M/s. Shailja Polyesters Pvt.Ltd., Surat V. The Income tax Officer, Ward-4(2), Surat

ITA 2490/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9341 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-07-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 23-08-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMIR VAKIL
• Assessee Lawyers: MITISH S MODI
• Keywords: Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH D BEFORE SHRI H.L. KARWA, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) M/S SHAILJA POLYESTERS PVT. LTD. 302, 302A, CENTER POINT, OPP. NEW CIVIL HOSPITAL, SURAT. VERSUS ITO WARD 4(2), SURAT. (APPELLANT) (RESPONDENT) PAN:AADCS3457R FOR THE APPELLANT: SHRI MITISH S. MODI, A.R. FOR THE RESPONDENT SHRI SAMIR VAKIL, D.R. ORDER PER H.L.KARWA, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III, SU RAT DATED 07-07-2004, RELATING TO ASSESSMENT YEAR 2001-02. GROUND NO. 1 OF THE APPEAL RELATES TO DISALLOWANCE OF ELECTRICAL EXPENSES OF RS. 87,750/- . THE ASSESSEE IS A PRIVATE LIMITED COMPANY, MAINLY ENGAGED IN PROCESSING OF PO Y INTO TEXTURISED YARN AT ITS FACTORY SITUATED AT PLOT NO. 6, BLOCK NO. 20 3, POST OFFICE-KARANJ (HARIYAL), TALUKA: MANDVI, DISTRICT: SURAT FOR LAST SEVERAL YEARS. THE ASSESSING OFFICER HAS DISALLOWED ELECTRICAL EXP ENSES OF RS. 1,87,000/-. THE ASSESSING OFFICER OBSERVED THAT, THE ASSESSEE H AD PAID RS. 1,87,000/- TO THE GUJARAT ELECTRICITY BOARD ON 26-02-2001 FOR OBT AINING ADDITIONAL CURRENT LOAD ON ACCOUNT OF ADDITION TO THE PLANT AND MACHIN ERY ACQUIRED DURING THE YEAR UNDER CONSIDERATION AND DEBITED THIS AMOUNT UN DER THE HEAD ELECTRICITY EXPENSES. THE ASSESSING OFFICER REQUIRED THE ASSES SEE TO EXPLAIN THE NATURE OF THESE EXPENSES. AFTER CONSIDERING THE ASSESSEES R EPLY, THE ASSESSING OFFICER 2 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) DID NOT AGREE WITH THE SAME AND STATED THAT SUCH EX PENDITURE WAS INCURRED FOR OBTAINING A LONG TIME AND ENDURING BENEFIT BY WAY O F ADDITIONAL POWER LOAD AND IT WAS NOT AN EXPENDITURE OF RECURRING NATURE O R OF SHORT TENURE. ACCORDING TO ASSESSING OFFICER, THE BENEFIT OF THE SAME HAD B EEN DERIVED OR TO BE DERIVED FOR MANY YEARS AND ACCORDINGLY HE TREATED THE TOTAL EXPENDITURE UNDER THIS HEAD AS CAPITAL EXPENDITURE AND DISALLOWED THE CLAIM OF THE ASSESSEE COMPANY BY ADDING TOTAL AMOUNT OF EXPENDITURE OF RS. 1,89,000/ - (COMPRISING DEVELOPMENT CHARGES OF RS. 1,57,500/- AND FEEDER CHARGES OF RS. 31,500/-). 2. ON APPEAL THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS. 78,250/-, OBSERVING AS UNDER: 2.4 AFTER GOING THROUGH THE ABOVE DECISIONS, IT IS FOUND THAT IN ALMOST ALL THE CASES THE HON'BLE COURTS HAVE LAID DOWN ONE PRINCIPLE IF A PARTICULAR ASSET WAS ACQUIRED AND USED FOR ENHANCIN G THE ACTIVITIES OF BUSINESS THEN IT SHOULD BE REGARDED AS INTEGRAL PAR T OF PROFIT EARNING PROCESS AND NOT FOR THE ACQUISITION OF AN ASSET OR A RIGHT OF A PERMANENT CHARACTER. IN THE CASE OF APPELLANT AFTER GOING TH ROUGH THE FINDINGS OF THE A.O. AND THE SUBMISSION MADE BY IT, IT IS FOUND THAT OUT OF THE TOTAL EXPENDITURE OF RS. 1,87,000/- INCURRED FOR LAYING D OWN THE HIGH TENSION ELECTRIC LINE, RS. 78,750/- WOULD BE REFUNDABLE TO IT AFTER CERTAIN INTERVAL. THE PLEA OF THE APPELLANT THAT THE ENTIR E ASSET IN THE FORM OF ELECTRIC LINE BELONG TO THE GEB IS NOT ACCEPTABLE A T ALL IN VIEW OF THE ABOVE STATED FACTS THAT EXPENDITURE TO THE EXTENT O F 78,750/- WOULD BE REFUNDED BACK AND THEREFORE ITS OWNERSHIP TO THE EX TENT OF RS. 78,750/- OUT OF THE ABOVE REFERRED EXPENDITURE REMAINS INTAC T AND FOR BALANCE AMOUNT OF RS. 1,08,250/- IS BEING ALLOWED AS REVENU E EXPENDITURE BECAUSE IT WAS INCURRED IN LAYING OF HIGH TENSION E LECTRIC LINE WITH THE INTENTION TO HAVE MORE POWER FOR ITS BUSINESS RESUL TING INTO ENHANCED PRODUCTION. IN THE RESULT THE APPELLANT GET A RELI EF OF RS. 1,08,250/- AND THE ADDITION MADE BY THE ASSESSING OFFICER IS RESTR ICTED TO RS. 78,250/-. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RE CORD. IN OUR VIEW, THE AMOUNT IN QUESTION IS IN THE NATURE OF DEPOSIT LYIN G WITH GUJARAT ELECTRICITY BOARD AND ASSESSEE IS ENTITLED FOR REFUND AFTER CER TAIN PERIOD OF INTERVAL. IN 3 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) THAT VIEW OF THE MATTER, THE AMOUNT IS IN INTACT AN D THEREFORE BY ANY STRETCH OF IMAGINATION, THE SAME CANNOT BE CONSIDERED AS REVEN UE EXPENDITURE. 4. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT I N THIS GROUND OF APPEAL AND ACCORDINGLY, THE SAME IS REJECTED. 5. GROUND NO. 2 OF THE APPEAL IS DIRECTED AGAINST T HE ACTION OF CIT(A) IN CONFIRMING THE ADDITION OF RS. 7,31,424/- MADE ON A CCOUNT OF OIL GAIN. THE ASSESSING OFFICER OBSERVED IN THE ORDER THAT THE AS SESSEE COMPANY HAD SHOWN AN EXCESS YIELD OF 1.20% OVER AND ABOVE THE NORMAL PRODUCTION, BUT NO REASON FOR THE SAME WAS GIVEN IN THE TAX AUDIT REPORT. TH E ASSESSING OFFICER VIDE HIS LETTER DATED 14-08-2003 ASKED THE ASSESSEE TO EXPLA IN AS TO WHETHER THIS EXCESS PRODUCTION WAS DUE TO OIL GAIN OR FOR ANY OTHER REA SON. IT WAS FURTHER POINTED OUT BY THE ASSESSING OFFICER THAT IF THE SUCH GAIN WAS DUE TO OIL GAIN, THEN THE DETAILS OF OIL CONSUMED DURING THE YEAR IN TERMS OF QUANTITY SHOULD BE FURNISHED WITH THE DETAILS OF CORRESPONDING GRAY YA RN USED BY IT SHOWING MONTH WISE DETAILS. IN RESPONSE TO THE SUCH LETTER THE ASSESSEE COMPANY REPLIED THAT THE SAID GAIN WAS DUE TO OIL GAIN. TH E ASSESSEE FURTHER SUBMITTED THAT IT WAS USING THE MACHINES OF ADVANCED TECHNOLO GY HAVING ENERGY CONSERVATIVE DEVICE WHICH REQUIRED LESS OIL DURING THE PROCESS AND THE SAME RESULTED INTO LESS OIL GAIN AFTER THE PROCESS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY DID NOT FURNISH THE SPECI FIC DETAILS OF CONSUMPTION OF OIL AND THE PRODUCTION IN TERMS OF VALUE AND IN TERMS OF QUANTITY. HE FURTHER POINTED OUT THAT THE ASSESSEE COMPANY DID NOT FURNI SH THE DETAILS OF OIL CONSUMPTION ON DAY TO DAY BASIS DURING THE COURSE O F MANUFACTURING PROCESS. THE ASSESSING OFFICER HAD ALSO MENTIONED THE COMPAR ATIVE RESULTS OF OIL GAIN OF M/S. VATIKA FILAMENTS (P) LTD., WHICH WAS SHOWN AT 5.49% FOR A.Y. 2003- 04, AND FURTHER MENTIONED THAT THE COMPANIES WHICH WERE CARRYING OUT SIMILAR ACTIVITIES LIKE THAT OF ASSESSEE COMPANY HAS SHOWN OIL GAIN RANGING FROM 1% TO 4 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) 5% AFTER USING THE MODERN MACHINES IN SURAT AND ARO UND SURAT CITY. THE ASSESSING OFFICER CONCLUDED AS UNDER: DURING THE YEAR, THE ASSESSEE HAD SHOWN CONSUMPTION OF YARN FOR 636294.547 KGS. AND THERE WAS CONSUMPTION OF OIL OF 10689.270 KGS. ACCORDINGLY, THERE SHOULD HAVE BEEN PRODUCTION OF 6 46983 KGS. OF YARN AND AFTER CONSIDERING WASTAGE OF 5733 KGS. AS REPOR TED BY THE ASSESSEE, THERE SHOULD HAVE BEEN PRODUCTION OF 641249.957 KGS . HOWEVER, THE ASSESSEE HAD SHOWN PRODUCTION OF 638220.170 KGS. OF YARN AFTER TAKING OUR WASTAGE. SO, THERE IS NO RECORD FOR 3029.787 K GS. OF YARN. IT IS FURTHER INTERESTED TO SEE THAT THE ASSESSEE HAS WRI TTEN YIELD OF 101.20% WHEREAS IN FACT, IT INCLUDES WASTAGE OF 5733.860 KG S., WHICH IS 0.9% OF THE CONSUMPTION, WHICH MEANS INTO ACTUAL OIL GAIN O F ONLY 100.3% AND NOT FOR 101.20% WHICH MEANS THAT DURING MANUFACTURI NG PROCESS, THERE WAS ONLY 0.3% NET OIL GAIN TO THE FINISHED GOODS WH EREAS, THE HON'BLE ITAT IN THE CASE OF MARMO TEXTURISERS HAS TAKEN OIL GAIN AT 1.62% WHICH WAS AFTER GIVING REDUCTION TO 3.5% WASTAGE. THE ASSESSEES CONTENTION THAT THE CASE OF MARMO TEXTURISERS WAS O LD CASE AND AFTER THAT LOT OF TECHNOLOGY UP-GRADATION HAS TAKEN PLACE AND HE IS USING ENERGY CONSERVATING MACHINE IS ALSO NOT ON THE SPEC IFIC ISSUE OF OIL GAIN. THE MODERNIZATION IN THE MACHINE HAS RESULTED INTO REDUCTION OF WASTAGE WHICH WERE EARLIER 3.5% AND NOW AROUND 0.5% , WHICH IS BEING REPORTED IN LARGE NUMBER OF CASE BY TEXTURISERS AND SIMILARLY THERE IS A REDUCTION IN CONSUMPTION OF ENERGY IN THE PRODUCTIO N OF TEXTURISED YARN AND THESE TWO THINGS APPEAR TO BE REASONABLE ALSO B ECAUSE TECHNOLOGY UP-GRADATION MEANS LOW COST TO THE ASSESSEE BY WAY OF REDUCTION IN WASTAGE AND REDUCTION IN CONSUMPTION OF ELECTRICITY . IT IS VERY DIFFICULT FOR THE ASSESSEE TO SHOW DAY- TO-DAY OIL CONSUMPTION AS THE SAME WILL EXPOSE THEM TO ACTUAL OIL CONSUMPTION IN PRODUCTION OF YARN, SO IT IS BETTER WAY WAS TO GIVE OIL CONSUMPTION ON THE BASIS OF ESTIMATED PRODUCTION AND ACCOUNT FOR O IL CONSUMPTION, ACCORDINGLY TO SAME. IF SOMEHOW SOME EXTRA OIL HAS BEEN PURCHASED, THE SAME CAN BE SHOWN AS PART OF CLOSING STOCK AND IF TOTAL OIL CONSUMPTION IS SHOWN LESS THAN 1.62% RATIO OF JUDGM ENT REQUIRES THAT THE ASSESSEE SHOULD PRODUCE PROPER DAY-TO-DAY PRODU CTION RECORD GIVING DETAILS OF YARN CONSUMED, WASTAGE GENERATED AND CONSUMPTION OF OIL WHICH ASSESSEE HAS CONVENIENTLY AVOIDED BY STAT ING THAT IT IS ONLY 1% OF TOTAL PURCHASE, SO NO DAY-TO-DAY CONSUMPTION REC ORD OF OIL MAINTAINED. NO DOUBT, IF PURCHASES ARE NOT SHOWN, THEY WILL INSIGNIFICANT, BUT IN TEXTURISING INDUSTRY SIGNIFIC ANCE OF OIL AND CONSEQUENT OIL GAIN IS IMPORTANT ASPECT AND IT IS W ELL KNOWN IN PARLANCE THAT TEXTURISERS MAJOR EARNING DEPENDS UPON OIL GA IN. 5 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) IN VIEW OF THE ABOVE, ACCEPTING THE ASSESSEES VIE W THAT USE OF OIL IS INSIGNIFICANT COMPARE TO TOTAL PRODUCTION/PURCHA SED CANNOT BE ACCEPTED AND AS IT WAS ALSO NOT DIFFICULT FOR THE A SSESSEE TO MAINTAIN DAY-TO-DAY STOCK OF OIL CONSUMPTION AS THERE WAS ON LY TWO RAW MATERIALS I.E. YARN AND OIL AND IT WAS NOT A CASE WHERE HUNDR EDS OF RAW MATERIALS ARE USED DAY IN AND DAY OUT, EVEN IN THOSE CASES PR UDENT BUSINESSMEN MAINTAINED DAY-TO-DAY RECORDS TO PREVENT LEAKAGE AT FACTORY THROUGH STAFF/EMPLOYEES. 6. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(1) OF THE IT ACT, 1961 AN D MADE AN ADDITION OF RS. 7,43,917/- TREATING THE SAME AS UNDISCLOSED SALE AM OUNT OF EXCESS PRODUCTION. 7. ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION STA TING THAT THE ASSESSEE COMPANY HAD NOT MAINTAINED THE STOCK REGISTER REGAR DING CONSUMPTION OF OIL ON DAY TO DAY BASIS AS IT WAS NOT NECESSARY. HE FU RTHER HELD THAT ASSESSING OFFICER HAS VERY CATEGORICALLY WORKED OUT THE SHORT COMINGS OF AREA OF PRODUCTION ON ACCOUNT OF OIL GAIN AND PROVED BEYOND DOUBT THAT THE PRODUCTION OF 7888 KGS. OF FABRICS WAS NOT SHOWN BY THE ASSESS EE COMPANY IN ITS BOOKS OF ACCOUNTS AND AS A RESULT HELD THE SAME IS UNDISCLOS ED SALES OUT OF BOOKS OF ACCOUNTS. HE FURTHER HELD THAT THE ASSESSEE COMPAN Y HAD NOT MAINTAINED DAY TO DAY STOCK REGISTER OF OIL CONSUMPTION AND THEREF ORE ITS CLAIM THAT LESS OIL WAS CONSUMED BECAUSE OF USE OF ADVANCE TECHNOLOGY H AS BEEN FOUND WITHOUT SUPPORT BECAUSE IN THE ABSENCE OF DETAILS QUANTITAT IVE CONSUMPTION, THE SAME CANNOT BE VERIFIED. ACCORDING TO CIT(A) HAD THERE BEEN QUANTITATIVE DETAILS OF CONSUMPTION AVAILABLE WITH THE ASSESSEE COMPANY, TH E SAME WOULD HAVE BEEN EXAMINED ON THE BASIS OF MERIT. 8. IN VIEW OF THE ABOVE, CIT(A) HELD THAT THE ADDIT ION MADE BY THE ASSESSING OFFICER OF RS. 7,43,917/- ON ACCOUNT OF U NDISCLOSED SALES AS A RESULT OF EXCESS PRODUCTION IN THE FORM OF OIL GAIN WAS JU STIFIED. 6 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) 9. BEFORE US, SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT THE COMPARISON OF THE OIL GAIN AS SHOWN BY THE ASSE SSEE COMPANY WITH THAT OF OIL GAIN AS HELD BY THE ITAT, AHMEDABAD BENCH IN TH E CASE OF M/S. MARMO TEXTURISERS PVT. LTD. AND THAT OF M/S. VATIKA FILAM ENTS (P) LTD. WAS TOTALLY INCORRECT. SHRI. MITISH S. MODI, LD. COUNSEL FOR T HE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE COMPANY WAS USING MODERN M ACHINES TO CARRY OUT ITS BUSINESS OF PROCESSING AND THE SAME WAS PURCHASED F ROM M/S. HIMSON TEXTILE ENGINEERING LIMITED, WHICH CONSUMED LESS OIL OR THA T COULD BE RUN EVEN WITHOUT ADDING OIL PROCESSING. HE FURTHER SUBMITTE D THAT THE ASSESSEE PREPARE DAY TO DAY STOCK REGISTER OF MATERIAL ITEM I.E. YAR N AND STOCK REGISTER WAS OFFERED FOR VERIFICATION AND THE DETAILS OF THE STO CK HAD BEEN FOUND SATISFACTORY AND AS PER THE BOOKS. SHRI. MITISH S. MODI, LD. CO UNSEL FOR THE ASSESSEE HAD PRODUCED 13,085 LTRS. OF OIL AMOUNTING TO RS. 4,56, 260/- AND THE TOTAL MATERIAL PRODUCED DURING THE YEAR WAS RS. 4,84,33,782/-. AC CORDING TO SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE PERCENTAGE OF OI L PURCHASED TO TOTAL PURCHASES COMES OUT TO 0.94%. HE FURTHER SUBMITTED THAT IT IS NOT PRACTICABLE TO KEEP DAY TO DAY RECORD OF TRIFLE ITEMS. EVEN EX CISE DEPARTMENT DO NOT FIND IT NECESSARY AND IMPORTANT TO KEEP DAY TO DAY RECORD O F CONSUMPTION OF OIL. SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE FURTHE R POINTED OUT THAT ASSESSEE COMPANY HAD SHOWN REASONABLE GROSS PROFIT OF 11%. HE FURTHER SUBMITTED THAT IN ABSENCE OF ANY OTHER MATERIALS OR FINDINGS THE G ROUND OF DEPARTMENT THAT, THE ASSESSEE HAS NOT GIVEN DETAILS OF OIL CONSUMED ON D AY TO DAY BASIS IS UNJUSTIFIED AND NOT SUSTAINABLE. SHRI. MITISH S. M ODI, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE CASE OF MARMO TEXU RISERS PRIVATE LIMITED, SURAT (ITA 338/AHD/1994) RELATING TO ASSESSMENT YEA R 1990-1991 DATED 27-07- 1994 IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT TH E ASSESSEE COMPANY HAD SHOWN GROSS PROFIT OF 11% WHICH IS MORE THAN GROSS PROFIT OF 8.76% SHOWN BY 7 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) NORMATIC CASE OF MARMO TEXURISERS PRIVATE LIMITED ( SUPRA). SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DE CISION OF ITAT, AHMEDABAD BENCH IN THE CASE OF ACIT, CC-2, SURAT VS . NAKODIA TEXTILES INDUSTRIES LIMITED, SURAT IN ITA NO. 185/AHD/1997 RELATING TO ASSESSMENT YEAR 1993-94, ORDER DATED 30-11-2004, WHEREIN IT HA S BEEN HELD THAT THE RATIO OF DECISION OF TRIBUNAL IN THE CASE OF M/S. MARMO T EXURISERS PRIVATE LIMITED DID NOT DECIDE THE OIL GAIN BUT DECIDED THE REASONA BLE WASTAGE BETWEEN 3% TO 3.5% AND THE DETERMINATION OF OIL GAIN AT 1.62% WAS THE RESULTANT FIGURE. SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE ALSO R ELIED ON THE DECISION OF ITAT, AHMEDABAD BENCH-B IN THE CASE OF ITO WARD-2(1 ), SURAT V/S. RINKESH PRINTS (P) LTD., ITA NOS. 1040 & 1041/AHD/1998 RELA TED TO ASSESSMENT YEARS 1995-96 AND 1996-97, ORDER DATED 12-09-2005 (151 TA XMAN- ITAT PAGE 44). FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT, JODHPUR, SMC BENCH, IN THE CASE OF ITO VS. PRAKASHCHAND (2006) 1 00 TTJ (JD) 639. IN VIEW OF THE ABOVE SHRI. MITISH S. MODI, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER AND CONFIRMED BY THE CIT(A) MAY BE DELETED. 10. SHRI. SAMIR VAKIL, THE LD. DR HEAVILY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. THE DEC ISIONS CITED AT THE BAR WERE ALSO DULY CONSIDERED BY US. IN THE INSTANT CASE, T HE ASSESSING OFFICER WAS NOT JUSTIFIED RELYING ON THE DECISION OF ITAT, AHMEDABA D BENCH IN THE CASE OF M/S. MARMO TAXURISERS PRIVATE LIMITED, SURAT IN ITA NO. 338/AHD/1994 RELATING TO ASSESSMENT YEAR 1990-1991, ORDER DATED 27-7-1994. IN A SUBSEQUENT DECISION DATED 30-11-2004, IN THE CASE O F NAKODIA TEXTILES INDUSTRIES LIMITED, SURAT IN ITA NO. 185/AHD/1997 R ELATING TO ASSESSMENT YEAR 1993-94, THE ITAT, AHMEDABAD BENCH HELD THAT THE RA TIO OF DECISION OF 8 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) TRIBUNAL IN THE CASE OF M/S. MARMO TEXURISERS PRIVA TE LIMITED DID NOT DECIDE THE OIL GAIN BUT DECIDED THE REASONABLE WASTAGE BET WEEN 3% TO 3.5% AND THE DETERMINATION OF THE OIL GAIN AT 1.62% WAS THE RESU LTANT FIGURE. 12. THUS, IN VIEW OF THE DECISION RENDERED IN THE C ASE OF NAKODIA TEXTILES INDUSTRIES LIMITED (SUPRA), THE COMPARISON OF THE O IL GAIN AS SHOWN BY THE ASSESSEE COMPANY WITH THAT OF OIL GAIN AS HELD BY T HE TRIBUNAL IN THE CASE OF MARMO TEXURISERS PRIVATE LIMITED (SUPRA) WAS TOTALL Y INCORRECT. FURTHERMORE THE ASSESSEE COMPANY WAS USING MODERN MACHINES TO C ARRY OUT ITS BUSINESS OF PROCESSING WHICH CONSUMED LESS OIL OR THAT COULD BE RUN EVEN WITHOUT ADDING OIL PROCESSING. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE FACT. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS REJE CTED BOOKS OF ACCOUNT UNDER SECTION 145(1) OF THE ACT ON VERY FLIMSY GROU ND THAT DAY TO DAY RECORD OF OIL CONSUMED IS NOT MAINTAINED. IN OUR VIEW THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT ON THE ABOVE GROUND. THE ASSESSEE WAS HAVING REGULAR BOOKS OF ACCOUNT AND MAINTAINING COMPLETE DETAILS WITH RESPECT TO OPENING STOCK, PURCHASES AND CLOSING STO CK OF VARIOUS RAW MATERIALS INCLUDING THE CONSUMABLES AND THE ACCOUNTS WERE DUL Y AUDITED. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAD NOT POI NTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO NOT FOUND ANY PURCHASES OR SALES O UTSIDE THE BOOKS. IN OUR VIEW, THE MERE NON MAINTENANCE OF STOCK REGISTER RE GARDING CONSUMPTION OF OIL ON DAY TO DAY BASIS CANNOT BE A BASIS FOR REJECTING BOOKS OF ACCOUNT. IN THE CASE OF RINKESH PRINTS PRIVATE LIMITED (SUPR A), THE ITAT, AHMEDABAD BENCH HELD AS UNDER: THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTI NG THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE HAD NOT MAINTAINED DAY-TO-DAY PRODUCTION RECORD. THE ASSES SEE WAS HAVING REGULAR BOOKS OF ACCOUNT AND MAINTAINING COMPLETE D ETAILS WITH RESPECT TO OPENING STOCK, PURCHASES AND CLOSING STOCK OF VA RIOUS RAW MATERIALS 9 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) INCLUDING THE CONSUMABLES AND THE ACCOUNTS WERE DUL Y AUDITED. THE REJECTION OF BOOKS, BY THE ASSESSING OFFICER WAS WI TH A PREDETERMINED MIND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN TH E BOOKS OF ACCOUNT AND, THEREFORE, THE REJECTION WAS RIGHTLY QUASHED B Y THE COMMISSIONER (APPEALS). SO FAR AS THE QUESTION OF OIL GAIN WAS CONCERNED, T HE ASSESSING OFFICERS CONCLUSION THAT GENERALLY NET OIL GAIN WAS 1 TO 2 P ER CENT BEING NOT SUPPORTED BY ANY FORMULA OR EXPERT ADVICE OR COMPAR ABLE CASE, WAS NOT SUSTAINABLE IN LAW AND THE COMMISSIONER (APPEALS) W AS QUITE JUSTIFIED IN DELETING THE ADDITION. THE COMMON ORDER OF THE COMMISSIONER (APPEALS) WAS CONFIRMED. 13. IN THE ABOVE CASE, THE TRIBUNAL HAS CLEARLY HEL D THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING BOOKS OF ACC OUNT OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD NOT MAINTAINED DAY TO DAY PRODUCTION RECORD. THE TRIBUNAL FURTHER HELD THAT THE ASSESSING OFFICERS CONCLUSION THAT GENERALLY NET OIL GAIN WAS 1 TO 2% BEING NOT SUPPORTED BY ANY FOR MULA OR EXPERT ADVICE OR COMPARABLE CASE, WAS NOT SUSTAINABLE IN LAW. IN OU R VIEW THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. SIMILARLY, IN THE CASE OF PRAKASHCHAND (SUPRA) THE SMC BENCH OF JODHPUR BENCH OF ITAT HELD (HEAD NOTE) AS UNDER: THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT, HE HELD ALSO NOT FOUND ANY INFLATED PURCHASE OR SUP PRESSED SALES. THE MERE NON-MAINTENANCE OF STOCK REGISTER CANNOT BE A BASIS FOR REJECTING THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAD NO T QUOTED EVEN A SINGLE CASE WHEREIN GP RATE OF 10.5 PER CENT HAD BE EN ACHIEVED. IT IS ALSO NOTICED THAT THE ASSESSEE STARTED BUSINESS AT A NEW STATION, I.E. SURAT AND THE ASSESSING OFFICER COMPARED THE GP RAT E ACHIEVED BY THE ASSESSEE AT BALTORA WITH THAT OF SURAT, HOWEVER, IG NORED OTHER CONTENTION OF THE ASSESSEE THAT NEW QUALITIES OF CL OTH WERE INTRODUCED WHILE CONDUCTING THE BUSINESS AT SURAT. IT SEEMS T HAT THE ADDITION HAD BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF PRESUMPTION ONLY WHICH IS NOT TENABLE IN THE EYES OF LAW. IN VIEW O F THAT, THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 10 ITA NO. 2490/AHD/2004 (ASSESSMENT YEAR 2001-02) IN VIEW OF THE DECISION OF JODHPUR BENCH (SUPRA) A LSO THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOK RES ULT UNDER SECTION 145(1) OF THE ACT. FURTHERMORE IN THE INSTANT CASE THE ASSES SEE HAD SHOWN GROSS PROFIT OF 11% WHICH IS QUITE REASONABLE IN THIS LINE OF BUSIN ESS. THUS, IN ABSENCE OF ANY OTHER MATERIALS OR FINDINGS, THE GROUND OF ASSESSIN G OFFICER THAT, THE ASSESSEE HAS NOT GIVEN DETAILS OF OIL CONSUMED OF DAY TO DAY BASIS, IS UNJUSTIFIED AND NOT SUSTAINABLE. 14. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) IS NOT JUSTIFIED AND ACCORDINGLY WE DELETE THE SAME. THIS GROUND OF APPEAL IS ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21-08 -2009. [ SD/- SD/- ( A.N. PAHUJA) (H.L. KARWA) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED: 21/08/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.