The ACIT, Circle-4, Baroda V. M/s. Ratnaveer Stainless Products Pvt. Ltd., Vadodara

ITA 1690/AHD/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3096 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-03-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(2)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1690/AHD/2015 ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 2(1)(2), BARODA VS M/S. RATNAVEER STAINLESS PRODUCTS PVT LTD, E-77/121 GIDC, SAVLI, MANJUSAR, VADODARA-391 775 [PAN : AABCR 9648 F] / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI DIL EEP KUMAR, SR DR ASSESSEE BY : SHRI TUSHAR P HEMANI WITH SHRI PARIMALSINH B PARAMR, ARS / DATE OF HEARING : 11/03/2020 / DATE OF PRONOUNCEMENT: 11/03/2020 / O R D E R PER RAJPAL YADAV, VICE PRESIDENT :- THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-2, VAD ODARA DATED 24 TH MARCH 2015 PASSED FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE N OT IN CONSONANCE WITH RULE 8 OF INCOME TAX (APPELLATE TRIBUNAL) RULE S, 1963; THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. THOUGH THE REVENUE HAS TAKEN FOUR GROUNDS OF APPEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE NAMELY THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE OF SCRAP OUTSI DE THE BOOKS OF ACCOUNTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCOME OF RS.7 8,03,992/-. AT THE RELEVANT TIME, IT WAS ENGAGED IN THE BUSINESS OF MA NUFACTURING STAINLESS ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 2 STEEL PRECISION FABRICATION EQUIPMENTS. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT WAS ISSUED AND SERVED UPON THE ASSES SEE. ON AN ANALYSIS OF THE RECORD, LEARNED ASSESSING OFFICER FORMED AN OPI NION THAT IN THE MANUFACTURING ACTIVITY OF THE ASSESSEE SCRAP IS BEI NG GENERATED. HE VISUALIZED THE GENERATION OF SCRAP STARTING FROM TH E MONTH OF APRIL 2007 UPTO 31 ST MARCH 2008. THE ASSESSING OFFICER FOUND THAT THE SALE OF SCRAP FOR THE MONTH OF FEBRUARY AND MARCH 2008 IS QUITE LOW I N COMPARISON TO THE FINISHED GOODS; THEREFORE, HE ESTIMATED THE GENERAT ION OF SCRAP BY TAKING INTO CONSIDERATION THE PERCENTAGE OF SCRAP GENERATE D IN EARLIER MONTHS AND HELD THAT THE ASSESSEE MUST HAVE SOLD THE SCRAP OUT OF BOOKS. ON THIS ANALYSIS, HE WORKED OUT THE VALUE OF SCRAP WHICH OU GHT TO HAVE BEEN GENERATED BY THE ASSESSEE AND NOT AVAILABLE IN THE CLOSING STOCK. ACCORDINGLY AN ADDITION OF RS.2,90,41,625/- WAS MAD E. SIMILARLY, ON ACCOUNT OF UNDERVALUATION OF THE FINISHED GOODS, AN ADDITION OF RS.4,81,596/- WAS ALSO MADE. THE ASSESSING OFFICER HAS THUS DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS.3,73,27,211/- AS AGAINST THE DISCLOSED INCOME OF RS.78,03,990/-. 4. DISSATISFIED WITH THE ADDITIONS, ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A). THE ASSESSEE HAS CONTEN DED THAT UPTO JANUARY 2008 IT USED TO BUY SHEETS, CONVERTED IT INTO FINIS HED GOODS I.E. SS WASHERS AND THE RESULTANT SCRAP WAS SOLD IN THE OPEN MARKET . FROM FEBRUARY 2008 AND ONWARDS, THE SCRAP GENERATED UPON CONVERSION OF SHEETS INTO SS WASHERS WAS CONVERTED INTO SHEETS BY MELTING AND TH EREAFTER, AGAIN IT WAS USED AS RAW-MATERIALS FOR MANUFACTURING SS WASHERS. SUCH ACTIVITY WAS CARRIED OUT IN THE WAGHODIA UNIT TAKEN ON LEASE BY THE ASSESSEE. THE ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 3 LEARNED FIRST APPELLATE AUTHORITY HAS ACCEPTED THE STAND OF THE ASSESSEE AND DELETED THE ADDITION. 5. DISSATISFIED WITH THE ORDER OF THE LEARNED CIT(A ), THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 07.12.2012 SET ASIDE THE ISSUE TO THE FILE OF THE A SSESSING OFFICER, BECAUSE ACCORDING TO THE TRIBUNAL THE ANNEXURE-A FILED BY T HE ASSESSEE BEFORE THE LEARNED CIT(A) SHOWING THE ACTIVITY OF MELTING THE ALLEGED SCRAP AND MANUFACTURING OF SHEETS WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. THE LEARNED CIT(A) HAS ALSO NOT CONFRONTED THE ASSE SSING OFFICER WITH THIS FRESH MATERIAL; HENCE THE TRIBUNAL HAS SET ASIDE TH E ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PASSING A FRESH ASSESSMENT OR DER AFTER LOOKING INTO THESE DETAILS. 6. THE LEANED ASSESSING OFFICER HAS MADE THE ADDITI ON AGAIN VIDE ORDER DATED 5 TH FEBRUARY 2014. 7. DISSATISFIED WITH THE ASSESSMENT ORDER, ASSESSEE CARRIED THE MATTER AGAIN IN APPEAL BEFORE THE LEARNED CIT(A) WHO HAS D ELETED THE ADDITION BY RECORDING A WELL REASONED FINDING. THE ORDER OF THE LEARNED CIT(A) READS AS UNDER:- 4.4. I HAVE CONSIDERED THE FACTS OF THE CASE, THE AO'S OBSERVATIONS AND THE SUBMISSION MADE BY THE AR OF THE APPELLANT. FOR DEC IDING THIS APPEAL, THE FACTS RELATING TO ADDITIONS MADE IN THE ORIGINAL AS SESSMENT ORDER PASSED ON 30/12/2010 IS REQUIRED TO BE CONSIDERED. IN THE ORI GINAL ASSESSMENT ORDER, THE AO HAD HELD THAT THE PERCENTAGE OF SCRAP GENERATION SHOWN IN THE MONTHS OF FEB AND MARCH WERE LOW AS COMPARED TO THAT SHOWN IN THE EARLIER MONTHS. THE APPELLANT HAD CLAIMED BEFORE THE AO THAT DURING THIS YEAR, IT HAD CHANGED ITS MANUFACTURING PROCESS. EARLIER THE GENE RATED SCRAP WAS SOLD IN THE MARKET. BUT IN THE FINANCIAL YEAR 2007-08, THE APPELLANT STARTED REPROCESSING THE SCRAP INTO SHEETS WHICH WERE AGAIN USED FOR MAKING FINISHED PRODUCTS. IT WAS ONLY AFTER THE SECOND CYCLE REUSE WAS COMPLETED THAT THE SCRAP WAS SOLD IN THE MARKET. IN THE APPELLATE PROC EEDINGS RELATING TO THE ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 4 ORIGINAL ASSESSMENT ORDER, THE APPELLANT CLAIMED TH AT THIS FACT REGARDING REPROCESSING OF THE SCRAP HAD BEEN TOTALLY IGNORED BY THE AO LEADING TO THE ADDITION MADE BY HIM OF 120430 KGS OF GRADE 304 AND 71065 KG OF GRADE 316 SCRAPS VALUED AT RS.2,90,41,625/-. AFTER CONSID ERING ORIGINAL ASSESSMENT ORDER AND THE DETAILS SUBMITTED BY THE APPELLANT IN THE APPELLATE PROCEEDINGS, THE ADDITIONS MADE BY THE AO WERE DIRECTED TO BE DE LETED BY MAKING FOLLOWING OBSERVATION IN THE APPELLANT ORDER PASSED BY CIT(A)-III, BARODA IN APPEAL NO. CAB/III-220/2010-11 DATED 28/09/2011:- '4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN THAT THE APPELLANT HAD SUBMITTED BEFORE THE A.O, THAT A PART OF THE SCRAP GENERATED WHILE MAKING THE FINISHED GOODS FROM THE RAW MATERIAL, IN THE FIRST AND SECOND CYCLE OF PRODUCTION IS REUSED BY CONVERTING IT INTO SHEET FORM AND AGAIN USING IT FOR THE PRODUCTION OF FINISHED G OODS. THE APPELLANT HAS SUBMITTED A COPY OF LETTER DATED 22.12.2010 ADD RESSED TO THE A.O. IN WHICH THIS PROCESS HAS BEEN EXPLAINED AS FOLLOWS : A) FIRST OF ALL, WE NEED TO STATE THAT THE COMPANY HAS CHANGED ITS MANUFACTURING PROCESS AND ACCORDINGLY THE COMPANY H AS STARTED REPROCESSING THE SCRAP GENERATED AT THE FIRST AS WE LL AS FOR SECOND TIMES. THUS, WHEN THERE WAS A CHANGE IN THE MANUFAC TURING PROCESS FROM 2007. THUS, WHATEVER THE SCRAP GENERATED AT TH E END OF FIRST / SECOND PROCESS, IS TREATED AS THE PART OF WORK IN P ROGRESS UP TO AND THEN ONLY WHATEVER SCRAP REMAINS ARE ALSO BEING DIV IDED INTO DIFFERENT CATEGORY HAVING DIFFERENT CONTENTS OF NICKEL. THUS, THE SCRAP WITH HIGHER NICKEL CONTENTS ARE TO BE SOLD TO SPECIFIC C USTOMERS AT GOOD PRICE AND SCRAP WITH LOWER CONTENTS OF NICKEL ARE S OLD TO OTHER CUSTOMERS HAVING SEPARATE REQUIREMENT WHERE THE REA LIZATION IS ALWAYS LOWER. THUS WHATEVER THE SCRAP GENERATED AT THE END OF FIRST / SECOND PROCESS IS SHOWN AS WORK IN PROGRESS AND THU S, THERE WAS NO STOCK OF THE SCRAP REMAINING WITH THE COMPANY AS AT 31.03.2007 AND ACCORDINGLY NO OPENING STOCK WAS SHOWN BY THE COMPA NY. IT IS PERTINENT TO NOTE THAT THE COMPANY HAS SOLD THE LAS T SCRAP DURING F.Y. 2006-07 I.E. ON 30.03.2007 AND AS THE ENTIRE SCRAP WAS SOLD ON 30.03.2007, NO QUANTITY WAS CARRIED FORWARD AS OPEN ING STOCK FOR THE FINANCIAL YEAR 2007-08. THUS, THERE WAS NO SCRAP GE NERATED AFTER THE LAST INVOICE OF 30.03.2007 AND THEREFORE NO QUANTIT Y WAS SHOWN AS OPENING STOCK, THE LAST SCRAP SAFE BILL IS ATTACHED HEREWITH AS ENCLOSURE 2 (PAGE NO.4) B) AS MENTIONED EARLIER, IT IS TO BE REITERATED T HAT BECAUSE OF THE CHANGE IN THE PROCESS AND COMMENCEMENT OF RE-UTILIZ ATION OF THE SCRAP GENERATED AT FIRST AND SECOND PROCESS AND CONVERT T HE SAME IN THE SHEET ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 5 FORM, THE COMPANY IS SHOWING THE SCRAP GENERATED, I F ANY, AFTER THE FIRST / 2ND PROCESS AS WORK IN PROGRESS AND NOT AS SCRAP BECAUSE CERTAIN PROCESSES ARE TO BE CARRIED ON THE SAID SCR AP MAKING THEM USABLE AS RAW MATERIAL AND ULTIMATELY THE SAID RAW MATERIAL WILL BE CONVERTED INTO FINISHED GOODS. THUS THIS WAS NEVER A SCRAP AND THEREFORE IT IS NOT SHOWN ACCORDINGLY. A STATEMENT SHOWING THE DETAILS OF CONSUMPTION OF RAW MATERIAL AFTER 12.03.2008 AND FINISHED GOODS MANUFACTURED AND SCRAP GENERATED IS ENCLOSED AS ENC LOSURE 3 (PAGE NO. 5). D) IT IS STATED THAT THE SCRAP GENERATED WAS 8,94, 206 KG, WHICH IS THE CORRECT QUANTITY. HOWEVER, THERE WAS NO OPENING STO CK BECAUSE OF THE FACT THAT THE LAST SCRAP WAS SOLD BY THE COMPANY DU RING FY 2006-07 ONLY ON 30.03.2007 AND THERE WAS NO OPENING STOCK W HICH IS ALSO CORROBORATED AND CONFIRMED BY THE DETAILS GIVEN AT PARA 3(A) ABOVE. MORE SO, THERE WAS CLOSING STOCK OF SCRAP BECAUSE O F THE FACT THAT THE ENTIRE SCRAP GENERATED AT FIRST / SECOND TIME ARE A LSO BEING RE-PROCESSED AND THEY ARE SHOWN AS WORK IN PROGRESS AND NOT AS S CRAP BECAUSE IT IS ALSO SALABLE / USABLE AT MUCH HIGHER VALUE THAN THE VALUE OF THE SCRAP. THUS THE QUESTION OF ANY SCRAP WHICH ARE GENERATED OUTSIDE THE BOOK DOES NOT ARISE. WE NEED TO REITERATE THAT DUE TO TH E CHANGE IN THE PRODUCTION PROCESS THE SCRAP GENERATED BY THE COMPA NY ARE AGAIN CONVERTED INTO RAW MATERIAL AND THEN INTO FINISHED GOODS AFTER RE- PROCESS, WHEN IT IS NOT FEASIBLE FOR THE COMPANY TO CONVERT THE SCRAP INTO THE FINISHED GOODS THEN ONLY THE SAME IS BEING SHOWN AS SCRAP AND SOLD IN THE MARKET.' 4.3.1 FROM THE ASSESSMENT ORDER, IT IS SEEN THAT T HIS FACTOR OF REUSE OF SCRAP BY CONVERTING IT INTO SHEET FORM HAS BEEN TOTALLY I GNORED BY THE A.O. WHILE PASSING THE ASSESSMENT ORDER. AFTER THE CHANGE IN P ROCESS OF MANUFACTURING BY THE APPELLANT, THE RAW MATERIAL AT ANY POINT OF TIME WILL BE EXISTING IN FOLLOWING THREE FORMS (I) RAW MATERIAL (II) RAW MATERIAL AS PART OF WORK IN PROGRESS WHI CH INCLUDES THE RAW MATERIAL BEING USED TO PRODUCE FINISHED PRODUCTS AS WELL AS SCRAP WHICH IS BEING CONVERTED/HAS BEEN CONVERTED INTO SH EET FORM FOR BEING USED AGAIN FOR PRODUCTION OF FINISHED GOODS. (III) FINISHED GOODS. 4.3.2 THE A.O. IN PARA 4.5 OF HIS ORDER HAS STATED THAT THERE WAS NOT GENERATION OF SCRAP IN THE MONTHS OF FEBRUARY AND M ARCH 2008. BUT HE HAS NOT CONSIDERED THE SUBMISSION OF THE APPELLANT THAT WHATEVER SCRAP WAS GENERATED DURING THESE MONTHS WERE AGAIN BEING REUS ED FOR CONVERSION INTO SHEET FORM AND HENCE SUCH SCRAPS WERE PART OF THE W ORK IN PROGRESS. THE TOTAL ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 6 DISREGARD OF QUANTITY OF SCRAP FORMING PART OF WORK IN PROGRESS GIVES A DISTORTED FIGURE OF RAW MATERIAL CONSUMPTION, SCRAP S GENERATION AND FINISHED GOODS. THE APPELLANT HAS CLAIMED THE PROCESS LOSS O F 2.55% WHICH HAS NOT BEEN ADVERSELY COMMENTED UPON BY THE A.O. THE APPEL LANT'S BOOKS OF ACCOUNT ARE AUDITED AND VIDE ANNEXURE G QUANTITATIV E DETAILS OF PRINCIPAL ITEMS OF RAW MATERIAL ARE GIVEN. A PERUSAL OF THE S AME SHOWS THAT THE AUDITOR HAS GIVEN A NOTE STATING THAT THE ABOVE QUA NTITY INCLUDE THE WORK IN PROGRESS QUANTITY OF RAW MATERIAL. THIS ANNEXURE IS REPRODUCED BELOW: (QTY. IN KGS.) SR. PARTICULARS OPENING PURCHASE CONSUMPTION SALES CLOSING STOCK 1. S.S. SHEET-304 286101 1958733 1815878 0 428956 2. S.S. SHEET-316 226013 1112013 840118 0 497908 TOTAL 512114 3070746 2655996 0 926864 NOTE: THE ABOVE QUANTITY INCLUDE THE WORK IN PROGRE SS QTY. OF RAW MATERIAL ANNEXURE H OF THE AUDIT REPORT, GIVES A STATEMENT O F QUANTITATIVE DETAILS OF FINISHED GOODS MANUFACTURED. THE SAME ANNEXURE IS REPRODUCED BELOW: SR. PARTICULARS OPENING MANUFACTURING SALES CLOSING STOCK 1. S.S. WASHERS -304 35823.00 1000721.27 1019799.56 16744.71 2. S. S. WASHERS -316 8192.18 640513.73 635920.44 12785.47 3. S.S. SHEET METAL COMPONENTS 304 10953.00 90085.00 100980.00 58.00 4. BRASS WASHERS 36.00 0.00 0.00 36.00 TOTAL 55004.18 1731320.00 1756700.00 29624.18 4.3.3 THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS HAS ALSO SUBMITTED AN INVENTORY SHEET SHOWING STOCK IN PROCE SS FOR THE F.Y. 2007-08 WHICH HAS BEEN MADE ANNEXURE 'A' TO THIS OR DER. 4.3.4 A PERUSAL OF THESE THREE SHOWS THAT THE APPEL LANT HAS BEEN ABLE TO EXPLAIN THE QUANTITATIVE DETAILS OF RAW MATERIAL, S CRAP AND FINISHED GOODS. IF THE A.O. 'S CONTENTIONS ARE ACCEPTED, THE N THERE WOULD BE FURTHER PRODUCTION OF SCRAP OF 120430 KG. FOR GRADE 304 AND 71065 KG OF GRADE 316 VALUED AT' 2,90,41,625/, WHICH HAS BEE N ALLEGEDLY SOLD BY THE APPELLANT IN THE MARKET OUTSIDE THE BOOKS OF AC COUNT AS PER THE A.O. IF THIS AMOUNT IS ADDED TO THE SALE OF SCRAP SHOWN BY THE APPELLANT, THEN THE BALANCE SHOWN ABOVE WILL BECOME A NEGATIVE FACTOR AND THE QUANTITATIVE DETAILS OF RAW MATERIAL, SCRAP AND FIN ISHED GOODS WOULD NOT MATCH. FOR THE ARGUMENT SAKE EVEN IF IT ASSUMED THAT THE PROCESS ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 7 LOSS OF 32394 KGS., HAS NOT TAKEN PLACE, EVEN THEN THE BALANCE FIGURE WILL BE A NEGATIVE FIGURE IF THE ARGUMENT GIVEN BY THE A.O. IS ACCEPTED. 4.3.4 THE ONLY OTHER ARGUMENT CAN BE THAT THOUGH TH E APPELLANT HAD SOLD OFF THE SCRAP IN MARKET, IT IS STILL BEING SHOWN AS PAR T OF THE WORK IN PROGRESS. IN SUCH A CASE TOO, ONLY THE PROFIT EARNE D ON SUCH UNACCOUNTED SALES CAN BE ADDED TO THE TOTAL INCOME. BUT, OWING TO THE FACT THAT THE APPELLANT HAD CHANGED ITS MANUFACTURI NG PROCESS AND IS REUSING THE SCRAP GENERATED BY CONVERTING IT INTO S HEET FORM IN ORDER TO MANUFACTURE FINISHED GOODS AND THIS CHANGE IN MANUF ACTURING PROCESS HAS NOT BEEN PROVED TO BE BOGUS OR NON-EXISTENT, TH IS ARGUMENT IS ALSO NOT ADMISSIBLE. 