ACIT, Jaipur V. VAISHALI METALS P LTD., Jaipur

ITA 27/JPR/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5159 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: SIDDARTH RANKA CA DHK
• Keywords: Rejection of books of accounts; Business income; Cost of acquisition
• Section: 43B; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 27/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. VAISHALI METALS PRIVATE LTD., G-485, ROAD NO. 9A, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACV 5752 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 48/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. VAISHALI METALS PRIVATE LTD., G-485, ROAD NO. 9A, VKI AREA, JAIPUR. CUKE VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACV 5752 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDARTH RANKA (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22.07.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/08/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE ARE TWO CROSS APPEALS BY THE REVENUE AND ASS ESSEE AGAINST THE ORDER OF LD. CIT (A)-II, JAIPUR DATED 31.10.2012 PERTAINI NG TO ASSESSMENT YEAR 2009-10. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO. 48/JP /2013. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 2 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. 1. THE ORDER OF LD. CIT (APPEALS) IS CONTRARY TO THE F ACTS OF THE CASE AND PREJUDICIAL TO THE ASSESSEE. 2. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE ADDITION MADE IS CONTRARY TO FACTS, LAW AND BASED ON ERRONEO US UNDERSTANDING OF THE FACTS OF THE CASE. 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD. CIT (APPEALS) OUGHT NOT TO HAVE UPHELD THE ACTION OF TH E LD. ASSESSING OFFICER IN REJECTING THE ACCOUNTS OF ASSESSEE U/S 145(3) OF THE INCOME TAX ACT, 1961. THE FINDINGS OF THE LD. CIT (APPEALS) ARE BAS ED ON ERRONEOUS UNDERSTANDING OF THE FACTS AND RECORDS AND THE CIRC UMSTANCES OF THE CASE DESERVE TO BE OMITTED. 4. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LD. CIT (APPEALS) OUGHT NOT TO HAVE UPHELD THE ACTION OF TH E LD. ASSESSING OFFICER IN PART OF TRADING ADDITIONS MADE. THE LD. CIT (APP EALS) HAS ALSO ERRED IN MAKING ADDITION OF RS. 30,42,043/- ON ACCOUNT OF TR ADE ADDITIONS BY ADOPTING THE AVERAGE RATE OF GROSS PROFIT OF A.Y. 2 008-09 AND A.Y. 2009- 10. THE ACTION OF THE LD. CIT (APPEALS) IS BASED ON SURMISES AND PRESUMPTIONS AND IS CONTRARY TO THE FACTS AND CIRCU MSTANCES OF THE CASE AND LAW AND DESERVES TO BE DELETED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY OR ALTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEED INGS. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT UNDER SECTION 14 3(3) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VID E ORDER DATED 28.12.2011. WHILE FRAMING THE ASSESSMENT, THE AO REJECTED THE BOOKS O F ACCOUNTS OF THE ASSESSEE ON THE BASIS THAT THE ASSESSEE HAS NOT TAKEN VARIOUS I TEMS OF STOCK MATERIALS LIKE PURCHASE OF COPPER WIRE VIDE INVOICE DATED 9.3.2009 VALUED AT RS. 6,14,724/- AND FURTHER DATED 6.03.2009 OF RS. 65,131/- IN CLOSING VALUE OF STOCK. IT WAS ALSO OBSERVED BY THE AO THAT THE VALUE OF SCRAP OF 5223. 150 KG HAS BEEN TAKEN AT RS. 200/- PER KG AND ALSO ON PERUSAL OF FORM NO. 4 OF T HE RAW MATERIAL DATED 31.03.2009 IT HAS BEEN SEEN THAT THE ASSESSEE HAS D ECLARED LOSS OF 184.950 KG WHILE 3 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. NO COMPLETE DETAILS OF PRODUCTION HAD BEEN SHOWN AG AINST THEM. AFTER REJECTING THE BOOKS OF ACCOUNT, THE AO PROCEEDED TO ESTIMATE THE GROSS PROFIT. HE ADOPTING THE GP RATE OF PREVIOUS YEAR @ 9.18% ON TOTAL TURNOVER OF RS. 10,36,19,819/- MADE TRADING ADDITION OF RS. 63,37,152/-. THE AO ALSO M ADE ADDITION OF RS. 15,864/- ON ACCOUNT OF LATE PAYMENT OF ESI CONTRIBUTION. THE A SSESSEE AGGRIEVED BY THIS ORDER, PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND PERUSAL OF MATERIALS AVAILABLE ON RECO RD, UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. HOWEVER, HE APPLIED GP RATE AT 6% AGA INST 9.18% APPLIED BY THE AO AND ALSO DELETED THE ADDITION OF RS. 15,864/- BY FO LLOWING THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF VINAY CEMENT LTD., 213 CTR 268. 3. NOW, AGGRIEVED BY THIS ORDER, BOTH REVENUE AND A SSESSEE HAS FILED CROSS APPEALS BEFORE THE TRIBUNAL. IN THE ASSESSEES APP EAL GROUND NO. 1 & 2 ARE GENERAL IN NATURE, NEEDS NO SEPARATE ADJUDICATION. GROUND NO. 3 IS AGAINST REJECTION OF BOOKS OF ACCOUNTS BY THE AO. 3.1. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS AND VEHEMENTLY ARGUED THAT THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT IS UNJUSTIFIED, ILLE GAL, ARBITRARY AND CONTRARY TO THE RECORDS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE AO REJECTED THE BOOKS OF ACCOUNT ON THE GROUND OF FALL IN GP, VALUE OF SC RAP TAKEN BY THE ASSESSEE AT RS. 200/- PER KG, PAYMENTS MADE TO SISTER CONCERN WERE NOT JUSTIFIED, PURCHASE OF COPPER WIRE NOT ENTERED IN THE STOCK REGISTER, COMP LETE DETAILS OF PRODUCTION NOT SHOWN, DIFFERENCE IN CONVERSION CHARGES AS PER TDS CERTIFICATES AND WHAT WAS BOOKED AS EXPENSE AND BOOKS OF ACCOUNTS NOT SUBMITT ED TO THE AO. THE LD. COUNSEL SUBMITTED THAT IT IS TRUE THAT THERE HAS BEEN SUBST ANTIAL FALL IN TURNOVER AND THE GP OF 4 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT THE TOTAL SALES QUANTITY DURING THE YEAR UNDER CONSIDERATION HAS DR OPPED CONSIDERABLY AND ALSO THE AVERAGE SELLING PRICE PER KG HAS ALSO DROPPED. IT I S SUBMITTED THAT THE AVERAGE SELLING PRICE HAS DROPPED BY OVER 6.20% OVER THE LA ST TWO YEARS. THIS HAS SQUEEZED THE MARGIN OF THE ASSESSEE COMPANY AND HAS LED TO A SHARP DOWNFALL IN THE GP. THE LD. COUNSEL SUBMITTED THAT TOTAL PRODUCTION QUANTIT Y DURING THE YEAR UNDER APPEAL HAS DROPPED CONSIDERABLY AND ALSO THE AVERAGE COST OF PRODUCTION PER KG HAS ALSO INCREASED SUBSTANTIALLY. HE SUBMITTED THAT WHEN TH ERE IS A DROP IN PRODUCTION QUANTITY AND INCREASE IN THE COST, IT RESULTED INTO SHARP DECLINE IN GROSS PROFIT. THE LD. COUNSEL SUBMITTED THAT ON THE ONE HAND AVERAGE SELLING PRICE HAS FALLEN DURING THE YEAR UNDER CONSIDERATION AND AT THE SAME TIME T HE COST OF PRODUCTION HAS INCREASED DURING THE YEAR UNDER CONSIDERATION, LEAD ING TO THE SHARP REDUCTION IN GP. THE LD. COUNSEL SUBMITTED THAT 80% COMPONENT OF SEL LING PRICE CONSISTS OF COPPER AND THE PRICES OF COPPER ARE LINKED TO PRICES DETER MINED AT LONDON METAL EXCHANGE AND BOMBAY METAL EXCHANGE. THE LD. COUNSEL DREW OU R ATTENTION TO HISTORICAL PRICE GRAPH FOR COPPER FOR THE FINANCIAL YEAR 2006-07, 07 -08, 08-09 AND 09-10. HE SUBMITTED THAT FROM THE GRAPH IT IS EVIDENT THAT DU RING THE YEAR UNDER APPEAL THERE WAS A DOWN FALL IN PRICES FROM AUGUST ONWARDS AND P ARTICULARLY FROM NOVEMBER 2008 TO MARCH, 2009 THERE WAS A DRASTIC DOWNFALL IN THE PRICES. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS SUFFERED HUGE LOSS ON ACCOUNT OF DOWNFALL IN THE PRICES AT LONDON METAL EXCHANGE TO THE EXTENT OF STOCK MAINTA INED BY THE ASSESSEE AS THE SALES HAPPEN ON THE FORTNIGHTLY RUNNING RATES WHERE AS PURCHASES WERE MADE IN THE PAST. THE AVERAGE PRODUCTION CYCLE OF THE ASSESSEE IS ABOUT 2-3 MONTHS. THE LD. COUNSEL SUBMITTED THE ASSESSEES PURCHASE FOR THE P ERIOD FROM APRIL TO OCTOBER AND 5 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. FOR THE PERIOD FROM NOVEMBER TO MARCH. HE SUBMITTE D THAT IT IS A FACT THAT ASSESSEES PURCHASES IN QUANTITATIVE TERMS CAME DOW N HEAVILY FROM NOVEMBER ONWARDS IN THE LIGHT OF HEAVY DOWNFALL IN THE METAL PRICES. AT THE SAME TIME DUE TO UNCERTAINTY IN PRICES THE ASSESSEE COULD NOT TAKE A DVANTAGE OF THE FALL IN PRICES AND ONLY NOMINAL PURCHASES WERE MADE BY IT. THE LD. CO UNSEL SUBMITTED THAT DUE TO PRIOR COMMITMENTS ALREADY MADE BY THE ASSESSEE, EVE N DUE TO UNCERTAINTY IN THE PRICES THE ASSESSEE COULD NOT REDUCE THE SALES DRAS TICALLY AND THUS HAD TO TAKE HIT DUE TO FALL IN PRICES. HE SUBMITTED THAT THE ASSES SEE HAD NO OPTION BUT TO ABSORB THE COST AND FALL IN THE METAL PRICES AND IN FACT I T HAS ALSO LIQUIDATED THE STOCK AT LOSS IN THE MONTH OF NOVEMBER TO MARCH. THE LD. COUNSEL SUBMITTED THAT SINCE THE PRICES ARE GOVERNED BY LONDON METAL EXCHANGE & BOMBAY META L EXCHANGE, THERE IS AN IMMEDIATE IMPACT ON SELLING PRICE. HOWEVER, THE COS T OF PRODUCTION EVEN WHEN THERE IS A DOWNFALL IN THE PURCHASE PRICE, THE TOTAL PROD UCTION COST WILL TAKE ITS TIME AND BOTH DO NOT AUTOMATICALLY GO IN THE SAME DIRECTION. LD. COUNSEL SUBMITTED THAT SIMILARLY SITUATED ASSESSES HAVE ALSO SUFFERED LOSS ON ACCOUNT OF STEEP FALL IN COPPER PRICES AS WITNESSED DURING THE SECOND HALF OF 2008- 09. LD. COUNSEL SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THE SE FACTS AND PROCEEDED TO REJECT THE BOOKS OF ACCOUNTS WITHOUT ANY BASIS. 3.2. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE AO WAS NOT RIGHT IN HOLDING THAT SALES DO NOT REPRESENT CLEAR PICTURE A ND FALL IN METAL PRICES WILL NOT AFFECT THE ASSESSEE APPELLANT AS ASSESSEE APPELLANT IS DOING WORK ON JOB WORK BASIS. IN FACT, THE ASSESSEE HAS BEEN CARRYING ON MANUFACT URING ACTIVITY AND NOT JOB WORK. THIS ITSELF SHOWS THAT THE AO HAS NOT APPRECIATED T HE FACTS IN RIGHT PERSPECTIVE. LD. COUNSEL SUBMITTED THAT IN THE YEAR UNDER APPEAL THE ASSESSEE HAS EARNED THE BEST 6 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. YIELD AS THERE WAS MINIMUM PROCESS LOSS. THIS FACT IS NOT CONSIDERED BY THE AO. ANOTHER OBJECTION OF THE LOWER AUTHORITIES WAS THAT THE ASSESSEE HAS VALUED THE SCRAP AT JUST RS. 200/- PER KG. LD. COUNSEL SUBMITT ED THAT THE APPELLANT FOLLOWS FIFO METHOD OF VALUATION OF STOCK AND THE CLOSING STOCK IS VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER. LD. COUNSEL SUBMITTED THAT THE SCRAP GENERATED IS NOT SOLD AND IS RE-CONVERTED INTO PIPES. THERE CANNOT BE ANY EXACT SCIENTIFIC BASIS FOR VALUATION OF SCRAP GENERATED. HOWEVER, THE ASSESSEE HAS ALWAYS L INKED IT TO THE PURCHASE COST OF RAW MATERIAL I.E. PIPES AND HAS VALUED ACCORDINGLY. LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS VALUED IT AT REASONABLE RATES AND VALU ATION OF SCRAP IS IN FACT AT THE HIGHEST RATE DURING THE YEAR UNDER CONSIDERATION IN COMPARISON TO LAST PURCHASE PRICE. LD. COUNSEL SUBMITTED THAT VALUATION OF CLO SING FINISHED GOODS, RAW MATERIAL, WORK-IN-PROGRESS, CONSUMABLES, ALUMINUM SCRAP, ALUM INUM PIPE, PVCHSP HAS BEEN FOUND IN ORDER BY THE AO AND NO UNDER VALUATION IS NOTICED BY THE AO. LD. COUNSEL SUBMITTED THAT MOREOVER THE RECORD OF THE ASSESSEE IS SUBJECTED TO INSPECTION BY THE EXCISE AUTHORITIES AND THE EXCISE AUTHORITIES HAVE NOT FOUND ANY DEFECT IN THE RECORDS SO MAINTAINED. LD. COUNSEL SUBMITTED THAT THERE CAN BE NO BASIS OF SUPPRESSION OF CLOSING VALUE OF STOCK AND THE SAME HAS BEEN MENTIONED WITHOUT PROPER APPRECIATION OF FACTS. LD. COUNSEL FURTHER S UBMITTED THAT THE PAYMENTS TO SISTER CONCERNS ARE NOT JUSTIFIED. LD. COUNSEL SUB MITTED THAT PAYMENT TO M/S. SAM ENTERPRISES HAS IN FACT FALLEN AS IN THE A.Y. 2007- 08 AVERAGE RATE PER UNIT WAS RS. 50/-, IN A.Y. 2008-09 IT WAS RS. 30/- AND IN A.Y. 2 009-10 IT WAS REDUCED TO RS. 26.33. THEREFORE, THIS ALLEGATION IS FALSE. LD. CO UNSEL SUBMITTED THAT IN CASE OF M/S. KWALITY TUBES & CAPILLARIES, INCREASE @ 10% IN AVER AGE RATE PER UNIT IS NOMINAL. HE, HOWEVER, SUBMITTED THAT LABOUR COST, ELECTRIC C OST ETC. CANNOT FLUCTUATE 7 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. DRASTICALLY AND IN FACT INCREASES EVERY YEAR. LD. COUNSEL SUBMITTED THAT BOTH M/S. SAM ENTERPRISES AND M/S. KWALITY TUBES & CAPILLARI ES ARE HAVING THEIR FACTORIES AT DIFFERENT LOCATIONS. ALL THE GOODS DISPATCHED TO SI STER CONCERNS OR OTHER PARTIES ARE SENT BY CHALLANS ONLY WHICH IS A MANDATORY REQUIREM ENT UNDER EXCISE RULES AND ALL THE RELEVANT ENTRIES HAVE BEEN ENTERED UNDER THE EX CISE REGISTERS AS PER EXCISE LAWS. EVEN COPIES OF CHALLANS WERE FURNISHED TO TH E AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT HE HAS EITHER NOT LOOKED INTO THE SAME OR HAS CONVENIENTLY IGNORED THE SAME. LD. COUNSEL SUBMITTE D THAT THE ASSESSEE HAS DULY DEDUCTED TDS ON THE PAYMENTS MADE TO THE SISTER CON CERNS. PAYMENT ARE ENTIRELY THROUGH ACCOUNT PAYEE CHEQUES ONLY. LD. COUNSEL SU BMITTED THAT THE PROPRIETOR OF M/S. SAM ENTERPRISES IS REGULARLY FILING HER RETURN OF INCOME AND HER TOTAL INCOME DURING THE YEAR IS AT THE HIGHEST TAX SLAB. THE AL LEGATION, IF ANY, IS MERELY A SUSPICION WHICH IS NOT BACKED WITH ANY CREDIBLE BAS IS. LD. COUNSEL FURTHER SUBMITTED THAT THE PROPRIETOR OF M/S. KWALITY TUBES & CAPILLA RIES IS ALSO REGULARLY FILING HIS INCOME TAX RETURN AND ALSO AT THE HIGHEST TAX SLAB. LD. COUNSEL SUBMITTED THAT IT WILL BE RELEVANT TO UNDERSTAND THE MANUFACTURING PROCESS OF THE ASSESSEE TO APPRECIATE THE COMPLEXITY OF WORK BEING UNDERTAKEN BY IT AND A LSO THE WORK BEING UNDERTAKEN BY ITS RELATED COMPANIES BEFORE MAKING THE BLIND AL LEGATION AGAINST THE ASSESSEE APPELLANT. LD. IN THIS REGARD, LD. COUNSEL DREW OUR ATTENTION TO PAPER BOOK PAGE 16. HE SUBMITTED THAT ON PERUSAL OF THE ABOVE MANUFACTU RING PROCESS, IT CAN BE OBSERVED THAT THE PROCESSES AS GOT DONE BY THE ASSE SSEE COMPANY FROM SISTER CONCERNS, FOR WHICH THE ASSESSEE HAS PAID JOB CHARG ES TO THEM AND HAS ALSO BEEN PAID IN THE PAST AND IN THE FUTURE AS WELL. THE WO RKS I.E. DRAWING & INTERMEDIATE ANNEALING, FINAL ANNEALING, PRE-FINAL DRAWING AND E ND FORMING WERE GOT DONE BY THE 8 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. ASSESSEE. LD. COUNSEL SUBMITTED THAT ANOTHER OBJECT ION OF THE LOWER AUTHORITIES IS THAT THE PURCHASES OF COPPER WIRE WERE NOT ENTERED IN THE STOCK REGISTER. HE SUBMITTED THAT THE AO HAS ALLEGED THAT INVOICE NO. 1022 DATED 09.03.2009 OF M/S. NEW INDIA EXTRUSIONS PVT. LTD. QTY. 2576.800 KGS V ALUE RS. 6,14,724/- WAS NOT ENTERED IN THE BOOKS. LD. COUNSEL SUBMITTED THAT TH E AO HAS FAILED TO CORRECTLY UNDERSTAND THE ACTUAL TRANSACTION AND HAS TOTALLY M ISUNDERSTOOD THE FACT THAT THE INVOICE HAS NOT BEEN TAKEN INTO CLOSING STOCK. ACTU ALLY THE MATERIAL RECEIVED UNDER THIS INVOICE IS AGAINST THE COPPER SCRAP SENT BY TH E ASSESSEE FOR CONVERSION INTO COPPER PIPES VIDE ITS INVOICE NO. 534 DT. 11.02.200 9 QUANTITY 2739.250 KGS. THEREFORE THIS IS NOT A PURCHASE MADE BY THE ASSESS EE BUT A CONVERSION OF SCRAP INTO PIPES WHICH IS DULY SHOWN IN THE RG-1 REGISTER PAGE NO. 71 ENTRY NO. 1 ON 11.02.2009 FOR REMOVAL OF 2739.250 KGS OF SCRAP FOR CONVERSION UNDER COVER OF INVOICE NO. 534 DATED 11.02.2009,ON PAYMENT OF EXCI SE DUTY OF RS. 49,307/- AND CESS RS. 986/- AND RS. 493/- RESPECTIVELY. THIS SC RAP WAS RECEIVED AFTER CONVERSION INTO COPPER PIPES ON 13.03.2009 UNDER COVER OF INVO ICE NO. 1022 OF M/S. NEW INDIA EXTRUSIONS PVT. LTD. QUANTITY 2576.800 AS THE DIFFE RENCE QUANTITY IS THE BURNING LOSS SHOWN SEPARATELY IN THE INVOICE. THIS RECEIPT OF COPPER PIPES IS SHOWN IN THE RG 23A PART-I REGISTER ON PAGE NO. 12 ENTRY NO. 2 DATE D 13.03.2009 AND IN FORM IV PAGE NO. 35 ENTRY NO. 27 REQUIRED TO BE MAINTAINED UNDER EXCISE LAWS AND WAS THEREAFTER IMMEDIATELY ISSUED FOR PRODUCTION. IN SU PPORT OF THIS CONTENTION, LD. COUNSEL HAS DRAWN OUR ATTENTION TO PAGES 166 AND 15 2 OF THE PAPER BOOK. LD. COUNSEL SUBMITTED THAT REMOVAL OF SCRAP FOR CONVERS ION AND RECEIPT OF PIPES AFTER CONVERSION IS ALSO REFLECTED IN THE QUANTITATIVE IN FORMATION WHICH IS ANNEXED AND FORMING PART OF THE AUDIT REPORT IN FORM 3CD. THERE FORE, THE AO HAS TOTALLY 9 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. MISUNDERSTOOD THE FACTS EXPLAINED FOR THIS ENTRY. THE LD. COUNSEL SUBMITTED THAT THE AO OBSERVED THAT INVOICE OF M/S. PERFECT INDUSTRIES DATED 06.03.2009 OF 486.200 KGS AMOUNT TO RS. 65,131/- WAS NOT ENTERED. LD. COU NSEL SUBMITTED THAT THE AO HAS FAILED TO CORRECTLY UNDERSTAND THE ACTUAL TRANSACTI ON AND HAS TOTALLY MISUNDERSTOOD THE FACT THAT THE INVOICE IS TOWARDS PURCHASE OF AL UMINUM TUBES AND NOT COPPER. LD. COUNSEL SUBMITTED THAT THE PURCHASE OF RS. 65,1 31/- DT. 06.03.2009 IS TOWARDS PURCHASE OF ALUMINUM TUBES FROM M/S. PERFECT INDUST RIES OF 486.200 KGS. HE DREW OUR ATTENTION TO PAPER BOOK PAGE 154. LD. COUNSEL S UBMITTED THAT THE PURCHASES FROM M/S. PERFECT INDUSTRIES WERE ALSO ISSUED FOR P RODUCTION UPON ITS RECEIPT IN THE FACTORY OF PRODUCTION AND ENTERED INTO RG 23A-1. LD . COUNSEL SUBMITTED THAT THIS RECEIPT OF ALUMINUM TUBES IS SHOWN IN THE FORM IV P AGE NO. 78 ENTRY NO. 4 REQUIRED TO BE MAINTAINED UNDER EXCISE LAWS AND WAS IMMEDIAT ELY ISSUED FOR PRODUCTION. LD. COUNSEL SUBMITTED THAT THE AFOREMENTIONED PURCHASES AND ISSUANCE IS ALSO REFLECTED IN THE QUANTITATIVE INFORMATION WHICH IS ANNEXED AN D FORMING PART OF THE AUDIT REPORT IN FORM 3 CD. LD. COUNSEL HAS SUBMITTED THAT THE AO HAS TOTALLY MISUNDERSTOOD THE FACTS. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE APPELLANT IS REGISTERED UNDER THE PROVISIONS OF CENTRAL EXCISE A ND IT IS MAINTAINING DETAILED QUANTITATIVE STOCK DETAILS AS PER THE PROVISIONS OF CENTRAL EXCISE. THERE IS A REGULAR AUDIT OF REGISTERS MAINTAINED BY THE ASSESSEE BY TH E OFFICIALS OF THE CENTRAL EXCISE DEPARTMENT AND NO ERROR WHATSOEVER HAS BEEN FOUND B Y THEM. THE RECORDS HAVE BEEN FOUND TO BE SATISFACTORY. THE LD. COUNSEL DREW OUR ATTENTION TO INTERNAL AUDIT REPORT OF THE ASSESSEE AS PREPARED BY THE EXCISE OF FICIALS WHICH IS ENCLOSED AT PAPER BOOK PAGES 119 TO 123. LD. COUNSEL SUBMITTED THAT THE AUTHORITIES BELOW HAVE FAILED TO PERUSE THE RECORDS AND HAVE MADE BASELESS ALLEGATIONS WITHOUT ANY 10 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. SUBSTANCE. THE LD. COUNSEL SUBMITTED THAT ANOTHER OBJECTION OF THE AO WAS THAT THE COMPLETE DETAILS OF PURCHASES WERE NOT SHOWN. LD. COUNSEL SUBMITTED THAT THE AO HAS MENTIONED THAT PROCESS LOSS HAS NOT BEEN DECLAR ED PROPERLY AND IS NOT VERIFIABLE. LD. COUNSEL SUBMITTED THAT AS PER THE AO, ON PERUSA L OF FORM NO. 4 OF THE RAW MATERIAL DATED 31.03.2009 IT HAS BEEN SEEN THAT THE ASSESSEE HAS DECLARED LOSS OF 184.950 KGS WHILE NO COMPLETE DETAILS OF PRODUCTION HAD BEEN SHOWN AGAINST THEM. THE LD. COUNSEL STATED THAT PROCESS LOSS SHOWN AT 1 84.950 KGS FORMS PART OF THE TOTAL PROCESS LOSS FOR THE MONTH OF MARCH WHICH IS 517.780 ON THE PRODUCTION OF 18451.150 KGS. HE SUBMITTED THAT THE TOTAL PURCHASE S FOR THE ENTIRE MONTH IS ENTERED ON THE LAST DATE OF THE MONTH. LD. COUNSEL SUBMITTED THAT THE AO HAS TOTALLY MISUNDERSTOOD THE FACTS EXPLAINED FOR THIS ENTRY. HE DREW OUR ATTENTION TO PAGES 167 TO 205 OF THE PAPER BOOK. LD. COUNSEL SUB MITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ALSO FURNISHED MONTHLY STOCK DETAILS. HE DREW OUR ATTENTION TO PAPER BOOK PAGE 20 OF THE WRITTEN SUBMISSIONS WHEREIN A CHART SHOWING DETAILS OF STOCK FROM 01.04.2008 TO 31.03.2 009 IS SHOWN. 3.3. ON THE OTHER HAND, LD. D/R SUPPORTED THE ORDER S OF AUTHORITIES BELOW. 3.4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE ISSUE TO BE EXAMINED IS WHETHER THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THERE IS NO QUARREL WITH REGARD T O THE PROPOSITION THAT THE AO IS EMPOWERED TO REJECT THE BOOKS OF ACCOUNT WHERE HE I S SATISFIED THAT THE BOOKS OF ACCOUNT SO PLACED BEFORE HIM DOES NOT REFLECT TRUE PICTURE OF PROFIT OR OTHERWISE. THE AO IS UNABLE TO DEDUCE THE CORRECT FIGURE OF THE PR OFIT FROM THE ACCOUNTS SO FURNISHED. IN OUR CONSIDERED VIEW THE REJECTION OF BOOKS OF ACCOUNT IS NOT MERE RITUALS AND CANNOT BE BASED UPON THE SUBJECTIVITY O F THE AO. THE AO SHOULD 11 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. OBJECTIVELY EXAMINE THE BOOKS OF ACCOUNT FURNISHED BEFORE HIM, VERIFY EACH TRANSACTION SO RECORDED BY THE ASSESSEE AND ITS IMP ACT ON PROFIT. IN THE CASE IN HAND, THE GROUND FOR REJECTION OF BOOKS OF ACCOUNT IS THAT THERE IS STEEP FALL IN THE GROSS PROFIT. IN THIS RESPECT THE CONTENTION OF THE ASSESSEE WAS THAT THERE WAS A STEEP FALL IN THE PRICES OF RAW MATERIAL. AT THE SA ME TIME, THE AVERAGE SELLING PRICE HAS DROPPED BY 6.20% OVER THE LAST 2 YEARS. AS PER THE ASSESSEE, THE MANUFACTURED PRODUCT WAS PRODUCED FROM THE RAW MATERIAL PURCHASE D AT A HIGHER RATE. HOWEVER, SELLING PRICE OF THE PRODUCT WAS DECREASED, THUS CA USING INTO SHRINKING OF MARGINS. WE FIND MERIT IN THE SUBMISSIONS OF THE LD. COUNSEL AS THE MARGINS ARE THE DIFFERENCE BETWEEN SELLING PRICE AND THE COST PRICE. THE AO OU GHT TO HAVE VERIFIED THIS FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE INCLUDING THE STOC K REGISTER WHETHER THE PRODUCTION WAS MADE OUT OF THE RAW MATERIALS PURCHASED EARLIER AND WHAT WAS THE SALE PRICE OF SUCH FINISHED GOODS. WE DO NOT FIND FROM THE RECORD THAT THIS FACT WAS VERIFIED BY THE AUTHORITIES BELOW. ANOTHER CONTENTION OF THE ASSESSEE IS THAT IT IS AMENABLE TO CENTRAL EXCISE LAW, MOVEMENTS OF RAW MATERIAL AND M ANUFACTURED PRODUCTS REMAINS UNDER CONTROL AND SUPERVISION OF THE AUTHORITIES UN DER THE CENTRAL EXCISE ACT. IT IS STATED THAT RECORDS RELATED TO RAW MATERIAL AND MAN UFACTURED PRODUCTS ARE SUBJECT TO AUDIT BY THE DEPARTMENT OF CENTRAL EXCISE. IT IS C ONTENDED THAT THE AUTHORITIES UNDER THE CENTRAL EXCISE ACT, IN FACT, AUDITED THE RECORD S OF THE ASSESSEE AND OUR ATTENTION IS DRAWN TO THE AUDIT REPORT OF THE CENTRAL EXCISE AUTHORITY. 3.5. THE LD. COUNSEL FOR THE ASSESSEE DEMONSTRATED FROM THE RECORDS THAT DISCREPANCIES AS NOTED BY THE AO IN FACT, DOES NOT EXISTS. THE AO HAS NOTED THAT INVOICE NO. 1022 DATED 09.03.2009 OF M/S. NEW INDIA EXTRUSIONS PVT. LTD. QTY. 2576.800 KGS VALUE RS. 6,14,724/- WAS NOT ENTERED. IN THIS REGARD THE LD. COUNSEL 12 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. CONTENDED THAT THE AO HAS FAILED TO CORRECTLY UNDER STAND THE ACTUAL TRANSACTION AND HAS TOTALLY MISUNDERSTOOD THE FCT THAT THE INVOICE HAS NOT BEEN TAKEN INTO CLOSING STOCK. ACTUALLY THE MATERIAL RECEIVED UNDER THIS IN VOICE IS AGAINST THE COPPER SCRAP SENT BY THE ASSESSEE FOR CONVERSION INTO COPPER PIP ES VIDE ITS INVOICE NO. 534 DATED 11.02.2009 QTY 2739.250 KGS. THEREFORE, THIS IS NOT A PURCHASE MADE BY THE ASSESSEE BUT A CONVERSION OF SCRAP INTO PIPES WHICH IS DULY SHOWN IN THE RG-1 REGISTER AT PAGE NO. 71 ENTRY NO. 1 ON 11.02.2009 F OR REMOVAL OF 2739.250 KGS OF SCRAP FOR CONVERSION UNDER COVER OF INVOICE NO. 534 DT. 11.02.2009, ON PAYMENT OF EXCISE DUTY OF RS. 49,307/- AND CESS RS. 986/- AND RS. 493/- RESPECTIVELY. LD. COUNSEL HAS DRAWN OUR ATTENTION TO PAGES 152 TO 153 AND 138 OF THE PAPER BOOK. IT IS STATED THAT THIS SCRAP WAS RECEIVED BACK AFTER C ONVERSION INTO COPPER PIPES ON 13.03.2009 UNDER COVER OF INVOICE NO. 1022 OF M/S. NEW INDIA EXTRUSIONS PVT. LTD. QTY 2576.800. LD. COUNSEL HAS DRAWN OUR ATTENTION T O PAGES 155-166 IN SUPPORT OF THE CONTENTION THAT THE RECEIPT OF COPPER PIPES IS SHOWN IN THE RG 23A PART-I REGISTER ON PAGE NO. 12 ENTRY NO. 2 DATED 13.03.200 9 AND IN FORM IV. WE FIND THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE CORR ECT AS THESE ENTRIES ARE DULY REFLECTED. FURTHER, IN RESPECT OF INVOICE OF M/S. PERFECT INDUSTRIES DATED 06.03.2009 OF 486.200 KGS AMOUNTINT TO RS. 65,131/- NOT ENTERE D, IT IS SUBMITTED THAT THE AO HAS FAILED TO CORRECTLY UNDERSTAND THE ACTUAL TRANS ACTION AND HAS TOTALLY MISUNDERSTOOD THE FACT THAT THE INVOICE IS TOWARDS PURCHASE OF ALUMINUM TUBES AND NOT COPPER. THE LD. COUNSEL FOR THE ASSESSEE HAS DR AWN OUR ATTENTION TO PAGE 164 OF THE PAPER BOOK. THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE FOUND TO BE CORRECT. THE OBJECTIONS OF THE AO AS MENTIONED IN T HE ASSESSMENT ORDER ARE AS UNDER:- 13 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. ON EXAMINATION OF BOOKS OF ACCOUNTS, IT IS NOTICE D THAT THE ASSESSEE HAS NOT TAKEN VARIOUS ITEMS OF STOCK MATERIALS LIKE PURCHASE OF COPPER WIRE VICE INVOICE NO. DATED 9.03.2009 VALUED AT RS. 6,14,724/- AND FURTHER DATED 6.03.2009 OF RS. 65,131/- IN CLOSING VALUE OF STOCK, FURTHER THE VALUE OF SCRAP OF 5223.150 KG HAS BEEN TAKEN AT RS. 200/- PER KG, FURTHER ON PERUSAL OF FORM NO. 4 OF THE RAW MATERIAL DATED 31.03.2009 IT HAS BEEN SEEN THAT THE ASSESSEE HAS D ECLARED LOSS OF 184.950 KGS WHILE NO COMPLETE DETAILS OF PRODUCTION HAD BEEN SHOWN AGAINST THEM. THE AO REJECTED THE CONTENTION OF THE ASSESSEE BY O BSERVING AS UNDER :- THE SUBMISSION OF THE ASSESSEE ARE NOT TENABLE AS IN SPITE OF THE REPEATED OPPORTUNITY THE ASSESSEE HAS NOT SUBMITTED THE BOOKS OF A/C AFTER THE DATE 9.9.2011 ON WHICH THE ASSESSEE WAS R EQUIRED TO JUSTIFY THE DEFECT AS MENTIONED ABOVE TO CROSS VERIFY THE C ONTENTION OF THE ASSESSEE. AS STATED ABOVE THE ASSESSEE HAS NOT ABS OLUTELY JUSTIFIED THE MANUFACTURING LOSS AND SCRAP GENERATION AND REA SONABILITY OF THE PAYMENT MADE TO PERSONS COVERED U/S 40A(2)(B). IT I S PERTINENT TO NOTE THAT CONVERSION CHARGES AMOUNTING TO RS. 69,29 ,015/- AND 13,85,726/- WAS PAID TO SISTER CONCERN M/S. KWALITY TUBE AND CAPILLARY AND M/S. SAM ENTERPRISES RESPECTIVELY THEREFORE THE TOTAL PAYMENT FOR CONVERSION CHARGES OF RS. 83,14,741/- WAS PAID TO S ISTER CONCERN OUT OF THE TOTAL CHARGES OF RS. 92,86,773/- AND THE ASSESS EE NEITHER JUSTIFY THE PAYMENT OF JOB WORK NOR THE GENERATION OF SCRAP THEREON EVEN THOUGH HE HAS NOT PRODUCED ANY RECORD OR CHALLAN FO R SENDING THE RAW MATERIAL AND RECEIVING THE FINISHED GOODS FROM THEM . IT MAY NOT BE OUT OF CONTEXT TO MENTION THAT THE PROPRIETOR OF M/S. K WALITY TUBES AND CAPILLARIES IS MR. SANDEEP PAPRIWAL THE DIRECTOR OF THE COMPANY AND 75% OF THE JOB WORK OF RS. 69,29,015/- OUT OF TOTAL RS. 92,86,773/- HAS BEEN GOT DONE AT THE FACTORY OF THE DIRECTOR FO R WHICH NO RELEVANT DETAILS WERE FURNISHED DURING THE ASSESSMENT PROCEE DINGS. THE REASON 14 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. OF DECLINE OF G.P. AS EXPLAINED BY THE ASSESSEE IS NOT ACCEPTABLE AS THE COPPER RATE ARE DECLINED IN THE MONTH OF SEPTEMBER TO NOVEMBER AND IN THE OTHER MONTHS THE RATES EITHER REMAINED CONST ANTLY SAME OR WERE IN INCREASING TREND. HOWEVER THE FACTS OF PRICE IN CREASE MAY BE A REASON IN THE CASE OF TRADERS BUT IN ASSESSES CASE, THE ASSESSEE DOING THE WORK ON JOB BASIS THEREFORE THE PRICE OF THE CO PPER HAVE NOT AFFECTED THE G.P. OF THE ASSESSEE. SINCE THE STOCK REGISTER OF THE ASSESSEE DID NOT PRESENT A CLEAR PICTURE OF THE JOB WORK DONE, MATERIAL ISSUED FOR PRODUCTION AND VALUE OF CLOSING STOCK WA S TAKEN AT BELOW THE PURCHASE PRICE. FURTHER NO STOCK OF MATERIAL GIVEN ON JOB WORK HAD BEEN GIVEN. THEREFORE, NO CLEAR PICTURE EMERGED FRO M THE VALUE OF SALES TAKEN BY THE ASSESSEE. THEREFORE, I HAVE NO O PTION BUT TO REJECT THE ACCOUNTS OF THE ASSESSEE BY APPLYING SECTION 14 5(3) OF THE ACT. THE ASSESSEE HAS GIVEN PARA-WISE EXPLANATION IN TH E PAPER BOOK BY WAY OF WRITTEN SUBMISSION. IN SUPPORT OF THE SUBMISSION, THE ASSES SEE HAS ALSO FURNISHED THE DAILY STOCK ACCOUNT OF COPPER SCRAP AND ALSO THE JOB WORK DONE BY M/S. KWALITY TUBES & CAPILLARIES ALONG WITH REFERENCE OF CHALLAN, QUANTI TY, PRODUCTION LOSS ETC. THE ASSESSEE HAS ALSO FILED COPY OF RG 23A REGISTER DEM ONSTRATING THAT ALL THE TRANSACTIONS WERE DULY RECORDED. THE ASSESSEE HAS A LSO GIVEN LEDGER ACCOUNT OF CONVERSION CHARGES OF SISTER CONCERNS AND ALSO COPY OF FORM NO. 16A. IN RESPECT OF DIFFERENCE IN CONVERSION CHARGES AS PER TDS CERTIFI CATES AND WHAT WAS DEBITED, IT IS STATED THAT THE DIFFERENCE OF RS. 19,30,603/- IS DU E TO THE CREDIT OF CENVAT INCLUDED IN THE GOODS SENT FOR JOB WORK AND GOODS RECEIVED F ROM JOB WORK THROUGH THE CREDIT NOTES RECEIVED FROM M/S. NEW INDIA EXTRUSIONS PVT. LTD. ON WHICH THOUGH TDS IS DEDUCTED BUT NOT DEBITED TO CONVERSION CHARGES A/C BUT TO CENVAT CREDIT A/C. THE DIFFERENCE OF RS. 2,77,796/- IS DUE TO THE CREDIT N OTE OF DISCOUNT RECEIVED FROM M/S. 15 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. SAM ENTERPRISES ON 31.03.2009 BUT ON WHICH TDS WAS ALREADY DEDUCTED EARLIER. THUS THERE IS NO ERROR AND DIFFERENCE OF RS. 22,08, 399/- (1930603+277796) IS RECONCILED. IT IS STATED THAT THESE CREDIT NOTES W ERE PRODUCED BEFORE THE AO BUT WERE NOT UNDERSTOOD BY THE AO. IT IS STATED THAT T HESE OBJECTIONS OF THE AO THAT THE DIFFERENCE COULD NOT BE EXPLAINED IS CONTRARY TO TH E FACTS. IT IS FURTHER STATED THAT BOOKS OF ACCOUNTS WERE DULY SUBMITTED BEFORE THE AO AS THE AO HIMSELF HAS NOTED IN THE ASSESSMENT ORDER THAT BOOKS OF ACCOUNTS, BILLS AND VOUCHERS ETC. WERE EXAMINED ON TEST CHECK BASIS. WE FIND THAT THE AO HAS NOTED THAT IN SPITE OF REPEATED OPPORTUNITY, THE ASSESSEE HAS NOT SUBMITTED THE BOO KS OF ACCOUNT AFTER THE DATE 9.9.2011 ON WHICH THE ASSESSEE WAS REQUIRED TO JUST IFY THE DEFECT AS MENTIONED ABOVE TO CROSS VERIFY THE CONTENTION OF THE ASSESSE E. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ASSESSEE H AD SUBMITTED PLAUSIBLE EXPLANATION TO THE DEFECTS AS POINTED OUT BY THE AO . WE ALSO NOTICED THAT IN THE PAPER BOOK THE ASSESSEE HAS GIVEN CERTIFICATE THAT EXCEPT DOCUMENT AT SL. NO. 10, ALL OTHER DOCUMENTS WERE PART OF THE RECORD OF THE LOWE R AUTHORITIES. THEREFORE, IT CAN BE INFERRED THAT THESE MATERIALS WERE AVAILABLE BEF ORE THE AO. THE AO HAS NOT GIVEN ANY FINDING ON THIS EVIDENCES, THEREFORE, IN OUR CO NSIDERED VIEW, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT WITHOUT PROPERLY EXAMINING THE SAME AND GIVING A SPECIFIC FINDING ON THE MATERIAL SO PLACED BEFORE HIM. THE BOOKS OF ACCOUNT CANNOT BE REJECTED IN A CASUAL MANNER AND PROCEED T O ESTIMATION OF GP MERELY ON THE BASIS OF PAST HISTORY OF THE ASSESSEE. IF THE ASSESSEE IS ABLE TO DEMONSTRATE THAT THE FACTS AND CIRCUMSTANCES WERE DIFFERENT FROM THE EARLIER YEARS RESULTING INTO FALL IN GP RATIO, THE GP RATE ADOPTED BY THE AO ON THE BASI S OF PAST HISTORY WOULD NOT BE A BETTER GUIDE. AFTER CONSIDERING THE TOTALITY OF TH E FACTS AND CIRCUMSTANCES OF THE 16 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THE AO HAS NOT CONSIDERED THE EVI DENCES WHICH WERE PLACED BEFORE HIM BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE FOR FALL IN GP, PRIMARILY IS THAT THERE WAS FALL IN THE PRICE OF COPPER AS WE LL AS SELLING PRICE OF THE FINISHED GOODS. THIS FACT NEEDS VERIFICATION AT THE END OF THE AO. THE HONBLE APEX COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. (1991 ) 188 ITR 44 (SC) HAS HELD SECTION 145 OF THE INCOME-TAX ACT, 1961, CONFERS SUFFICIENT POWER UPON THE OFFICER NAY IT IMPOSES A DUTY UPON HIM T O MAKE SUCH COMPUTATION IN SUCH MANNER AS HE DETERMINES FOR DED UCING THE CORRECT PROFITS AND GAINS. THEREFORE, WE HEREBY SET ASIDE THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ASSESSMENT TO THE FILE OF THE AO FOR DE NOVO ASSESSMENT. 3.6. SINCE WE HAVE SET ASIDE THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS FOR FRESH ASSESSMENT, OTHER GROUNDS ARE NOT BEING ADJUDICATED . CONSEQUENTLY ESTIMATION OF PROFIT WOULD NOT SURVIVE. RESULTANTLY THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEAL ITA NO. 27/JP/2013 : 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN (1) RESTRICTING THE TRADING ADDITION OF RS. 30,42,043/- AGAINST RS. 63,37,152/- MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT T HE AO HAD APPLIED THE GP RATE OF 9.18% AS DECLARED BY THE ASSESSEE ITSELF IN THE AY 2008-09. (2) DELETING ADDITION OF RS 4284/- MADE ON ACCOUNT OF D EPOSITING THE ESI CONTRIBUTION OF EMPLOYEES BEYOND THE PRESCRIBED TIM E DESPITE THE FACT THAT AS PER SECTION 36(1)(VA) EMPLOYEES CONTRIBUTION SHO ULD HAVE BEEN DEPOSITED IN TIME AS PRESCRIBED IN THE RELEVANT LAW . SECTION 43B PERMITS DELAYED PAYMENT IF PAID BEFORE FILING OF ROI AS PER SECTION 139(1) IN CASE OF EMPLOYERS CONTRIBUTION NOT IN THE CASE OF EMPLO YEES CONTRIBUTION. 17 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. 5. APROPOS GROUND NO. 1, BOTH THE PARTIES HAVE ADOP TED THE SAME ARGUMENTS AS WERE MADE IN ASSESSEES APPEAL I.E. ITA NO. 48/JP/2 013, SINCE WE HAVE SET ASIDE THE IMPUGNED ORDER ON REJECTION OF BOOKS OF ACCOUNTS FO R DECISION AFRESH, ACCORDINGLY THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. GROUND NO. 2 RELATES TO DELETION OF ADDITION OF RS. 4284/- MADE ON ACCOUNT OF DEPOSIT OF ESI CONTRIBUTION BEYOND THE PRESCRIBED T IME. 6.1. THIS ISSUE IS COVERED BY THE DECISION OF COORD INATE BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE CASE OF ACIT VS. RAJA STHAN STATE BEVERAGES CORPORATION LTD. IN ITA NO. 968/JP/2013. THE ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SUPREME COURT IN THE MATTER OF CIT VS. VINAY CEMENT, 213 CTR 268 (SC) AND ALSO RELIED UPON THE J UDGMENT IN THE CASE OF CIT VS. P.M. ELECTRONICS LTD., 313 ITR 161, CIT VS. AIMIL L TD. & OTHERS., 321 ITR 508. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WE DO NO T FIND MERIT IN THE GROUND RAISED BY THE REVENUE. THE GROUND IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/08/2016 . SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 26/08/2016. DAS/ 18 ITA NOS. 27 & 48/JP/2013 M/S. VAISHALI METALS PVT. LTD. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-4, JAIPUR. 2. THE RESPONDENT- M/S. VAISHALI METALS PVT. LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 27(2)/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR