ITO 13(1)(3), MUMBAI V. PARAG ENGINEERING PRODUCTS P.LTD, MUMBAI

ITA 2492/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1893 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTIKEYAN
• Assessee Lawyers: G C LALKA
• Keywords: Rejection of books of accounts; Depreciation; Additional evidence; TDS; Set aside; FORM 26AS
• Section: 133(6); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.2492/M/2017 ASSESSMENT YEAR: 2012-13 INCOME TAX OFFICER- 13(1)(3), 2 ND FLOOR, ROOM NO.225, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. PARAG ENGINEERING PRODUCTS PVT. LTD., 121, ABCD, GOVERNMENT INDUSTRIAL ESTATE, CHARKOP, KANDIVALI (W), MUMBAI 400 067 PAN: AACCP2592D (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI G.C. LALKA, A.R. REVENUE BY : SHRI ABHIRAMA KARTIKEYAN, D.R. DATE OF HEARING : 06.12.2019 DATE OF PRONOUNCEMENT : 09.12.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.10.2013 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2000-01. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE ORDER OF THE LEARNED C!T(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE CIT(A) ERRED IN TREATING THE INTEREST PAID AT THE TIME OF PURCHASE OF SECURITIES (BROKEN PERIOD INTEREST) AS REVENUE EXPE NDITURE, HOLDING THE SECURITIES HELD BY THE BANK STOCK-IN-TRADE AND NOT AS INVESTME NTS. ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 2 2.2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT DISA LLOWANCES OF SAID INTEREST WAS MADE ON THE GROUND THAT THIS INTEREST WAS PAID BY T HE ASSESSEE AT THE TIME OF PURCHASE OF SECURITIES WHICH IS INDIRECTLY AN 'ADDE D COST' OF THE SECURITIES. 2.3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SAID THAT IT HAS BEEN SHOWING THE GOVT. SECURITIES AS STOCK-IN-TRADE IN THE BALANCE SHEET. THESE SECURITIES SHOWN AS INVEST MENT UNDER CAPITAL ACCOUNT. 2.4. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAS NOT EVEN FOLLOWED THE RBI GUIDELINES IN THIS REGARD. SINCE I T HAS BEEN PROVED THAT ASSESSEE HAS NOT BEEN SHOWING THE SECURITIES AS STOCK-IN-TRA DE, THE SAME BECAME A CAPITAL SET AND ANY INTEREST PAID ON ACQUISITION OF THE SAM E WILL HAVE TO BE CAPITALIZED. 3.1. THE CST(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION ARISING IN THE VALUATION OF SECURITIES HELD AS STOCK-IN-TRADE AT T HE END OF THE ACCOUNTING YEAR. 3.2. THE CIT(A) FAILED TO APPRECIATE THAT THE ASSES SEE IS PROVIDING ONLY FOR THE DEPRECIATION AND NOT FOR APPRECIATION. THE ASSESSEE HAS TAKEN THE STAND THAT HE HAS PROVIDED FOR THE APPRECIATION AS WELT BUT SAME IS N OT TRUE AS WHAT APPRECIATION HAS BEEN PROVIDED FOR IS IN RESPECT OF ONLY THOSE SECUR ITIES WHERE DEPRECIATION WAS EARLIER CLAIMED. IN OTHER WORDS, WHERE THERE IS NO DEPRECIATION CLAIMED AND THERE IS APPRECIATION IN THE VALUE OF SECURITIES, THE SAME H AS NOT BEEN OFFERED TO TAX. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THST OF THE ASSESSING OFFICER RESTORED. 3. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE D ELETION OF ADDITION OF RS.3,28,32,575/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF UNPROVED EXPENSES. 4. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE INFORMATION UNDE R SECTION 133(6) OF THE ACT FROM SOME PARTIES WITH WHOM THE A SSESSEE HAS ENTERED INTO BUSINESS TRANSACTIONS. THE AO IN SOME CASES RECEIVED REPLIES WHILE IN SOME CASES THE NOTICES WE RE EITHER NOT SERVED OR NOT RESPONDED. THE DETAILS OF THE INFORM ATION GATHERED BY THE AO FROM 7 PARTIES IS GIVEN ON PAGE NO.3 OF T HE ASSESSMENT ORDER WHICH WAS AT VARIANCE TO THE DETAILS FILED BY THE ASSESSEE AND ACCORDINGLY THE ASSESSEE WAS ASKED TO RECONCILE THE SAID ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 3 DISCREPANCIES WITH ITS THE BOOKS OF ACCOUNTS. IN RESPONSE TO THE QUERY OF THE AO THE ASSESSEE SUBMITTED THAT OUT OF 7 PARTIES SUBMISSIONS FROM 4 PARTIES HAVE ALREADY BEEN SUBMIT TED ON 09.03.2015 BY THE ASSESSEE. IN RESPECT OF CHARCORE PETROLEUM THE ASSESSEE SUBMITTED THAT THE AO MAY TAKE ACTION AGAINST THEM AND AS REGARDS VENUS PETROLEUM THE ASSESSEE SU BMITTED BEFORE THE AO THAT A COPY OF THE REPLY RECEIVED FRO M THE SAID PARTY MAY BE PROVIDED SO THAT THE ENTRIES COULD BE RECONCILED. SIMILARLY, THE ACCOUNT OF BRITANNIA INDUSTRY LTD. W AS EXPLAINED BY THE ASSESSEE BY SUBMITTING THAT THERE ARE SEPARA TE ACCOUNTS IN THE BOOKS OF ASSESSEE ,ONE IS IN RESPECT OF CONV ERSION CHARGES OF WHICH HAS A CREDIT BALANCE OF RS.9,26,67,066/- A ND SECOND ACCOUNT IS IN RESPECT OF THE REIMBURSEMENT OF EXPEN SES WHICH HAVE BEEN CREDITED TO THE RESPECTIVE EXPENSES ACCOU NT. THE ASSESSEE ALSO SUBMITTED THAT THE DISCREPANCIES IN T HE BOOKS OF THE ASSESSEE AND THE PARTIES WITH WHOM TRANSACTED D URING THE YEAR MAY BE ON ACCOUNT OF THE FACT THAT ASSESSEE MI GHT HAVE ACCOUNTED THE BILL IN THE CURRENT YEAR AND THE PART Y MAY HAVE ACCOUNTED FOR THE TRANSACTIONS IN THE NEXT YEAR. T HE AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND EVEN NOTED THAT ASSESSEE HAS CLAIMED CERTAIN TDS IN RESPECT OF WHICH THE COR RESPONDING INCOME HAS NOT BEEN OFFERED. THIS DISCREPANCY WAS AS PER THE CLAIM MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS AND AS PER FORM 26AS. FINALLY, THE AO ADDED A SUM OF RS.3,28, 32,575/- WHICH REMAINS UNPROVED AS PER DETAILS BELOW: SR NO NAME OF THE PARTY NATURE OF TRANSACTIONS AMOUNT RS 1 SHREEKUSH MACHINERY & SPARES PVT. LTD. HYGIENE CONTRACT 17,10,639 ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 4 2 VIRTUAL CLEANING SYST EMS P VT. LTD. HYGIENE CONTRACT 6,01,371 3 CHARKOP PETROLEUM OIL & FUEL 1,10,81,002 4 RONAK OVERSEAS OIL & FUEL 1,05,68,465 5 RATNA MACHINES PVT. LTD. PURCHASE 88,71,098 TOTAL 3,28,32,575 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DEL ETED THE DISALLOWANCE BY OBSERVING AND HOLDING AS UNDER: 5.6 I HAVE CONSIDERED THE FACTS ON RECORD AND SUBM ISSIONS CAREFULLY. IT IS SEEN FROM PARA 4.1. OF THE ASSESSMENT ORDER THAT THE ASS ESSING OFFICER INFORMED THE APPELLANT OF NON-SERVICE/NO REPLY IN RESPECT OF VAR IOUS CREDITORS ONLY VIDE LETTER DATED 20.3.2015 AND THE ASSESSMENT ORDER WAS PASSED ON 30 .3.2015. REPLY WAS FILED VIDE LETTER DATED 27.3.2015 WHICH IS REPRODUCED IN THE A SSESSMENT ORDER IN PARA 4.2. THE ASSESSING OFFICER HAS ACCEPTED THAT CONFIRMATIONS W ERE FILED IN RESPECT OF FOUR PARTIES BUT HAS OBJECTED TO IT STATING THAT SUPPORTING BILL S, VOUCHERS , QUANTITATIVE DETAILS , IDENTITY OF PERSONS SIGNING THE CONFIRMATIONS IS NO T FILED. WHILE THE ASSESSEE HAS STATED THAT THE CONFIRMATIONS WERE FILED VIDE LETTE R DATED 9.3.2015, IT IS NOT CLEARLY STATED WHAT ELSE WAS CALLED FOR SINCE THE NOTICE DA TED 20.3.2015 DOES NOT MAKE IT CLEAR AS TO WHAT WAS ALREADY ON RECORD AND WHAT ELS E WAS CALLED FOR. AS REGARDS CHARKOP PETROLEUM, THE ASSESSEE HAD STATED BEFORE T HE ASSESSING OFFICER TO TAKE ACTION AS DEEMED FIT IN CASE THEY DID NOT RESPOND T O ITS NOTICE. AS ADDITIONAL EVIDENCE, THE CONFIRMATION FROM CHARKOP PETROLEUM H AS BEEN FILED. 5.7. AT THIS STAGE IT IS NOTED THAT THE ONUS LIES O N THE PERSON WHO MAKES THE CLAIMS. THE ASSESSING OFFICER HAD CALLED FOR CONFIRMATIONS. IF IT CAN BE SHOWN THAT SUCH CLAIMS ARE FALSE, ADDITION CAN BE MADE. HOWEVER, AD DITION CANNOT BE MADE FOR LACK OF RESPONSE FROM THE CREDITOR/PURCHASE PARTY AND MO RE SO WHEN THE GOAL POSTS ARE SHIFTED BY CALLING UPON THE ASSESSEE AT THE LAST MI NUTE TO PROVIDE VARIOUS DETAILS FROM THE BOOKS OF THE SUPPLIERS OVER WHOM THE ASSESSEE H AS NO CONTROL. 5.8. THERE IS MERIT IN THE SUBMISSIONS OF THE APPEL LANT THAT THE ASSESSING OFFICER HAS NOT UNDERSTOOD THE NATURE OF APPELLANT'S BUSINESS W HILE SUBMITTING THE REMAND REPORT. IT DOES APPEAR THAT THE ASSESSING OFFICER HAS NOT D ISCUSSED THE ISSUES/DOUBTS WITH THE APPELLANT BEFORE SENDING THE REPORT. THE APPELLANT HAS EXPLAINED THAT CLEANING JOB FOR THE FACTORY WAS GIVEN TO SHREEKUSH MACHINERY AND SP ARES PVT. LTD. AND VIRTUAL CLEANING SYSTEMS PVT. LTD. OIL AND FUEL IS PURCHASE D FROM RONAK OVERSEAS AND CHARKOPPETRLOEUM. THE SAME IS USED TO FIRE THE BURN ERS IN THE BAKING PROCESS. MACHINERY IS PURCHASED FROM RATNA MACHINES P. LTD. WHICH IS PART OF FIXED ASSETS. COPIES OF THE BILLS FOR PURCHASE ARE FILED. IT IS C LEAR THAT THE IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS NOT ASKED TH E APPELLANT THE NATURE AND ITEM OF PURCHASE AND THEREBY SPECULATED THAT OIL AND FUEL P URCHASE IS EXCESSIVE ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 5 5.9. SINCE THE LARGER PART OF EXPENSES WERE IN RESP ECT OF PURCHASES FROM RONAK OVERSEAS AND CHARKOP PETRLOEUM, DETAILS OF QUANTITY AND AMOUNT OF PURCHASE WAS CALLED. THE POSITION IS AS FOLLOWS. 5.10. IT IS NOTED FROM THE ABOVE THAT SIMILAR PURCH ASES HAVE BEEN MADE IN SUBSEQUENT YEARS ALSO. NO SUCH ADDITION/DISALLOWANCES ARE MADE IN ASSESSMENT ORDERS FOR AY 2013-14 AND AY 2014-15 AS SEEN FROM THE COPIES FILE D BEFORE ME. IN LATER YEARS, THE APPELLANT HAS SWITCHED TO GAS AS FUEL INSTEAD OF OI L AND FUEL. CONFIRMATIONS HAVE BEEN FILED BY ALL THE PARTIES. NONE OF THESE PARTIES ARE RELATED TO THE APPELLANT. PAYMENTS HAVE BEEN MADE BY CHEQUES. NONE OF THE EXPENSES CLA IMED HAVE BEEN PROVED TO BE NON-GENUINE. IF THE PARTIES HAVE NOT GIVEN DETAILS SUCH AS THEIR BANK STATEMENTS, COPY OF AGREEMENT ETC. IT DOES NOT MEAN THAT THE EXPENSE S CLAIMED ARE BOGUS. IT IS NOT NECESSARY THAT THERE BE A FORMAL AGREEMENT IN ALL C ASES. AS PER THE JOB WORK AGREEMENT BETWEEN THE APPELLANT AND BIL, THE APPELLANT IS REQUIRED TO ENSURE THAT HIGHEST STANDARD OF CLEANLINESS IS MAINTAINED AT TH E FACTORY AT ALL TIMES. 5.11. IN THE FACTS OF THE CASE, AND FOR THE REASONS NARRATED ABOVE, THE DISALLOWANCE MADE OF RS.3,28,32,575/- IS DELETED AND GROUND OF APPEAL NO 2 IS ALLOWED. 6. THE LD. D.R. CONTENDED BEFORE THE BENCH THAT THE SAID ADDITION OF RS.3,28,32,575/- WAS DELETED BY LD. CIT (A) WITHOUT NOTICING THE FACT THAT THE SAID AMOUNTS REMAINED UN VERIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND CAM E TO LIGHT ONLY WHEN THE AO ISSUED NOTICES UNDER SECTION 133(6 ) TO THE SUPPLIER FY 201 1 - 12 FY 2012-13 FY 2013 - 14 QUANTITY AMOUNT QUANTITY AMOUNT QUANTIT Y AMOUNT CHARKOP PETROLEUM 223,986 110,81,002 63000 29,15,762 2800 163,742 RONAK OVERSEAS 200000 105,68,465 10000 6,09,000 OTHERS 40000 32,31,033 1449 67,062 MAHANAGA R GAS LTD. 630,508 (INSTALLATIO N CHARGES) 247,839 92,25,851 444,628 181.43.47 0 TOTAL 255,11,008 128,17,67 5 183,07,21 2 ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 6 PARTIES WITH WHOM ASSESSEE ENTERED INTO BUSINESS TR ANSACTIONS DURING THE YEAR. THE LD. D.R. SUBMITTED THAT ALL T HESE DISCREPANCIES WERE SPECIFICALLY CONFRONTED TO THE A SSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ONLY AFTER THE ASSESSEE FAILED TO EXPLAIN THE SAID DISCREPANCIES, THE SAME WERE ADDED TO THE INCOME OF THE ASSESSEE. THE LD. D.R. ALSO SUBMITTED THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO REITERATED HIS FINDING BY STATING THAT THE ASSESSEE HAS NOT COOPERATED IN THE REMAND PROCEEDIN GS ALSO. THEREFORE, THE LD. CIT(A)S ORDER IN DELETING THE S AID ADDITION IS CONTRARY TO THE FACTS ON RECORDS AND KINDLY MAY BE SET ASIDE. 7. ON THE OTHER HAND, THE LD. A.R. RELIED HEAVILY O N THE ORDER OF LD. CIT(A) BY SUBMITTING THAT LD. CIT(A) HAS PAS SED A VERY REASONED ORDER AFTER TAKING INTO ACCOUNT SUBMISSION S OF THE ASSESSEE, DETAILS FILED, THE QUANTITATIVE AND QUALI TATIVE TALLY OF THREE PARTIES BESIDE EXPLAINING THE MODUS OPERANDI IN THE BUSINESS OF THE ASSESSEE. THE LD. A.R. FINALLY SUBM ITTED THAT IN VIEW OF THE REASONED AND SPEAKING ORDER BY THE LD. CIT(A), THE GROUND RAISED BY THE REVENUE MAY BE DISMISSED. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT THE LD. CIT(A) HAS CONSIDER ED ALL THE ASPECTS AND DIMENSIONS OF THE ISSUES INCLUDING THE DETAILED RECONCILIATION AND EXPLANATION BY THE ASSESSEE. T HE LD. CIT(A) HAS SPECIFICALLY NOTED THAT THE ADDITION CAN NOT BE MADE FOR LACK OF RESPONSE FROM THE CREDITORS/PURCHASE PARTY AND M ORE SO WHEN THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE BA LANCE STANDING IN THE CREDIT OF A PARTY AT THE LAST MOMEN T BY PROVIDING DETAILS AND BOOKS OF SUPPLIERS ON WHOM THE ASSESSEE HAS NO ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 7 CONTROL. UNDER THESE FACTS AND CIRCUMSTANCES, WE A RE IN AGREEMENT WITH THE CONCLUSION OF LD. CIT(A) THAT DI SALLOWANCE OF RS.3,28,32,575/- IS UNCALLED FOR. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED BY THE REVENUE. 9. THE ISSUE RAISED IN 2 ND GROUND OF APPEAL IS AGAINST THE DELETION OF RS.2,02,64,475/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF INCOME REPRESENTING UNACCOUNTED PRODUCTI ON. 10. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS OF PRODUCTION OF BREAD FOR BRITANNIA INDUS TRY LTD. ON CONTRACTUAL BASIS. THE ENTIRE RAW MATERIAL IS SUPP LIED BY THE BRITANNIA INDUSTRY LTD WHICH GO INTO THE MANUFACTUR ING PROCESSES. DURING THE YEAR, THE ASSESSEE DISCLOSED THE RECEIPT OF CONVERSATION CHARGES OF RS.9,16,00,806/- IN THE P&L ACCOUNT FROM BRITANNIA INDUSTRY LTD. ACCORDING TO THE AO T HE SAID AMOUNT IS NOT IN AGREEMENT WITH THE AMOUNT SHOWN IN 26AS AND ACCORDINGLY INFORMATION WAS CALLED FOR UNDER SE CTION 133(6) FROM BRITANNIA INDUSTRY LTD. BESIDES REQUIRING THE ASSESSEE TO FURNISH THE COPY OF AGREEMENT WITH THE BRITANNIA IN DUSTRIES LTD. BILLS, VOUCHERS, QUANTITATIVE DETAILS, FINISHED GOO DS MANUFACTURED AND RAW MATERIALS CONSUMED ETC. WHICH WAS REPLIED BY THE ASSESSEE ON 27.03.2015 EXPLAINING TH E QUERY RAISED BY THE AO. FINALLY, THE AO REJECTED THE BOO KS OF ACCOUNTS OF THE ASSESSEE UNDER SECTION 145(3) OF THE ACT ON THE GROUND THAT RESULTS AS PER BOOKS OF ACCOUNTS WERE NOT RELI ABLE AS THERE WAS EXCESS CONSUMPTION OF FUEL OF 24638 METERS. FI NALLY, THE AO ESTIMATED UNACCOUNTED SALES AT RS.2,02,64,478/- BY ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 8 OBSERVING AS UNDER AND ADDING THE SAME TO THE INCOM E OF THE ASSESSEE: 5.6. I HAVE CONSIDERED THE FACTS ON RECORD AND SUB MISSIONS CAREFULLY. IT IS SEEN FROM PARA 4.1. OF THE ASSESSMENT ORDER THAT THE ASS ESSING OFFICER INFORMED THE APPELLANT OF NON-SERVICE/NO REPLY IN RESPECT OF VAR IOUS CREDITORS ONLY VIDE LETTER DATED 20.3.2015 AND THE ASSESSMENT ORDER WAS PASSED ON 30.3.2015. REPLY WAS FILED VIDE LETTER DATED 27.3.2015 WHICH IS REPRODUC ED IN THE ASSESSMENT ORDER IN PARA 4.2. THE ASSESSING OFFICER HAS ACCEPTED THAT C ONFIRMATIONS WERE FILED IN RESPECT OF FOUR PARTIES BUT HAS OBJECTED TO IT STATING THAT SUPPORTING BILLS, VOUCHERS, QUANTITATIVE DETAILS , IDENTITY OF PERSONS SIGNING THE CONFIRMATIONS IS NOT FILED. WHILE THE ASSESSEE HAS STATED THAT THE CONFIRMATIONS WERE FILED VIDE LETTER DATED 9.3.2015, IT IS NOT CLEARLY STATED WHAT ELSE WAS CA LLED FOR SINCE THE NOTICE DATED 20.3.2015 DOES NOT MAKE IT CLEAR AS TO WHAT WAS ALR EADY ON RECORD AND WHAT ELSE WAS CALLED FOR. AS REGARDS CHARKOP PETROLEUM, THE A SSESSEE HAD STATED BEFORE THE ASSESSING OFFICER TO TAKE ACTION AS DEEMED FIT IN C ASE THEY DID NOT RESPOND TO ITS NOTICE. AS ADDITIONAL EVIDENCE, THE CONFIRMATION FR OM CHARKOP PETROLEUM HAS BEEN FILED. 11. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) AL LOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 6.3. IN THE REMAND REPORT SUBMITTED BY THE AO, THE AO MERELY REITERATED THE CONCLUSION OF THE ASSESSMENT ORDER AS REGARDS THE E STIMATION OF ALLEGED UNACCOUNTED PRODUCTION WITHOUT DEALING WITH THE CON TENTIONS OF THE APPELLANT. IN THE REJOINDER THE APPELLANT ALSO REITERATED HIS SUB MISSIONS MADE IN THE APPELLATE PROCEEDINGS. 6.4. I HAVE CONSIDERED THE FACTS ON RECORD AND RIVA L SUBMISSIONS. IT IS NOTED THAT THE APPELLANT DOES NOT MANUFACTURE/PRODUCE BREAD ON ITS OWN ACCOUNT. IT MERELY CARRIES OUT JOB WORK AND RECEIVES MATERIAL FROM BIL AND BAKES BREAD FOR BIL FOR WHICH IT RECEIVES CONVERSION CHARGES AS PER THE AGR EEMENT WITH BIL. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE ACTUAL CONSUMP TION OF POWER AND OIL CAN VARY FROM THE ESTIMATED STANDARD RATES, AND THAT THE VAR IANCE NEED NOT BE AN EVIDENCE OF UNACCOUNTED PRODUCTION WITHOUT ANY OTHER CORROBO RATIVE EVIDENCE. 12. THE LD. D.R. SUBMITTED BEFORE THE BENCH THAT TH E LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE IS ENGAGED IN THE CONTRACT MANUFACTURING FOR BRITAN NIA INDUSTRY LTD. AND WAS NOT INVOLVED IN DIRECT SELLING OF THE MANUFACTURED PRODUCT. THE LD. D.R. SUBMITTED THAT THERE WAS EXC ESS USE OF POWER FUEL TO THE TUNE OF 24,638 LITERS WHICH WAS NOT EXPLAINED AT ALL AND CONSEQUENTLY THE SAID ADDITION WAS MADE ON THE BASIS ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 9 OF NOT SUBMITTING ANY PLAUSIBLE EXPLANATION ON EXCE SS CONSUMPTION OF OIL IN THE MANUFACTURING . BESIDES, THE AO NOTICED SEVERAL INFIRMITIES AND ANOMALIES IN THE BO OKS OF ACCOUNTS OF THE ASSESSEE. SIMILARLY, THERE WAS SHO RT CONSUMPTION OF ELECTRIC UNIT TO THE TUNE OF 77,17 W HICH WAS ALSO NOT EXPLAINED BY THE ASSESSEE. THE LD. D.R. SUBMIT TED THAT IN VIEW OF THESE FACTS THE RESULT AS SHOWN IN THE BOOK S OF ACCOUNTS WERE UNRELIABLE AND AO WAS NOT IN A POSITION TO ASS ESS THE INCOME CORRECTLY AND THEREFORE RIGHTLY REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE UNACCOUNTED SALES OF THE ASSESSEE. THE LD. D.R. THEREFORE PRAYED THAT THE ORDER OF LD. CIT(A) MAY BE SET ASIDE ON THIS ISSUE BY ALLOWING THE APPEAL OF T HE REVENUE ON THIS GROUND. 13. THE LD. A.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AO BY SUBMITTING THAT THE ASSESSEE WAS ONLY CARR YING OUT CONTRACT WORK FOR BRITANNIA INDUSTRY LTD. UNDER CON TRACTUAL OBLIGATION WHICH PROVIDED THAT THE ENTIRE FACTORY W AS TO BE USED EXCLUSIVELY FOR THE MANUFACTURING, PACKAGING AND ST ORING OF PRODUCTS FOR BRITANNIA INDUSTRY LTD. AND PRODUCTION WOULD BE AS PER SCHEDULE GIVEN BY BRITANNIA INDUSTRY LTD. THE P RODUCTION PROCESSES WERE ALSO SUBJECT TO THE INSPECTION OF BR ITANNIA INDUSTRY AND SAMPLE TEST CHECKING WAS ALSO DONE. T HEREFORE, THERE IS NO POSSIBILITY OF MANUFACTURING THE BREAD BY THE ASSESSEE ON ITS OWN FOR SELLING DIRECTLY IN THE MAR KET. THE LD. A.R. SUBMITTED THAT THE LD. CIT(A) HAS CALLED FOR T HE COMPARISON OF ACTUAL AND STANDARD MONTHWISE CONSUMPTION FOR PR ECEDING AND SUCCEEDING YEAR AND NOTED THAT THE DEVIATION/VA RIANCES WERE NORMAL AND NO ADDITION WAS MADE ON ACCOUNT OF SUCH ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 10 VARIANCES IN 2013-14 AND 2014-15. THE LD. A.R. STR ESSED UPON THE FACT THAT THE AO HAS CALCULATED THE ESTIMATED U NACCOUNTED SALE ON ACCOUNT OF EXCESS CONSUMPTION OF FUEL OF 24 638 LETERS BUT IGNORED THE SHORT CONSUMPTION OF POWER OF ELECT RICITY OF 77,179 UNIT. THE LD. A.R., THEREFORE, SUBMITTED TH AT ALL THESE VARIANCES WERE WITHIN THE STANDARD NORMS AND THE LD . CIT(A) HAS RIGHTLY PASSED THE SPEAKING ORDER DIRECTING THE AO TO DELETE THE ADDITION. THE LD. A.R. THEREFORE PRAYED THAT T HE APPEAL ON THIS GROUND OF THE REVENUE MAY BE DISMISSED. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE OBSERVE THAT IN THIS CASE THE ADDITION WAS PRIMARILY BASED UPON THE EXCESS CO NSUMPTION OF FUEL TO THE EXTENT OF 24638 LITTERS. WE OBSERVE THAT THE ASSESSEE WAS CONTRACT MANUFACTURER OF BRITANNIA IND USTRY LTD. AND WAS OPERATING UNDER THE DIRECT CONTROL AND SUPE RVISION OF BRITANNIA INDUSTRY LTD. AND WAS NOT ALLOWED TO DO O R MANUFACTURED BREAD FOR ANY OTHER OUTSIDE PARTY. WE ALSO NOTE THAT THE EXCESS CONSUMPTION OF FUEL WAS WITHIN THE STANDARD NORMS AS HAS BEEN OBSERVED BY LD. CIT(A) BY COMPARI NG THE ACTUAL AND STANDARD CONSUMPTION IN THE PRECEDING AN D SUCCEEDING YEAR AND CAME TO THE CONCLUSION THAT THE ESTIMATION OF UNACCOUNTED SALE ON THE BASIS OF EXCESS CONSUMPT ION OF FUEL IS WRONG AND AGAINST THE PROVISIONS OF THE ACT. WE ARE QUITE CONVINCED WITH THE CONCLUSION DRAWN BY THE LD. CIT( A) ON THIS ISSUE AS THE AO HAS MADE ADDITION ON HYPOTHETICAL B ASIS NOT APPRECIATING THE FACTS IN CORRECT PERSPECTIVE. ACC ORDINGLY, WE ARE UPHOLD THE ORDER OF LD CIT(A) BY DISMISSING THE GRO UND RAISED BY THE REVENUE. ITA NO.2492/M/2017 M/S. PARAG ENGINEERING PRODUCTS PVT. LTD. 11 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.12.2019. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 09.12.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.