4.4 ON THE BASIS OF ALL THE FACTS DISCUSSED ABOV E, IT IS HELD THAT THE ADDITION MADE IN THE ASSESSMENT ORDER ON ACCOUNT OF SALES OF SCRAP OUTSIDE THE BOOKS OF ACCOUNTS IS NOT BASED UPON FACTS AND IS NO T SUSTAINABLE. ACCORDINGLY, THIS ADDITION IS DIRECTED TO BE DELETE D.' 4.4.1 THE DEPARTMENT FILED AN APPEAL BEFORE ITAT AG AINST THE ORDER OF CIT(A). THE ITAT HELD THAT ANNEXURE A' OF APPELLAT E ORDER HAD NOT BEEN CONFRONTED TO THE AO AND HENCE THE ISSUE WAS REMAND ED BACK TO THE FILE OF THE AO WITH FOLLOWING OBSERVATIONS:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. THE ONLY GRIEVANCE OF THE REVE NUE IS AGAINST THE NOT NON-GRANTING OF OPPORTUNITY TO THE ASSESSING OF FICER TO REBUT THE ANNEXURE - A AS NO REMAND REPORT WAS CALLED FOR FRO M THE AO BY LD. CIT(A) IN RESPECT OF THE ANNEXURE-'A' TO THE ORDER OF LD. CIT(A). ADMITTEDLY, NO DETAILS BEFORE THE TRIBUNAL HAS BEEN FILED IN SUPPORT OF THE ANNEXURE-A TO THE ORDER OF LD. CIT(A). IT IS AL SO NOT DISPUTED THAT THE ANNEXURE-A WAS NOT CONFRONTED WITH THE AO BY TH E LD. CJT(A). UNDER THESE FACTS AND CIRCUMSTANCES, IT WOULD BE IN TEREST OF JUSTICE, THIS ISSUE IS REMITTED BACK TO THE FIFE OF ASSESSIN G OFFICER TO DECIDE AFRESH AFTER CONSIDERING ALL THE DETAILS AND MORE P ARTICULARLY ANNEXURE-A TO THE ORDER OF LD. CIT(A). NEEDLESS TO SAY THAT THE AO WOULD AFFORD REASONABLE OPPORTUNITY TO THE ASSESSEE FOR FURNISHING THE DETAILS IN SUPPORT OF ITS CLAIM AND THIS GROUND OF REVENUE'S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE .' 4.4.2 THE AO HAS AGAIN PASSED AN ASSESSMENT ORDER O N 05/02/2014 MAKING THE SAME ADDITIONS AS WERE MADE IN THE ORIGINAL ASS ESSMENT ORDER. THE SUBMISSIONS MADE BY THE APPELLANT DURING THE CURREN T APPELLATE PROCEEDINGS HAVE ALREADY BEEN REPRODUCED ABOVE. FROM THESE SUBM ISSIONS IT IS SEEN THAT THE AO HAS MADE THE SAME ADDITIONS BY OBSERVING THA T THERE WERE NO STAMPS ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 8 OF EXCISE AUTHORITIES ON THE CHALLANS, ASSESSEE DID NOT SUBMIT A COPY OF TRANSPORTATION BILL ETC. IN SUPPORT OF MATERIAL REC EIVED FROM ONE UNIT TO ANOTHER AND NO CHALLANS WERE SUBMITTED FOR RECEIVIN G BACK THE REPROCESSED MATERIAL FROM WAGHODIYA UNIT TO MANJUSAR UNIT. THE AO HAS AGAIN HELD THAT ANNEXURE 'A' PREPARED BY THE APPELLANT WAS NOT HING BUT AN EYE WASH WHICH HAS BEEN PROVED TO BE A SHAM. THE AO HAS CLAI MED THAT FOR ARRIVING AT THIS CONCLUSION SHE HAD MINUTELY EXAMINED EACH OF T HE PROCESSES. SHE HAS ALSO STATED THAT THE APPELLANT HAD-SOLD THE GENERATED SC RAP OUT OF THE BOOKS AND THE ANNEXURE 'A' IS NOTHING BUT FIGURATIVE ADJUSTMENT S UBMITTED BY THE ASSESSEE ON THE BASIS OF SOME MANAGED FIGURES. ANNEXURE W AN D COPIES OF CHALLANS AND TRANSPORTATION LEDGER UNIT AND COPY OF LEAVE & LICENSE AGREEMENT FOR WAGHODIA HAVE BEEN MADE PART OF-THE ASSESSMENT ORDE R BY THE AO. 4.4.3 AN EXAMINATION OF THESE DOCUMENTS REVEALS THA T THE AO HAD USED SUCH HARSH LANGUAGE WITHOUT BOTHERING TO EXAMINE THE DOC UMENTS SUBMITTED BY THE APPELLANT BEFORE HER, THE OBSERVATION MADE BY T HE CIT(A) IN THE APPELLATE ORDER PASSED IN RELATION TO THE ORIGINAL ASSESSMENT PROCEEDINGS AND WITHOUT EXAMINING DIFFERENT COLUMNS OF ANNEXURE 'A', WHICH SHE WAS BOUND TO DO AS PER THE DIRECTIONS GIVEN BY THE ITAT. IN FACT, IN T HE ASSESSMENT ORDER NOTHING HAS BEEN STATED AS TO WHAT FIGURES ARE MANAGED IN A NNEXURE 'A' AND WHAT IS THE BASIS OF HOLDING THAT THIS IS NOTHING BUT FIGUR ATIVE ADJUSTMENT. THE NATURE OF ANNEXURE 'A' HAS BEEN DISCUSSED IN DETAIL IN THE APPELLATE ORDER PASSED IN RELATION TO THE ORIGINAL ASSESSMENT ORDER AND HAS ALREADY BEEN REPRODUCED ABOVE. 4.4.3 NOW AS DISCUSSED HEREAFTER, BEFORE THIS OFFIC E THE APPELLANT HAS SUCCESSFULLY CONTROVERTED THE FINDINGS OF THE AO TO SHOW THAT THE CLAIM MADE BY THE AO THAT THE DETAILS WERE MINUTELY EXAMINED D URING THE ASSESSMENT PROCEEDINGS IS NOT CORRECT. AS SUBMITTED BY THE APP ELLANT, THE STAMP OF EXCISE AUTHORITY IS NOT REQUIRED ON ANY GATE PASS OR CHALL ANS AS PER EXCISE MANUAL IN FORCE W.E.F F.Y 2005. 4.4.3.1 SECONDLY, THE COPIES OF CHALLANS SUBMITTED BY THE APPELLANT TO THE AO, WHICH HAVE ALSO BEEN MADE PART OF THE ASSESSMEN T ORDER BY THE AO ARE IN 02 PARTS: THE UPPER PART IS RELATING TO SENDING THE MATERIAL TO WAGHODIA UNIT FROM MANJUSAR UNIT AND THE LOWER HALF IS FOR T HE PURPOSE OF RECEIVING BACK THE REPROCESSED MATERIAL FROM WAGHODIA UNIT TO MANJUSAR UNIT. THUS, THE EVIDENCE ABOUT RECEIVING BACK THE MATERIAL FROM WAGHODIA UNIT TO MANJUSAR UNIT IS ALREADY A PART OF ASSESSMENT ORDER ITSELF AND HENCE THE AO'S OBSERVATION THAT ENTIRE WORK HAS BEEN DONE AS MANJUSAR UNIT ITSELF IS NOT CORRECT. ON THE CHALLANS, THE QUANTITY OF SCRAP SENT FROM MANJUSAR UNIT TO WAGHODIA UNIT AND ALSO THE QUANTITY OF REPROCESS ED MATERIAL SENT FROM WAGHODIA UNIT TO MANJUSAR UNIT HAVE ALSO BEEN RECOR DED. THE CHALLANS ALSO ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 9 MENTION THE BURNING LOSS INCURRED DURING SUCH REPRO CESSING. THE APPELLANT HAS ALSO SUBMITTED A COPY OF ELECTRICITY BILLS OF T HE WAGHODIA UNIT TO SHOW THAT IT WAS WORKING DURING THIS PERIOD. 4.4.3.2 THE OTHER CONTENTION OF THE AO THAT THE APP ELLANT DID NOT SUBMIT COPIES OF TRANSPORT BILL ETC. IS NOT BASED UPON FAC TS. THE AO HAS HERSELF MENTIONED IN PARA 3.2 OF HER ORDER THAT THE ASSESSE E WAS SPECIFICALLY REQUESTED TO SUBMIT THE LEDGER OF TRANSPORTATION/FREIGHT ETC. FOR THE MONTH OF FEB AND MAR 2008. THUS, NO TRANSPORTATION BILLS WERE ASKED TO BE SUBMITTED. THE APPELLANT HAD SUBMITTED THE LEDGER AS ASKED FOR. TH E AO HAS OBSERVED THAT IN SUCH LEDGERS, THERE IS ONLY THREE INSTANCES OF TRAN SPORTATION FROM MANJUSAR UNIT TO WAGHODIA UNIT. THE AO DID NOT ASK THE APPEL LANT TO EXPLAIN THIS DISCREPANCY AND JUMPED TO THE CONCLUSION THAT THIS MEANS THAT THERE WAS NO TRANSPORTATION OF GOODS BETWEEN THESE 2 UNITS. NOW, DURING THE COURSE OF THE CURRENT APPELLATE PROCEEDINGS, THE APPELLANT HAS SU BMITTED THAT ONE TRANSPORTATION BILL INCLUDED SEVERAL DIFFERENT DAYS OF TRANSPORTATIONS MADE BETWEEN THESE 02 PLACES. IT HAS ALSO BEEN SUBMITTED DETAILS OF ONE SUCH BILL WITH AND HAS ALSO TALLIED QUANTITIES OF MATERIALS T RANSPORTED IN THE BILLS WITH THE QUANTITIES MENTIONED ON THE CHALLANS, WHICH ARE ALREADY PART OF THE ASSESSMENT ORDER. HENCE, THESE OBSERVATIONS OF THE AO ARE ALSO NOT CORRECT. 4.4.3.3 NOW COMING TO ANNEXURE 'A', A COPY OF WHIC H HAS BEEN MADE PART OF THE ASSESSMENT ORDER, THIS ANNEXURE IS NOTHING BUT THE TALLY OF QUANTITATIVE DETAILS OF MATERIALS USED BY THE APPELLANT, THE SCR AP GENERATED, THE WORK IN PROGRESS ON ACCOUNT OF REPROCESSING OF SUCH SCRAPS AND THE PROCESS LOSS INCURRED DURING SUCH PROCESS. IN THE REMAND PROCEED INGS, THE AO HAS AGAIN EXAMINED THIS ANNEXURE A' AND HAS STATED THAT THE QUANTITY OF RAW MATERIAL AND WIP MENTIONED IN THE ANNEXURE 'A' MATCHES WITH QUANTITY MENTIONED IN THE TAX AUDIT REPORT (AFTER IGNORING THE DIFFERE NCE IN FIGURE OF PROCESSING LOSS). THE AO HAS FURTHER STATED THAT THE PROCESSIN G LOSS MENTIONED IN ANNEXURE 'A' AND AS MENTIONED IN ANNEXURE 7 (ANNE XURE FOR CHALLAN DETAILS) OF THE ASSESSMENT ORDER HAS NOT MATCHED. A S PER THE AO, THE PROCESS LOSS AS PER ANNEXURE 'A' FOR MONTHS OF FEB 2008 AND MARCH 2008 ARE 7779 KGS WHEREAS AS PER ANNEXURE 7 THIS IS 6749 KGS. T HUS, THERE IS DIFFERENCE OF 930KGS. THE APPELLANT HAD EXPLAINED BEFORE THE AO T HAT THIS DIFFERENCE WAS ON ACCOUNT OF THE FACT THAT THE LOSS MENTIONED IN T HE ANNEXURE 7 WAS ONLY FOR REPROCESSING THE SCRAP. THERE ARE 2 OTHER PROCE SSES AFTER THAT IN WHICH THE MATERIAL LOSS TAKES PLACE I.E HOT ROLLING PROCESS A ND COLD ROLLING PROCESS AND THE EXPLANATION HAS BEEN FILED IN REJOINDER TO THE REMAND REPORT ALSO. A PERUSAL OF THE CHALLAN SHOWS THAT THEY MENTION CLEA RLY THE BURNING LOSS IN REPROCESSING OF SCRAP, WHICH IS THE SUBSTANTIVE PAR T OF PROCESS LOSSES. ALL THE MANUFACTURING PROCESS RESULT INTO SOME LOSSES. HENC E, SOME LOSS IS BOUND TO TAKE PLACE IN OTHER PROCESSES ALSO, AS CLAIMED BY T HE APPELLANT. MOREOVER, THE ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 10 LOSS OF 930KGS IS QUITE INSIGNIFICANT AS COMPARED T O THE QUANTITY OF SCRAP BEING REPROCESSED BY THE APPELLANT. HENCE, THE APPE LLANT'S SUBMISSIONS IN THIS REGARD IS ALSO ACCEPTABLE. 4.4.4 THUS, THE APPELLANT HAS BEEN ABLE TO AUTHENTI CATE THE FIGURES MENTIONED IN THE ANNEXURE 'A' WHICH HAS ALSO BEEN ACCEPTED BY THE AO IN THE REMAND PROCEEDING EXCEPT THE DISPUTE ABOUT THE SMALL AMOUN T OF JOSS OF 930KGS. THE APPELLANT HAS ALSO BEEN ABLE TO PROVE THE TRANSPORT ATION OF SCRAP FROM MANJUSAR UNIT TO WAGHODIA UNIT AND RECEIVING BACK T HE REPROCESSED MATERIAL FROM WAGHODIA UNIT TO MANJUSAR UNIT. BESID ES, THE FACT REMAINS THAT SINCE THE QUANTITATIVE DETAILS AS PER THE ANNE XURE 'A' ARE TOTALLY MATCHING HENCE, UNDER NO CIRCUMSTANCES THERE CAN BE ADDITION OF THE VALUE OF ENTIRE SCRAP GENERATED BY THE APPELLANT AS SALE OUT SIDE THE BOOKS OF ACCOUNTS AS HAS BEEN DONE BY THE AO IN THE ORIGINAL ASSESSME NT ORDER AS WELL AS IN THE CURRENT ASSESSMENT ORDER. IF THE AO WAS TO MAKE SUC H ADDITIONS, SHE SHOULD HAVE ALSO REDUCED THE CLOSING STOCK BY THE QUANTITY OF SCRAP ALLEGEDLY SOLD OUTSIDE THE BOOKS OF ACCOUNTS, ON ACCOUNT OF WHICH ADDITION HAD BEEN MADE BY HER. BUT SINCE NOW THE APPELLANT HAS PROVED THAT TH E SCRAP GENERATED BY IT IN THE MONTHS OF FEB & MARCH 2008 WERE PART OF THE STO CK AS WORK IN PROGRESS, THE ENTIRE ADDITION MADE BY THE AO ON THIS ACCOUNT IS DIRECTED TO BE DELETED. 8. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. ORIGINALLY, THE STAND OF THE ASSESSING OFFICER WAS THAT FOR THE MONTH OF FEBRUARY AND MARCH 2008 T HE ASSESSEE HAS NOT SHOWN SALE OF SCRAP IN THE SAME RATIO AS WAS SHOWN/ GENERATED IN THE EARLIER MONTHS. THE ASSESSING OFFICER HAS HARBOURED A BELI EF THAT SINCE IN THE MANUFACTURING ACTIVITY OF THE ASSESSEE WHERE SCRAP GENERATION IS A CONSEQUENTIAL EFFECT, EITHER ITS SALES OUGHT TO BE SHOWN OR IT SHOULD BE AVAILABLE IN THE CLOSING STOCK. HENCE, HE ASSUMED THAT THE ASSESSEE MUST HAVE SOLD THE SCRAP OUT OF BOOKS. HE ESTIMATED THE VALUE OF SUCH SCRAP AND MADE ADDITION. BEFORE THE LEARNED CIT(A) THE ASSES SEE HAS DEMONSTRATED THAT IT HAS ESTABLISHED A MELTING UNIT AT WAGHODIA WHICH WAS TAKEN ON LEASE. THE SCRAP WAS MELTED AND CONVERTED INTO SHEETS. THE SE SHEETS WERE USED FOR MANUFACTURING SS WASHERS. ON AN ANALYSIS OF THE MA TERIAL SUBMITTED BY THE ASSESSEE, LEARNED CIT(A) HAS ACCEPTED THE CASE OF T HE ASSESSEE AND DELETED ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 11 THE ADDITION. THE ORDER OF THE LEARNED CIT(A) WAS SET ASIDE BY THE TRIBUNAL SIMPLY FOR THE REASON THAT THESE MATERIALS WERE NOT CONFRONTED WITH THE ASSESSING OFFICER; HENCE, AN OPPORTUNITY WAS GIVEN TO THE ASSESSING OFFICER TO COMMENT ON THESE MATERIALS AND TO RECORD THE FIN DINGS. IN THIS BACKGROUND, WE HAVE PERUSED THE ASSESSMENT ORDER DA TED 05.02.2014. A PERUSAL OF THE ASSESSMENT ORDER WOULD INDICATE THAT IT IS RUNNING INTO 80 PAGES. IN THE FIRST THREE PAGES, THE ASSESSING OFFI CER HAS NARRATED A BRIEF HISTORY ABOUT HOW THE ADDITION WAS MADE, HOW THE MA TTER TRAVELLED UPTO THE TRIBUNAL IN ITA NO. 3008/AHD/2011 AND HOW IT CA ME BACK TO HER. THEREAFTER, LEARNED ASSESSING OFFICER HAS REPRODUCE D THE MATERIAL SUBMITTED BY THE ASSESSEE AS ANNEXURE-A, BILLS AND VOUCHERS, CHALLANS, LEASE DEEDS, ACCOUNTING ENTRIES ETC. TO OUR MIND, THIS I S NOT THE WAY TO EXAMINE THE DETAILS AND PASS AN ASSESSMENT ORDER. FROM PAG E NOS. 5 TO 78, THE LEARNED ASSESSING OFFICER HAS JUST REPRODUCED THE C OPIES OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN THE SHAPE OF CHALLANS, BILLS AND VOUCHERS, LEASE DEEDS ETC. THERE IS NO ANALYSIS AND NO INVESTIGAT ION. SIMPLY PLACING THESE DOCUMENTS AS A PART OF THE ASSESSMENT ORDER, THE AS SESSING OFFICER AGAIN MADE THE ADDITIONS. WHEN THIS ASSESSMENT ORDER WENT BEFORE THE LEARNED CIT(A) FOR RE-APPRECIATION, THEN LEARNED FIRST APPE LLATE AUTHORITY HAS MADE AN ANALYSIS OF THE DETAILS AND OBSERVED THAT THE AS SESSING OFFICER HAS NOT APPLIED HER MIND WHILE PASSING THE ASSESSMENT ORDER . AT THE COST OF REPETITION, WE WOULD LIKE TO AGAIN TAKE NOTE OF THE FINDINGS OF THE LEARNED CIT(A) RECORDED IN PARAGRAPH NO.4.4.3 WHICH READ AS UNDER:- 4.4.3 AN EXAMINATION OF THESE DOCUMENTS REVEALS TH AT THE AO HAD USED SUCH HARSH LANGUAGE WITHOUT BOTHERING TO EXAMINE TH E DOCUMENTS SUBMITTED BY THE APPELLANT BEFORE HER, THE OBSERVATION MADE B Y THE CIT(A) IN THE APPELLATE ORDER PASSED IN RELATION TO THE ORIGINAL ASSESSMENT PROCEEDINGS AND WITHOUT EXAMINING DIFFERENT COLUMNS OF ANNEXURE 'A' , WHICH SHE WAS BOUND TO DO AS PER THE DIRECTIONS GIVEN BY THE ITAT. IN F ACT, IN THE ASSESSMENT ORDER ITA NO. 1690/AHD/2015 DCIT VS. RATNAVEER STAINLESS PRODUCTS PVT LTD AY : 2008-09 12 NOTHING HAS BEEN STATED AS TO WHAT FIGURES ARE MANA GED IN ANNEXURE 'A' AND WHAT IS THE BASIS OF HOLDING THAT THIS IS NOTHING B UT FIGURATIVE ADJUSTMENT. THE NATURE OF ANNEXURE 'A' HAS BEEN DISCUSSED IN DE TAIL IN THE APPELLATE ORDER PASSED IN RELATION TO THE ORIGINAL ASSESSMENT ORDER AND HAS ALREADY BEEN REPRODUCED ABOVE. 9. THEREAFTER, LEARNED FIRST APPELLATE AUTHORITY HA S EXAMINED THE STAND OF THE ASSESSEE DEMONSTRATING HOW THE SCRAP WAS TAK EN FROM MANJUSAR UNIT I.E. PRESENT UNIT TO WAGHODIA UNIT AND HOW FINISHED SHEETS WERE RECEIVED BACK BY THE ASSESSEE. THE LEARNED CIT(A) ALSO APPR ECIATED AND HIGHLIGHTED AS TO HOW THE LEARNED ASSESSING OFFICER FAILED TO A PPRECIATE THE EXCISE CHALLAN SUBMITTED BY THE ASSESSEE. AFTER CONSIDERI NG THE WELL REASONED FINDINGS OF THE LEARNED CIT(A), WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 11 TH MARCH 2020 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT AHMEDABAD, DATED 11/03/2020 *BT / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '! / THE RESPONDENT. 3. & ( / CONCERNED CIT 4. ( ) ( / THE CIT(A)- 5. & , & , /DR,ITAT, AHMEDABAD, 6. 1 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) & ITAT, AHMEDABAD 1. DATE OF DICTATION- 11.03.2020