ITO, Ward - 11(2), Kolkata, Kolkata V. M/s. Santhal Multicast Pvt. Ltd., Kolkata

ITA 2229/KOL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100227 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY MUKHERJEE JCITSRDR
• Keywords: Gross profit estimation; Rejection of books of accounts; Business income; Additional evidence; Procedural lapse; Reason to believe; Revenue expenditure
• Section: 143(3); 142(1); 133(6); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2229 / KOL / 2010 ASSESSMENT YEAR :2004-05 INCOME TAX OFFICER, WARD-11(2), P7, CHOWRINGHEE SQUARE, 6 TH FLOOR, KOLKATA-69 V/S . M/S SANTHAL MULTICAST PVT. LTD., 11/B, MAHARSHI DEVENDRA ROAD, ROOM NO.11, 2 ND FLOOR, KOLKATA-001 [ PAN NO.AAJCS 1215K ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJAY MUKHERJEE, JCIT-SR-DR /BY RESPONDENT NONE /DATE OF HEARING 16-11-2015 /DATE OF PRONOUNCEMENT 04-12-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA IN APPEAL NO.128/CI T(A)-1/WARD-1(2)/06-07 DATED 15.05.2007. ASSESSMENT WAS FRAMED BY ITO WARD -45(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.10.2006 FOR ASSESSMENT YEAR 2004 -05. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE EVEN THOUGH NOTICE OF HEARING WAS ISSUED TO ASSESSEE THR OUGH REGISTERED POST. ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 2 HOWEVER, WE FIND THAT IT IS A REVENUE APPEAL AND TH E ISSUE RAISED IN THIS APPEAL BY THE REVENUE CAN BE ADJUDICATED WITHOUT TH E APPEARANCE OF THE ASSESSEE. HENCE, WE PROCEED TO TAKE UP THIS APPEAL AFTER HEARING, SHRI SANJAY MUKHERJEE, LD. DEPARTMENTAL REPRESENTATIVE A PPEARING ON BEHALF OF REVENUE. 3. THE FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) HAS ERRED IN DELETING THE APPLICATION U/S145 OF THE ACT . 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY ENGAGED IN BUSINESS OF MANUFACTURING OF INGOTS AND CEMENT. THE ASSESSEE FILED RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING THE LOSS OF RS. (-) 338876.61 UNDER THE HEAD OF BUSINESS INCOME . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND SEVERAL DISCREPANC IES FROM THE AUDIT REPORT FILED BY ASSESSEE WHICH WERE AS FOLLOWS:- I) AUDITORS REPORT STATES THAT ASSESSEE HAS NOT Y ET ADEQUATE INTERNAL DATA COMMENSURATE WITH THE NATURE OF ASSES SEES BUSINESS; II) THE COMMENT OF AUDITOR THAT DETAILS EXAMINATIO N OF COST RECORDS U/S. 209(1)(D) OF THE COMPANIES ACT, 1956 HAS NOT B EEN CARRIED OUT WITH A VIEW TO DETERMINE WHETHER THEY ARE ACCURATE OR CO MPLETE; III) AS PER AUDIT REPORT, THE ASSESSEE HAS EARNED SPECULATIVE PROFIT IN DEALING OF SHARES BUT THE ASSESSEE DOES NOT MAINTAI N PROPER RECORDS OF THE TRANSACTION INVOLVED; IV) DURING THE COURSE OF HEARING IT WAS FOUND THA T VOUCHERS CONNECTING TO REVENUE EXPENDITURE ARE MOSTLY SELF M ADE. SOME EXPENDITURE WERE SUPPORTED WITH THE BILLS AND SOME WERE JUST SIGNED/ HAVING THUMP IMPRESSION WITHOUT SUPPORTING BILLS. V) NOTICES WERE ISSUED TO THE VARIOUS PARTIES UNDER SECTION 133(6) OF THE ACT AND THE DIFFERENCES WERE OBSERVED BETWEEN T HE RECORDS OF THE ASSESSEE AND REPLIES SUBMITTED BY THOSE PARTIES. ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 3 VI) THE ASSESSEE FAILED TO PROVIDE THE STOCK REGIST ER FOR VERIFICATION. THE ASSESSEE JUST CLAIMED THAT THE ACCOUNTS HAVE BE EN AUDITED BY AN INDEPENDENT AUDITOR AND ACCORDING TO HIS REPORT THE ACCOUNTS ARE MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. VII) THE AO OBSERVED THE DISCREPANCY BETWEEN THE T DS CERTIFICATE ISSUED BY THE TATA MOTORS AND SUBMISSION MADE BY TH E ASSESSEE. IN VIEW OF ABOVE THE AO REJECTED THE BOOKS OF ACCOU NTS AND FRAMED THE ASSESSMENT UNDER SECTION 144 OF THE ACT. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO CIT(A) WH O ALLOWED THIS GROUND IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : I HAVE GONE THROUGH THE SUBMISSION OF LD. AR AS WE LL AS THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER AND FI ND THAT BOOKS OF ACCOUNT WERE MAINTAINED AS PER ACCOUNTING STANDARD AS WELL AS BY EXCISE LAW. IT IS SHOWING THE ACCOUNTS ARE INCORREC T OR INCOMPLETE IS A REVENUE. THE FACTS AS NARRATED BY AR REMAINED THE Q UESTION OF REJECTION OF BOOKS OF ACCOUNT CANNOT BE JUSTIFIED. THIS GROUND IS THEREFORE ALLOWED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US ON THE FO LLOWING GROUND : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN DELETING THE APPLICATION OF SEC. 145 OF TH E I.T. ACT DENYING THE COMMENT OF AUDITORS REPORT. 5. WE FIND FROM THE AFORESAID DISCUSSION THAT THE A O HAS NOT BROUGHT SUFFICIENT REASONS FOR REJECTING THE BOOKS OF ACCOU NTS. THE AO FORMED THE OPINION FOR THE REJECTING THE BOOKS ON ACCOUNT OF S OME PROCEDURAL LAPSES HIGHLIGHTED BY THE AUDITOR OF THE COMPANY IN HIS RE PORT. WHILE REJECTING THE BOOKS OF THE ASSESSEE, INCOME-TAX OFFICER HAS TO CO NSIDER THE FOLLOWING ASPECTS : (I) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A M ETHOD OF ACCOUNTING? (II) EVEN IF REGULAR ADOPTION OF A METHOD OF ACCOUN TING IS THERE WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCED FROM THE METHOD EMPLOYED? ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 4 (III) WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED ? (IV) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE I N THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN? IF THE ANSWERS TO ABOVE FOUR QUESTIONS ARE IN THE A FFIRMATIVE, ASSESSEE'S PROFITS ARE TO BE COMPUTED ON THE BASIS OF HIS ACCOUNTS. IN SUCH CASES, PROVISO TO SECTION 145(1) OR SECTION 145(2) CANNOT BE INVOKED. THE PATNA HIGH COURT HAS DELIVERED A VERY IMPORTANT RULING IN MD. UMER VS. CIT 1975 CTR (PAT) 13 : (1975) 101 ITR 525 (PAT) . IN THAT CASE, THE ASSESSEE WAS