELLATE ORDER THAT ASSESSE E HAD SOLD 39.09 MT OF STOCK AT RS. 10,74,819/- (PAGE 16-17 PARA XI). SINC E THE ALLEGATION OF THE EXCISE OFFICIALS WAS THAT THERE WAS SHORTAGE OF 250.04 MT OF MS INGOTS AND 202.950MT EXCESS STOCK OF FINISHED MS BARS, THIS DI FFERENCE IN THE WEIGHMENT MAY BE DUE TO HUMAN ERROR, IMPLIEDLY THE QUANTITY O F RAW MATERIAL ISSUED FOR PRODUCTION WAS NOT REDUCED FROM THE STOCKS OF RAW M ATERIAL AND SIMULTANEOUSLY THE STOCK OF FINISHED GOODS WAS NOT INCREASED BY THE SAME QUANTITY. BUT IN TOTALITY THE STOCK OF THE ASSESSEE FIRM REMAINS THE SAME. FURTHER WE WOULD LIKE TO SUBMIT THAT THE NATURE OF MANUFACTURING PROCESS IN WHICH THE ASSESSEE IS INVOLVED IS SUCH WHICH INCLUD ES THE MOVEMENT OF HEAVY RAW MATERIAL EITHER IN THE FORM OF INGOTS OR SCRAP MATERIAL AND IT IS PRACTICALLY NOT POSSIBLE TO WEIGH THE EXACT QUANTITY OF RAW MAT ERIAL EACH TIME IT IS PUT IN THE FURNACE FOR PRODUCTION OF ROLLS. THUS THE EXCES S FINISHED MS BARS LYING IN STOCK OF THE ASSESSEE COMPANY WAS ON ACCOUNT OF CON VERSION OF RAW MATERIAL ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 8 INTO FINISHED GOODS. AND FURTHER THAT AFTER THE SUR VEY THE EXCESS STOCK OF FINISHED GOODS WAS DULY ENTERED IN THE STOCK RECORD S (APB 10), THE GROSS PROFIT/LOSS EARNED BY THE ASSESSEE COMPANY HAD ALRE ADY BEEN REFLECTED IN THE AUDITED BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSID ERATION AND DUE INCOME TAX HAS BEEN PAID BY THE COMPANY ON THE SAME. THUS IT IS SUBMITTED THAT WHEN THE SALES OF 202.995 MT OF MS BARS HAD ALREADY BEEN INCLUDED IN THE TOTAL SALES IN BOOKS AND PROFIT ON SUCH SALE WAS AL SO REFLECTED AND DUE TAX ON SUCH PROFIT HAS ALREADY BEEN PAID AND MOREOVER CORR ESPONDING RAW MATERIAL USED FOR THIS PRODUCTION (LEADING TO THE ALLEGED SH ORTAGE OF RAW MATERIAL AT THE TIME OF SURVEY) HAS ALSO BEEN REDUCED IN THE BO OKS OF ACCOUNTS, THERE IS NO JUSTIFICATION TO SUSTAIN EVEN PART OF THE ADDITI ON, AS DONE BY LD. CIT(A) AS IT IS LEADING TO TAXING THE SAME RECEIPT / INCOME TWIC E. WITHOUT PREJUDICE TO ABOVE, IT IS ALSO SUBMITTED TH AT THE LD. CIT(A) HAS APPRECIATED THE FACT THAT THE SHORTAGE OF RAW MATER IAL AND SIMULTANEOUS EXCESS OF FINISHED GOODS AT THE TIME OF SURVEY WOUL D OBVIOUSLY BE DUE TO THE FACT THAT PART OF THE RAW MATERIAL HAS BEEN CONVERT ED INTO FINISHED GOODS AND WAS ABOUT TO BE RECORDED, HOWEVER IN THE MEANTIME S URVEY ACTION OF EXCISE DEPARTMENT TOOK PLACE. NOW COMING TO THE MARGINAL D IFFERENCE BETWEEN THE ALLEGED SHORTAGE OF RAW MATERIAL AND ALLEGED EXCESS OF FINISHED GOODS, IT IS SUBMITTED THAT UPTO THE DATE OF ACTION CONDUCTED ON 23.12.2009 BY THE OFFICERS OF DGCEI, THE ACTUAL PRODUCTION OF MS BARS WAS 29668.220 MT, WHEREAS CONSUMPTION OF MS INGOTS WAS 31781.160 MT R ESULTING INTO BURNING LOSS OF 1015.810 MT (3.20%), SCRAP GENERATION OF 10 18.865 MT (3.21%) AND MIS-ROLL OF 78.265 MT (0.25%). THE LD. CIT(A) HAS P ARTLY ACCEPTED AND PARTLY REJECTED THESE FACTS AND EVIDENCE AVAILABLE ON RECO RD BY OBSERVING THAT SCRAP SO GENERATED AND MIS-ROLL CAN BE USED AGAIN. IT IS SUBMITTED THAT THOUGH SCRAP AND MIS-ROLL CAN BE USED AGAIN, HOWEVER THE ANOTHER IMPORTANT FACT WHICH HAS BEEN NOT APPRECIATED BY LD. CIT(A) IS THAT IN FACT THESE SCRAP AND MIS-ROLL ARE THE VARY ITEMS WHICH CANNOT BE MEASURED AND THEIR W EIGHT CANNOT BE ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 9 DETERMINED ACCURATELY UNLESS WEIGHED ON THE WEIGHIN G SCALE. AS ALREADY MENTIONED AND BEING THE UNDISPUTED THAT NEITHER THE RAW MATERIAL NOR THE FINISHED GOODS HAD BEEN ACTUALLY WEIGHED AND THEIR WEIGHT WAS TAKEN ON APPROXIMATE BASIS. IN THIS APPROXIMATION, THE MOST DIFFICULT PART COMES FOR ESTIMATING THE WEIGHT OF RAW MATERIAL OF IRREGULAR SHAPE AND SIZE. ACCORDINGLY THE DIFFERENCE OF WEIGHT IS TO BE SEEN IN THIS BACK GROUND THAT THE EXACT WEIGHT OF RAW MATERIAL HAS NOT BEEN DETERMINED AND IT IS B EING TAKEN ON ESTIMATED BASIS, THEN CONSIDERING THE TOTAL WEIGHT OF RAW MAT ERIAL, THERE IS ONLY MINOR DIFFERENCE, WHICH NEEDS TO BE IGNORED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY THE OBSERVATION OF LD. CIT(A) THA T THE APPELLANT HAS PRODUCED 242.04 MT OF FINISHED GOODS AS AGAINST 202 .95 MT OF THE EXCESS STOCK OF FINISHED GOODS SO FOUND DURING THE COURSE OF SURVEY, IS WITHOUT CONSIDERING THE REALITY AND PRACTICALITY OF PECULIA R FACTS OF THIS CASE WHERE WEIGHT OF RAW MATERIAL WAS NOT ACTUALLY TAKEN BUT W AS TAKEN ON ESTIMATED BASIS AT THE TIME OF SURVEY AND WITHOUT APPRECIATIN G THAT IN SUCH A SITUATION THERE IS BOUND TO BE SOME MINOR DIFFERENCES, MORE P ARTICULARLY CONSIDERING THAT ACTUAL WEIGHMENT OF SCRAP WAS NOT AT ALL CONSI DERED AND IN THE INSTANT CASE IT HAS NOT BEEN DONE. ACCORDINGLY FINDING OF L D. CIT(A) OF BALANCE SHORTAGE OF RAW MATERIAL BEING CONVERTED INTO FINIS HED GOODS AND SOLD IS NOT TENABLE IN VIEW OF AFORESAID SUBMISSIONS AND CONSEQ UENT DIRECTION FOR ADDITION OF RS. 10,74.819/- (THOUGH NOT ADDED FINAL LY) DESERVES TO BE REMOVED / SET ASIDE. IT IS SUBMITTED THAT BOOKS OF ACCOUNTS ARE DULY AUD ITED. THE AUDITOR HAS NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNTS. MOREOVE R, THE LD. AO HAS NOT POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUN TS EXCEPT THE DIFFERENCE IN THE STOCK OF RAW MATERIAL AND FINISHED GOODS AT THE TIME OF SURVEY OF DGCEI, WHICH HAS ALSO BEEN DULY CORRECTED BY THE APPELLANT BY PASSING THE ENTRY IN THE FINISHED GOODS AND RAW MATERIAL ACCOUNT. THE LD . CIT(A) HAS ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS. ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 10 THE LD. CIT(A) WHILE UPHOLDING THE INVOKING OF PROV ISIONS OF SEC 145(3) WHICH WAS ONLY ON BASIS OF INFORMATION SUPPLIED BY THE CE NTRAL EXCISE DEPARTMENT, ESTIMATED THE GP @3.20% AS AGAINST 3.03% DECLARED B Y THE ASSESSEE. THE GP DECLARED BY THE ASSESSEE FOR THE PRECEDING THREE YE ARS IS AS UNDER: AY TURNOVER GP NP 2007 - 08 109 CR. 3.17% 0.96% 2008 - 09 135 CR. 3.06% 1.01% 2009 - 10 121 CR. 3.03% 1.14% THE GP ESTIMATED BY THE LD. CIT(A) IS WITHOUT ANY B ASIS NOR BASED ON ANY COMPARATIVE CASE. IT IS AN ESTABLISHED POSITION BAC KED WITH JURISDICTIONAL PRONOUNCEMENTS, THAT IF THE PROVISIONS OF SEC 145(3 ) ARE INVOKED THE BEST GUIDE TO ESTIMATE THE GP / NP IS THE PAST PERFORMAN CE OF THE ASSESSEE. THE ABOVE TABLE REVEALS THAT THOUGH THERE IS A MARGINAL FALL IN THE GP RATE BY ONLY 0.03%, HOWEVER THE N.P. RATE HAS INCREASED COMPARAT IVELY SUBSTANTIALLY BY 0.13%. THUS THE GP / NP AS DECLARED BY THE ASSESSEE OUGHT NOT TO BE DISTURBED BY LD. CIT(A) AND THEREFORE THE ADDITION OF RS. 20,11,527/- SUSTAINED BY THE LD. CIT(A) DESERVES TO BE DELETED AND THE AS SESSEE PRAYS ACCORDINGLY. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S GOTAN LIME KHANIJ UDHYOG REPORTED IN 256 ITR 243 HAS HELD THAT IN EVE RY CASE OF REJECTION OF BOOKS OF ACCOUNTS U/S 145(3), THERE IS NO NEED TO M AKE ADDITIONS IF THE GP / NP RESULTS ARE SATISFACTORY. THIS CASE OF APPELLANT IS FULLY SUPPORTED BY THE AFORESAID DECISION OF HONBLE RAJASTHAN HIGH COURT, IN AS MUCH AS THAT NP RATE SO SHOWN DURING THE YEAR UNDER CONSIDERATION IS BET TER THAN EARLIER YEARS AND THUS DOES NOT CALL FOR ANY TRADING ADDITION. IN THE EVENT, THE LD. CIT(A) WAS NOT SATISFIED WITH THE GP / NP RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THEN AT BEST GP RATE OF LAST YEAR (I.E. 3.06%) COULD HAVE BEEN CONSIDERED BY LD. CIT(A) WHEREAS THE GP RATE OF 3.20% SO TAKEN BY LD. CIT(A) IS WITHOUT ANY BASIS, WITHOUT ANY COMPARABLE CASE AND WITHOUT CONSIDERING EARLIER YEA R GP / NP VIS-A-VIS THE GP / NP OF THE YEAR UNDER CONSIDERATION OF THE APPELLA NT. ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 11 7. ON THE CONTRARY, THE LD. DR HAS VEHEMENTLY SUPPO RTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CI T(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD. CIT(A) HAS DECIDED THE ISSUE BY HOLDING AS UNDER: (X) IT IS AN UNDISPUTED FACT THAT ON THE DATE OF SU RVEY BY DGCEI ON 23/12/2009, THERE WAS SHORTAGE OF RAW MATERIAL OF 2 50.04 MT VALUED AT RS 54,50,562/- AND EXCESS STOCK OF FINISHED GOODS O F 202.995 MT VALUED AT RS 62,40,494/-. IT HAS INCREASED THE STOCK OF FI NISHED GOODS BY 202.995 MT AND REDUCED THE STOCK OF RAW MATERIAL BY 250.04 MT IN ITS STOCK RECORDS BEFORE 31ST MARCH 2010. BUT THE FACT REMAIN S THAT THERE WAS SHORTAGE OF RAW MATERIAL AND EXCESS OF FINISHED GOO DS. THERE IS NO EVIDENCE ON RECORD THAT THE APPELLANT HAS SOLD ITS RAW MATERIAL OUTSIDE ITS BOOKS OF ACCOUNTS. THUS, IN VIEW OF THESE FACTS, TH E ONLY CONCLUSION WHICH CAN BE DRAWN IS THAT THE SHORTAGE OF RAW MATERIAL E XPLAINS THE EXCESS OF THE FINISHED GOODS I.E. THE SHORTAGE IN RAW MATERIA L ACCOUNTS FOR THE EXCESS OF FINISHED GOODS FOUND ON THE DATE OF SURVE Y. (XI) DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T HAS FILED A CHART SHOWING DETAILS OF MS INGOTS CONSUMPTION, PRODUCTION OF MS BARS, SCRAP, BURNING LOSS AND MIS ROLL, WHICH WAS ALSO FILED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS FOR THE PERIOD 01.04.2009 TO 22/12/2009 . IT IS NOTED FROM THE SAID CHART THAT ON CONSUMPTION OF 31781.160 MT OF MS INGOTS, THERE WAS BURNING LOSS OF 1015.810 MT I.E. THE BURNING LO SS ACCOUNT FOR 3.20% OF THE CONSUMPTION OF RAW MATERIAL. IT MAY BE MENTI ONED HERE THAT NO ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 12 BENEFIT CAN BE GIVEN TO THE APPELLANT ON ACCOUNT OF MIS ROLL AND SCRAP GENERATED DURING THE PROCESS OF MANUFACTURING OF MS BARS AS CLAIMED BY THE APPELLANT IN ITS SUBMISSIONS AS THESE ARE RECYC LED FOR PRODUCTION OF MS INGOTS AS THE FINANCIAL STATEMENTS OF THE APPELL ANT SHOW ONLY VERY SMALL AMOUNT ON SALE OF SCRAP. IF THIS BURNING LOSS OF 3.20% IS APPLIED TO 250.04 MT OF RAW MATERIAL FOUND SHORT AT THE TIME O F SURVEY AND CONTENTION OF THE APPELLANT IS ACCEPTED THAT THE RA W MATERIAL IS CONVERTED INTO FINISHED GOODS, THEN THE CONSUMPTION OF 250.04 MT OF RAW MATERIAL SHOULD PRODUCE 242.04 MT OF MS BARS WH EREAS THE EXCESS STOCK OF MS BARS FOUND BY THE OFFICERS OF DGCEI WAS TO THE TUNE OF 202.95 MT. THUS, THERE IS FALLACY IN THE CLAIM OF THE APPE LLANT COMPANY THAT IT HAS TAKEN INTO ITS STOCK REGISTER THE SHORTAGES OF RAW MATERIAL AND THE EXCESS STOCK OF FINISHED STOCK. IN FACT, IT HAS TAK EN INTO ACCOUNT, THE EXCESS STOCK OF 202.95 MT ONLY WHEREAS THE ACTUAL P RODUCTION FROM 250.04 MT OF RAW MATERIAL SHOULD BE TO THE TUNE OF 242.04 MT AS COMPUTED ABOVE. THUS, IT IS CRYSTAL CLEAR THAT THE APPELLANT HAS SOLD 39.09 MT OF THE FINISHED GOODS OUTSIDE ITS BOOKS OF ACCOU NTS. THESE FACTS, AGAIN SUPPORT THE REJECTION OF BOOKS OF ACCOUNTS OF THE A PPELLANT COMPANY U/S 145(3) OF THE ACT. IT MAY BE MENTIONED THAT AS PER THE DETAILS OF VALUATION OF EXCESS FINISHED STOCK OF 202.995 MT, IT WAS NOTE D THAT THE SAID STOCK WAS VALUED AT RS. 55,80,405/- I.E. @ RS. 27,496/- P ER MT. THUS, THE STOCK OF 39.09 MT IS VALUED AT RS. 27,496/- PER MT AND IT IS HELD THAT THE APPELLANT HAS SOLD 39.09 MT OF FINISHED STOCK VALUE D AT RS.10,74,819/- OUT OF ITS BOOKS OF ACCOUNTS. (XII) I HAVE ALREADY UPHELD THE REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT U/S 145(3) OF THE ACT. IT HAS BEEN HELD IN A NUMBER OF JUDICIAL PRONOUNCEMENTS THAT AFTER REJECTING THE BOOKS OF AC COUNTS, THE PAST TRADING RESULTS ARE TO BE KEPT IN VIEW WHILE APPLYI NG THE GP RATE. IT WOULD ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 13 BE APPROPRIATE TO REPRODUCE HEREUNDER THE PAST TRAD ING RESULTS OF THE APPELLANT COMPANY AS UNDER: FY TURNOVER GROSS PROFIT G.P% NET PROFIT (LOSS) NP% 2007 - 08 105,62,17,373/ - 3,35,50,742/ - 3.17% 1,16,76,460/ - 1.0 9% 2008 - 09 135,70,70,031/ - 4,15,42,786/ - 3.06% 1,29,95,367/ - 0.96% 2009 - 10 121,80,17,2781 - 3,69,65,026/ - 3.03% 1,38,43,519/ - 1.14% (XIII) IT IS NOTED THAT ON TURNOVER OF RS. 105,62,1 7,373/- AND RS. 135,70,70,031/- THE APPELLANT HAS DECLARED GP RATE OF 3.17% AND 3.06% FOR THE AY 2008-09 AND 2009-10 RESPECTIVELY. HOWEVE R, FOR THE YEAR UNDER CONSIDERATION, THE GP RATE WAS 3.03% ON TURNO VER OF RS. 121,80,17,278/-. IT HAS BEEN HELD EARLIER IN THIS O RDER THAT THE APPELLANT HAS SOLD 39.09 MT OF FINISHED STOCK VALUED AT RS. 1 0,74,819/- OUT OF ITS BOOKS OF ACCOUNTS, THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I THINK IT WOULD BE APPROPRIATE TO APPLY A GP RATE OF 3.20% TO THE TOTAL TURNOVER OF RS. 121,80,17,278/- WHICH GIV ES GROSS PROFIT OF RS. 3,89,76,553/- AGAINST RS. 3,69,65,026/- (3.03%) DEC LARED BY THE APPELLANT RESULTING IN TRADING ADDITION OF RS. 20,11,527/-. I T IS CLARIFIED THAT THIS ADDITION OF RS. 20,11,527/- INCLUDES SALE AMOUNTING TO RS. 10,74,819/- WHICH WAS HELD TO BE OUT OF THE BOOKS OF ACCOUNTS O F THE APPELLANT. THE BASIS OF MAKING ADDITION BY THE ASSESSING OFFICE R WAS THAT DURING THE SURVEY OPERATION, THE CENTRAL EXCISE DEPARTMENT FOU ND THERE WAS EXCESS OF RAW MATERIAL. IT IS THE CONTENTION OF THE ASSESSE E THAT THE LD. CIT(A) HAS NOT TAKEN INTO CONSIDERATION THE FACT THAT SOME SCR AP WAS GENERATED