INDIVIDUAL, WHO DERIVED INCOME FROM SALE OF COU NTRY LIQUOR IN ASSESSMENT YEAR 1966-67. TRIBUNAL GAVE FIVE REASONS FOR THE PU RPOSE OF REJECTION OF BOOK PROFITS AS FOLLOWS:- (1) THE SALES WERE NOT VERIFIABLE. (2) FROM THE POINT OF DRAWING OF THE LIQUOR FROM TH E BARRELS, NO ACCOUNT WAS MAINTAINED AND EVEN THE NORMAL LEAKAGE IN THE P ROCESS OF DRAWING AND FILLING IN THE BOTTLES WAS NOT SHOWN. (3) YEAR TO YEAR, THE BOOK RESULTS SHOWN HAVE BEEN REJECTED AND PROFIT INVARIABLY ESTIMATED BY THE DEPARTMENT. (4) THE PERCENTAGE OF PROFIT SHOWN WAS LOW. (5) DRAWINGS FOR EXPENSES WERE INADEQUATE. HOWEVER, ASSESSEE HAD PRODUCED ALL HIS BOOKS OF ACC OUNTS BEFORE THE INCOME-TAX OFFICER AND ONLY TWO DEFECTS WERE FOUND BY HIM : (1) ABSENCE OF CASH MEMOS WHICH MEANS SALES ARE NOT VERIFIABLE, AN D (2) CERTAIN TRANSACTIONS WERE NOTED IN LUMP SUMS. 5.1 BUT NO FINDING HAS BEEN RECORDED BY EITHER OF T HE AUTHORITIES BELOW AS TO THE UNACCEPTABILITY OF THE METHOD AND IRREGULARITY OF THE ACCOUNTS KEPT BY THE ASSESSEE. IT IS WELL SETTLED THAT IN THE ABSENCE OF SUCH A FINDING RECORDED BY THE AUTHORITIES, THE BOOK RESULTS CANNOT BE IGNORED OR BRUSHED ASIDE [SEE R.B. ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 5 BANSILAL ABIRCHAND SPINNING & WEAVING MILLS VS. CIT (1970) 75 ITR 260 (BOM) ]. AS HELD BY THE SUPREME COURT IN CIT VS. A KRISHNASWAMI MUDALIAR (1964) 53 ITR 122 (SC) , THIS PROVISO IMPOSES A STATUTORY DUTY ON THE INCO ME-TAX OFFICER TO EXAMINE IN EVERY CASE, THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE AND TO SEE WHETHER OR NOT IT HAS BEEN REGU LARLY EMPLOYED AND TO DETERMINE WHETHER THE INCOME, PROFITS AND GAINS OF THE ASSESSEE COULD PROPERLY BE DEDUCED THERE FROM. VERY IMPORTANT PRI NCIPLE OF LAW IS LAID DOWN BY PATNA HIGH COURT IN THE FOLLOWING WORDS:- 'THERE IS NO FINDING IN THE PRESENT CASE THAT ANY O F THE ENTRIES IN THE BOOKS OF ACCOUNT WAS NOT CORRECT; THERE IS NO FINDI NG THAT THE ASSESSEE IS NOT EMPLOYING A METHOD OF ACCOUNTING; A ND THERE IS NO FINDING THAT SUCH A METHOD OF ACCOUNTING HAS BEEN I RREGULARLY EMPLOYED BY THE ASSESSEE. IN THE ABSENCE OF ANY SUC H FINDING, THERE BEING NO REASON GERMANE TO THE UNACCEPTABILIT Y OF THE BOOK RESULTS, IT MUST BE HELD THAT THE TRIBUNAL AS WELL AS THE REVENUE AUTHORITIES BELOW HAD NO MATERIALS BEFORE THEM, ON THE BASIS OF WHICH IT COULD BE SAID THAT THE TRADING RESULTS WER E NOT VERIFIABLE AND THAT, THEREFORE, THEY SHOULD NOT BE ACCEPTED, N OR IS IT THEIR CASE THAT THE TRADING RESULTS COULD NOT BE DEDUCIBLE FROM THE ENTRIES OF THE BOOKS OF ACCOUNTS REGULARLY EMPLOYED.' [SEE ALS O C. ARUMUGASWAMI NADAR VS. CIT (1961) 42 ITR 237 (MAD) ]. THE PATNA HIGH COURT, THEREFORE, HELD THAT'THE FIN DING OF THE TRIBUNAL UPHOLDING THE REJECTION OF THE BOOK PROFIT SHOWN BY THE ASSESSEE WAS VITIATED BY REASON OF ITS RELIANCE UPON SUSPICION, SURMISES AS ALSO IRRELEVANT MATERIAL . THE FINDING THAT SALES WERE UNVERIFIABLE IS NOT BAS ED ON THE MATERIALS ON RECORD AND IS AN ARBITRARY FINDING .' IN VIEW OF ABOVE, THE GROUND RAISED BY THE REVENUE REGARDING REJECTION OF BOOKS OF ACCOUNTS IS DISMISSED. 6. NEXT TWO GROUND RAISED BY THE REVENUE READS AS U NDER:- ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 6 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF LOSS OF RS.84 ,40,567/- ON THE BASIS OF SOME FRESH EVIDENCE VIOLATING THE PROVISION OF R ULE-46A(3) OF I.T. RULES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF LOSS OF RS.84 ,40,567/- WHICH WAS MADE DUE TO THE VARIATION OF THE AMOUNTS FURNISHED BY THE ASSESSEE U/S 142(1) & COLLECTED BY THE A.O U/S. 133(6). 7. THE COMMON ISSUE RAISED BY REVENUE IS THAT LD. C IT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.84,40,567/- ON THE BASIS OF FRESH EVIDENCE WITHOUT FOLLOWING THE PROVISIONS OF RULE-46A OF THE I.T. RULES, 1962. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS S HOWN MANUFACTURING EXPENSES OF RS.5,23,32,438/- IN RELATION TO SALE SH OWN IN THE FINANCIAL STATEMENT OF THE ASSESSEE FOR RS.4,38,91,871/-. FRO M THE ABOVE, AO FOUND A LOSS OF RS.84,40,567/- IS ARISING OUT OF TRADING AC COUNT OF ASSESSEE. THE AO CALLED UPON THE ASSESSEE TO JUSTIFY THE TRADING LOS S BUT ACCORDING TO THE AO THE ASSESSEE DID NOT OFFER ANY EXPLANATION. THEREFO RE THE AO REJECTED THE LOSS CLAIMED BY ASSESSEE. SO AO DISALLOWED THE LOSS CLAI M BY ASSESSEE AND ADDED IT TO THE INCOME OF ASSESSEE. 8. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) WHO HAS ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING AS UNDER :- TAKING INTO THE ACCOUNT THE CIRCUMSTANCE AND FACTS AS NARRATED ABOVE, IT IS APPARENT THAT NO DIFFERENCE IN THE AMOUNT BET WEEN MANUFACTURING COST AND SALE PLUS CLOSING STOCK COULD BE ADDED TO THE NET PROFIT OF THE APPELLANT AS THE APPELLANT HAD MAINTAINED HIS BOOKS OF ACCOUNTS AS PER THE PROVISIONS OF LAW AND FURTHER THE ASSESSING OFF ICER HAD NOT FOUND ANY DISCREPANCY RELATING TO THE PURCHASE AND SALE. WHIL E IT IS UNUSUAL FOR THE SALE PRICE TO BE LESS THAN THE COST PRICE IT IS NOT AN ESSENTIAL SINE QUA NON OF BUSINESS ENTERPRISE. THERE HAS BEEN AND WILL BE SITUATIONS WHEN THIS MAY BE THE CASE. THE CRUCIAL FULCRUM FOR THIS TO BE TESTED ON IS EVIDENCE AND A PROPER ENUCLEATING AND MARSHALLING O F FACTS. THIS UNFORTUNATELY IS WOEFULLY LACKING IN THIS CASE. FUR THER, THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD IN SUPPORT OF HIS CO NTENTION. THEREFORE, ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 7 THIS ADDITION DESERVES TO BE DELETED AND ON MERITS AS STATED ABOVE THIS GROUND IS ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD LD. DR AND PERUSED THE MATERIALS A VAILABLE ON RECORD. BEFORE US, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO. WE FIND THAT DURING THE APPELLATE PROCEEDINGS BEFORE LD. CIT(A) LD. AR OF ASSESSEE SUBMITTED THE ARGUMENTS, WHICH EXTRACTED FROM THE ORDER OF LD. CI T(A) IS REPRODUCED BELOW:- IT IS WRONG TO ASSUME THAT SALE PRICE CANNOT BE LE SS THAN COST PRICE. IN A MANUFACTURING, COST EXCEEDS SALES PRICE DUE TO VA RIOUS REASONS SUCH AS PURCHASE OF RAW MATERIAL AT HIGH RATE, LACK OF Q UALITY CONTROL HIGH COST OF PRODUCTION DUE TO WRONG CALCULATION, OVER CONSUM PTION OF ELECTRICALLY OR POWER WHERE QUALITY IS NOT STABILIZED IN THE FIR ST YEAR, USE OF FINALLY TECHNIQUES ETC. IN THIS CASE, THE APPELLANT ALSO IN CURRED HIGH COST OF PRODUCTION DUE TO FOLLOWING REASONS: 1) ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF STEEL INGOTS FROM SCRAP. LOW GROSS PROFIT WAS DUE TO DECR EASE IN SALE PRICE OF FINISHED GOODS AND INCREASE IN COST OF RAW MATER IALS AND ALSO THE VERY HIGH OUTGO ON ACCOUNT OF ELECTRICITY. THIS BEI NG THE FIRST YEAR OF MANUFACTURING THERE WERE TEETHING PROBLEMS WHICH TO OK TIME TO STABILIZE. 2) AS MAY BE SEEN FROM THE FOLLOWING COMPARATIVE CHART THE COST OF ELECTRICITY PER METRIC TON FOR THIS YEAR WAS MUCH H IGHER COMPARED TO NEXT YEAR: YEAR 2003-04 2004-05 PRODUCTION (M.TON) 4007.68 4129.95 ELECTRICITY CONSUMED (RS) 1,54,78,738 1,18,12,249 CONSUMPTION PER M.TON 3862 2860 3) THE COMPANYS MANUFACTURING UNIT WAS NOT WORKING SM OOTHLY THROUGHOUT THE YEAR DESPITE ASSESSEES BEST EFFORTS . JUST TO KEEP THE BUSINESS RUNNING AND TO INCREASE PRODUCTION MANUFAC TURING EXPENSES WERE INCURRED. DUE TO SEVERAL PROBLEMS LIK E ELECTRICITY, LABOUR, ETC., THE MANUFACTURING UNIT WAS ULTIMATELY SHUT DOWN ON 03/11/2006. IN CONCLUDING, WE SUBMIT THE FOLLOWING: 1. THE ASSESSING OFFICER HAS NOT DETECTED ANY DISCR EPANCY IN THE AMOUNTS OF PURCHASES, SALES, CLOSING STOCK OR ANY O THER ITEM OF EXPENDITURE. THE ALLEGED DEFECTS RAISED BY THE ASSE SSING OFFICER WERE ALL EXPLAINED IN COURSE OF THE ASSESSMENT PROC EEDINGS. ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 8 2. THE ACCOUNTS OF THE COMPANY WERE PROPERLY AUDITE D AND THE SAME WERE FOLLOWED BY TAX AUDIT, A REPORT OF WHICH IN FORM NO. 3CD WAS FILED ALONG WITH THE RETURN. IN ANNEXURE TO FORM NO. 3CD INFORMATION IN RESPECT OF QUANTITY OF PURCHASES, CO NSUMPTION, CLOSING STOCK AND PRODUCTION WERE GIVEN AND THOSE H AVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, DETAILS OF THE MANUFACTURING PROCESS, ISSUE OF RAW MATERIALS AND A S TO HOW THE RAW MATERIAL, FINISHED GOODS, ETC., WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS WERE FURNISHED AND THE ASSESSING OFFICER HAD NOT FOUND ANY FAULT WITH SUCH DETAILS. 4. THE ASSESSING OFFICER HAD NOT FOUND ANY EVIDENCE THAT THE ASSESSEE HAD MADE PURCHASE OR SALES OUTSIDE THE BOO KS OF ACCOUNT. THE ITEMS MANUFACTURED BY THE ASSESSEE BEI NG EXCISABLE GOODS, THE MANUFACTURING AND RELATED RECO RDS WERE ALSO SUBJECTED TO PERIODICAL CHECKING BY THE CENTRAL EXC ISE AUTHORITIES. SUCH AUTHORITIES HAVE NEVER GIVEN ANY ADVERSE FINDI NG AGAINST THE RECORDS MAINTAINED BY THE COMPANY. 5. THE REJECTION OF THE BOOKS OF ACCOUNT BY THE ASS ESSING OFFICER IS NOT BASED ON ANY COGENT REASON. 6. THE REASON FOR THE HIGH COST OF PRODUCTION WHICH ULTIMATELY RESULTED IN A LOSS UNDER THE MANUFACTURING AND TRAD ING ACCOUNT WAS MAINLY DUE TO THE HIGH EXPENDITURE ON ACCOUNT O F ELECTRICITY AS HAVE BEEN EXPLAINED IN DETAIL ABOVE. CONSIDERING THE FACTS AND CIRCUMSTANCES AS SUBMITTE D ABOVE, IT IS HUMBLY PRAYED THAT THE ADDITION OF RS.84,40,567/- M AY KINDLY BE DELETED. FROM THE AFORESAID DISCUSSION, WE FIND THAT AO HAS NOWHERE REJECTED THE SALES OR PURCHASE OF ASSESSEE VIS--VIS OTHER MANUF ACTURING EXPENSES INCURRED BY ASSESSEE DURING THE YEAR. WE FIND THAT AO, AFTER REJECTING THE BOOKS OF ACCOUNTS, HAD PRESUMED THAT NO PRUDENT BUS INESS MAN WOULD SELL THE GOODS LESS THAN THE MANUFACTURING COST. HOWEVER , THERE IS NO RESTRICTION UNDER ANY LAW THAT ASSESSEE CANNOT SALE THE PRODUCT LESS THAN ITS MANUFACTURING COST. MOREOVER, IT WAS THE FIRST YEAR OF ITS BUSINESS OF THE ASSESSEE AND ASSESSEE WAS NOT HAVING EXPERT KNOWLED GE OF ITS BUSINESS INTRICACIES. WE FURTHER FIND THAT AO HAS DISALLOWED THE LOSS INCURRED BY ASSESSEE WITHOUT ANY RATIONAL GROUND. WHEREAS THE A O HAD NOT POINTED OUT ANY MATERIAL DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THE MERE FACT THAT FOR CERTAIN REASON, THE ASSESSEE COULD NOT EAR N BETTER MARGIN OF PROFIT, ITA NO.2229/KOL/2010 A.Y 2004-05 ITO WD-11(2) KOL. V. M/S SANTHAL MULTICAST PVT. LTD. PAGE 9 CANNOT BE THE REASON TO BELIEVE THAT THE ASSESSEE R ETURNED LESS PROFIT THAN WHAT IT ACTUALLY EARNED. POSSIBILITY OF UNSTABLE MA RKET CONDITION CANNOT BE RULED OUT. THE TRIBUNAL, THEREFORE, DELETED THE TRA DING ADDITIONS. WE DO NOT FIND ANY ADDITIONAL EVIDENCE HAVING BEEN ADMITTED B Y THE LD. CIT(A) EXCEPT COMPARATIVE CHART OF EXPENSES. THE LD. DR WAS UNABL E TO POINT OUT AS TO WHAT WAS THE FRESH EVIDENCE ON THE BASIS OF WHICH THE LD . CIT(A) ALLOWED RELIEF TO THE ASSESSEE. EVEN THE GROUND OF APPEAL OF THE REVE NUE IN THIS REGARD IS VERY VAGUE. IN VIEW OF THE ABOVE, WE INCLINE NOT TO INTE RFERE IN THE ORDER OF LD. CIT(A) AND THIS GROUND OF REVENUES APPEAL IS DISMI SSED. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 04/12/ 2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 04 /1 2 /2015 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO, WARD-11(2), P7, CHOWRINGHEE SQ, 6 TH FL, KOL-69 2. /RESPONDENT-M/S SANTHAL MULTICAST PVT. LTD. 11/B, M AHARSHI DEVENDRA ROAD ROOM NO 11, 2 ND FLOOR, KOLKATA-001 3. * +, - - . / CONCERNED CIT KOLKATA 4. - - .- / CIT (A) KOLKATA 5. 012 33+,, - +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,