DURING THE MANUFACTURING PROCESS, WHICH GAVE DIFFERE NCE BETWEEN THE RAW MATERIAL AND FINISHED GOODS. FURTHER THE LD. COUNSE L FOR THE ASSESSEE HAS CONTENDED THAT THE FIRST APPELLATE AUTHORITY UNDER THE CENTRAL EXCISE ACT ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 14 I.E. COMMISSIONER OF APPEAL-1, CENTRAL EXCISE VIDE ORDER DATED 02/1/2013 HAS GIVEN A FINDING THAT THERE WAS NO SUFFICIENT MAT ERIAL ON RECORD TO ESTABLISH CLANDESTINE REMOVAL ON CLEARANCE BY THE A PPELLANT. IT IS STATED BY THE ASSESSEE THAT ON THE DATE OF SURVEY, ACTUAL PRO DUCTION OF MS BARS WAS 29668.220 MT WHEREAS CONSUMPTION OF MS INGOTS WAS 317 81.160 MT RESULTING INTO BURNING LOSS OF 1015.810 MT, SCRAP GE NERATION OF 1018.865 MT AND MIS ROLL OF 78.265 MT. WE FIND THAT THIS FACT IS NOT CONSIDERED BY THE LD. CIT(A) WHILE DECIDING THIS ISSUE. HAD THE LD . CIT(A) TAKEN INTO ACCOUNT THIS FACT THAT THIS ADDITION WOULD NOT HAVE BEEN SUSTAINED. THIS FACT IS NOT REBUTTED BY PLACING ANY CONTRARY MATERI AL BY THE REVENUE. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION SUSTAINED BY THE LD. CIT(A). ACCORDINGLY, GROUND RAISED IN THE C.O. IS ALLOWED. 9. NOW WE TAKE REVENUES APPEAL IN ITA NO. 143/JP/201 7. IN THIS APPEAL, THE ONLY ISSUE INVOLVED IS RESTRI CTING THE TRADING ADDITION TO RS. 20,11,527/- INSTEAD OF RS. 52,35,63 0/- MADE BY THE ASSESSING OFFICER. THE LD DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE ASSESSING OFFICER. ON THE CONTRARY, THE LD AR HAS R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOT H THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. SO FA R THE ACTION FOR ITA 143/JP/2017 & CO 06/JP/2017_ DCIT VS PREMIUM BARS 15 RESTRICTING THE ADDITION BY THE LD CIT(A), WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS CONSIDERED THE FACTS AND COUPLED WITH THE FACTS THAT THE FIRST APPELLATE AUTHORITY OF THE CENTRAL EXCISE DEPARTMEN T HAS GIVEN SOME RELIEF TO THE ASSESSEE. EVEN THE ASSESSING OFFICER HAS NOT CARRIED OUT ANY INDEPENDENT ENQUIRY ON THE BASIS OF THE INFORMATION RECEIVED FROM THE CENTRAL EXCISE DEPARTMENT, THEREFORE, THE GROUND RA ISED IN THE REVENUES APPEAL IS HEREBY DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/01/2018. SD/- SD/- HKKXPAN DQY HKKJR (BHAGCHAND) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24 TH JANUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE D.C.I.T., CIRCLE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S PREMIUM BARS (P) LTD., JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 143/JP/2017 & CO 06/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR