Asstt.CIT,Cir-2, Kolhapur, V. Menon Bearings Ltd.,

ITA 468/PUN/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56452 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 04-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTUAMA
• Assessee Lawyers: S U PATHAK
• Keywords: Gross profit estimation; Unexplained expenditure; Opportunity of being heard; Question of law
• Section: 69C; 143(3); 80IB; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 468/PN/2007 (ASSTT. YEAR: 2001-02) ASST. COMMISSIONER OF INCOME TAX , ... APPELLANT CIRCLE -2, AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. MENON BEARINGS LTD., RESPONDENT G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE C.O. NO. 45/PN/2008 (ARISING OUT OF ITA NO. 467/PN/2007) (ASSTT. YEAR: 2001-02) MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE V. AS ST. COMMISSIONER OF INCOME TAX, ... RESPONDENT CIRCLE -2, AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR ITA NO. 469/PN/2007 (ASSTT. YEAR: 2003-04) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIR-2 AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 2 C.O. NO. 44/PN/2008 (ARISING OUT OF ITA NO. 469/PN/2007) (ASSTT. YEAR: 2003-04) MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE V. ASST. COMMISSIONER OF INCOME TAX, ... RESPONDENT CIRCLE -2, AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR ITA NO. 881/PN/2008 (ASSTT. YEAR: 2000-01) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIR-2 AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE ITA NO. 882/PN/2008 (ASSTT. YEAR: 2002-03) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIR-2 AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 3 C.O. NOS. 30 & 31/PN/2009 (ARISING OUT OF ITA NO. 881 & 882/PN/2008) (ASSTT. YEAR: 2000-01 & 2002-03) MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE V. ASST. COMMISSIONER OF INCOME TAX, ... RESPONDENT CIRCLE -2, AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR ITA NO. 908/PN/2008 ASSTT. YEAR : 2000-01 MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE V. JOINT COMMISSIONER OF INCOME TAX, ... RESPONDENT RANGE 1, KOLHAPUR ITA NO. 532/PN/2008 ASSTT. YEAR : 2004-05 ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIR-2 AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 4 MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE ITA NO. 773/PN/2009 ASSTT. YEAR : 2004-05 DY COMMISSIONER OF INCOME TAX, ... APPELLANT CIR- 1 KOLHAPUR V. MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE ITA NO. 909/PN/2008 ASSTT. YEAR : 2002-03 MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, KOLHAPUR PAN : NOT AVAILABLE V. JOINT COMMISSIONER OF INCOME TAX, ... RESPONDENT RANGE 1, KOLHAPUR ITA NO. 883/PN/2008 (ASSTT. YEAR: 2005-06) ASST. COMMISSIONER OF INCOME TAX, ... APPELLANT CIR-2 AAYAKAR BHAVAN, TARABAI PARK, KOLHAPUR V. MENON BEARINGS LTD., CROSS OBJECTOR G-1, M.I.D.C., GOKUL SHIRGAON, ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 5 KOLHAPUR PAN : NOT AVAILABLE ASSESSEE BY : S/SHRI S.U. PATHAK & NIKHIL S. PAT HAK DEPARTMENT BY : MS. ANN KAPTUAMA DATE OF HEARING : 07.0 7.2011 DATE OF PRONOUNCEMENT: ORDER PER BENCH ITA 468/PN/2007 THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUNDS THAT THE LD CIT(A) HAS ERRED IN : 1) HOLDING THAT THE BOOKS OF ACCOUNTS ARE PROPER THOUG H THE A.O HAD RIGHTLY POINTED OUT NUMBER OF DEFECTS IN THE BOOKS OF ACCOU NTS RENDERING THEM LIABLE FOR REJECTION; 2) DELETING THE ADDITION OF RS. 14,54,975/- MADE ON A CCOUNT OF LOW GROSS PROFIT PERCENTAGE; 3) GRANTING RELIEF IN RESPECT OF ADDITION MADE ON ACCO UNT OF UNACCOUNTED PRODUCTION EXPENSES OF RS. 58,77,423/-; 4) GRANTING RELIEF OF RS. 1,82,000/- ON ACCOUNT OF DIS COUNT, RS.25,39,883/- ON ACCOUNT OF COUPON ENCASHMENT AND RS. 6,00,000/- ON ACCOUNT OF MARKET EXPENSES; AND 5) ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S. 80 IB O F THE ACT IN RESPECT OF INCOME FROM SALE OF SCRAP, AND EMPTY BARREL SALE. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADVAN CED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. GROUND NO. 1 ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 6 3. THE RELEVANT FACTS ARE THAT ASSESSEE IS IN THE B USINESS OF MANUFACTURING AUTOMOBILE ENGINE PARTS FOR A NUMBER OF YEARS. THE A.O. POINTED OUT DIFFERENT DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, REJECTED THE SAME AND MADE SEVERAL ADDITIONS ON ACCOUNT OF LOW GROSS PROFIT PERCENTAGE, UNACCOUNTED PRODUCTION EXPENSES, ON ACCOUNT OF DENIAL OF CLAIME D DISCOUNT AND ANOTHER EXPENSES AND HAD DISALLOWED THE CLAIMED DEDUCTION U /S. 80 IB OF THE ACT IN RESPECT OF INCOME FROM SALE OF SCRAP, EMPTY BARREL SALE AN D INTEREST EARNED ON DEPOSITS. THE LD CIT(A) AFTER DISCUSSING THE CASE OF THE ASS ESSEE IN DETAIL HAS HELD REJECTION OF BOOKS OF ACCOUNT AS UNJUSTIFIED AND HAS GIVEN SO ME RELIEF WHICH IS QUESTIONED BY THE REVENUE IN THE ABOVE STATED GROUNDS. 4. IN SUPPORT OF THE GROUND NO. 1, THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. HE REFERRED CONTENTS OF PARA NOS. 9.1 TO 9.3 AND 10 OF THE ASSESSMENT ORDER WHEREIN THE A.O HAS DISCUSSED THE REASONS LEADING TO HIS ACTION FOR REJECTION OF THE BOOKS OF ACCOUNT. THE LD. D.R . SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN MANUFACTURING REGISTER TO DEDUCE THE C ORRECT INCOME OF THE ASSESSEE. ON THE ISSUE OF ADDITION MADE ON ACCOUNT OF LOW GRO SS PROFIT PERCENTAGE, UNACCOUNTED PRODUCTION EXPENSES ETC., THE LD. D.R. SUBMITTED THAT THE LD CIT(A) HAS DELETED THESE ADDITIONS MERELY ON THE BASIS THA T THESE ARE AD HOC IN NATURE. HE SUBMITTED THAT THE LD CIT(A) HAS GIVEN RELIEF ON AC COUNT OF WASTAGE ON THE BASIS THAT IT IS ALLOWABLE UP-TO 2%. HE HAS NOT GIVEN T HE BASIS ON WHICH HE CAME TO THIS CONCLUSION. 5. THE LD. A.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER. HE SUBMITTED THAT THE LD CIT(A) TOOK NOTE OF VARIOUS REGISTERS ETC., MAINTAINED, BESIDES THE REGULAR COMPUTERIZED ACCOUNTS MAINTAINE D. THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE THE LD CIT(A). THESE WERE FORWA RDED TO THE A.O AND HIS REMAND REPORT WAS CALLED FOR BY THE LD CIT(A). AFT ER CONSIDERING THE REMAND REPORT, FACT THAT THE EFFECTIVE SCRUTINY WAS STARTE D LATE AND THAT SOME INFORMATION ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 7 WAS NOT SPECIFICALLY CALLED BY THE A.O., LD CIT(A) HELD THAT THE A.O WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THE LD. A.R. SU BMITTED FURTHER THAT THE ASSESSEE IS A PROFESSIONALLY MANAGED LARGE CONCERN. THE ACC OUNTS OF THE ASSESSEE COMPANY ARE AUDITED. IT IS ALSO SUBJECT TO CONTROL BY THE EXCISE DEPARTMENT WHICH SCRUTINIZES PRODUCTION AS WELL AS SALES. VARIOUS REGISTERS HAV E BEEN MAINTAINED BY THE ASSESSEE WITH REGARD TO PRODUCTION. THE A.O, HOWEVER, HAS ONLY TALKED ABOUT ONE SUCH REGISTER, NAMELY, THE STRIP TRANSFER REPORT, WHICH, THE ASSESSEE HAS POINTED OUT, ONLY CONTAINS AN ESTIMATE OF THE NUMBER OF BEARINGS ETC. , THAT CAN BE CUT FROM THE STRIP. THE LD A.R. ALSO CITED THE FOLLOWING DECISIONS :- A. ON THE RATIO THAT NO ADDITION CAN BE MADE SIMPLY BE CAUSE THE ASSESSEE DID NOT MAINTAIN STOCK RECORD AND G.P. WAS LOWER AS COM PARED TO EARLIER YEAR : 1) R.B. JESSARAM FATEHCHAND VS. CIT (1969) 75 ITR 33 ( BOM) 2) M. DURAIRAJ VS. CIT (1972) 83 ITR 484 (KER.) 3) CHHAJER PACKING PLASTICS PVT. LTD., VS I.T.O, ITA NO. 364/PN/2004 , A.Y. 2000-01, ORDER DATED 24 TH JUNE 2005. 4) HOWRAH TRADING COMPANY VS. CIT (1968), 67 ITR 5 82 (CAL.) 5) ITO VS. BOTHRA INTERNATIONAL, 117 TTJ (JODH) 6 72 6) CIT VS. JAS JACK ELEGANCE EXPORTS, 40 DTR 236 ( DELHI ) 7) ITO VS. PRAKASH CHAND, 100 TTJ (JODH) 639 8) DCIT VS. GAJANAN TRADERS, 104 TTJ (BANG) 1030 9) DASS FRIENDS BUILDERS (P) LTD. VS. DCIT, 88 T TJ (AGRA) 651 10) DELHI SECURITIES PRINTERS VS. DCIT, 15 SOT 353 (DEL) B. BOOKS SUBJECTED TO GOVT. DEPTT. EXAMINATION REJECTION NOT JUSTIFIED: 1) VIJAY INDUSTRIES VS. ITO [112 TTJ 353 (JP) 2) ASHOK KUMAR & CO. VS. ITO [2 SOT 518 (ASR.)] 3) SHANKER RICE CO. VS. ITO [72 ITD 139 (SB)] 4) EVERGREEN BAR RESTAURANT VS. ACIT [6 DTR 56 (I TAT)] ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 8 C. WHEN THERE IS NO DEFECT, THERE IS NO NEED OF ESTIMATION : 1) PANDIT BROS. VS. CIT [26 ITR 159 (PUNJ.) 2) S. VEERIAH REDDIAR VS. CIT [38 ITR 152 (K ER.)] 3) INTERNATIONAL FOREST CO. V/S. CIT [101 ITR 721 (J&K)] 4) R.B. BANSILAL ABIRCHAND SPINNING WEAVING MILLS. LTD. VS. CIT [75 ITR 260] (BOM)] 5) R.B. JESSARAM FETECHAND (SUGAR DEPT.) V. CIT [7 5 ITR 33 (BOM)] 6. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT THE A.O HAS REJECTED THE BOOKS OF ACCOUNT MAINLY ON THE FOLLOWING BASIS. I. SUPPORTING DOCUMENTS ON THE BASIS OF WHICH VARI OUS PRODUCTION REPORTS WERE MADE WERE NOT AVAILABLE. WHAT WAS TER MED AS CONSUMPTION RECORDS WERE ACTUALLY RECORDS OF ISSUE OF MATERIAL. II. MATCHING OF CONSUMPTION WITH ACTUAL PRODUCTION DATE WISE OR BATCH WISE COULD NOT BE MADE. III. DURING ASSESSMENT PROCEEDINGS, THE ONLY PRODUC TION RELATED RECORD PRODUCED WAS THE STRIP TRANSFER REPORT (STR). IV. DISCREPANCIES WERE NOTICED IN THESE STRS, WHICH COULD NOT BE SATISFACTORILY EXPLAINED BY THE APPELLANT. THE DIS CREPANCIES WERE IN THE NUMBER OF BLANKS MENTIONED IN THE STRS AND THE NUMB ER OF BEARINGS ACTUALLY PRODUCED. V. THE APPELLANT COULD NOT CORRELATE CONSUMPTION OF VARIOUS RAW MATERIALS TO THE PRODUCTION OF FINISHED GOODS. THE REASON GI VEN THAT RAW MATERIAL WAS PURCHASED IN KILOGRAMS AND THE FINAL PRODUCT SOLD I N PIECES WAS NOT CONSIDERED SATISFACTORY. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 9 7. THE EXPLANATION OF THE ASSESSEE REGARDING THE PR OPER MAINTENANCE OF BOOKS OF ACCOUNT BY IT REPRODUCED BY THE LD CIT(A) AT PAG E NO. 2 TO 4 OF THE FIRST APPELLATE ORDER REMAINED AS UNDER : I. WHATEVER RECORDS WERE MAINTAINED, WERE SHOWN TO THE ASSESSING OFFICER. II. ALL THE RECORDS WERE PRODUCED BUT THE ASSESSING OFFICER DID NOT GO THROUGH THE COMPLETE RECORDS. III. THE COMPANY PRODUCED BEARINGS. THE NUMBER OF PIECES IS VERY LARGE TO MAKE IT IMPOSSIBLE TO MAINTAIN RECORDS ON THE BA SIS OF WEIGHT. IV. THE PRODUCTS ARE SOLD ON PIECE BASIS AND, THERE FORE, WEIGHT LOOSES ITS SIGNIFICANCE. V. THE APPELLANT HAD MAINTAINED ALL PRODUCTION REC ORDS CONTAINING RECEIPT OF MATERIAL, ISSUE OF MATERIAL PRODUCTION, CONSUMPT ION ETC. VI. THE APPELLANT SUBMITS MONTHLY RETURN OF PRODUCT ION TO THE EXCISE DEPARTMENT ALONG WITH CLEARANCES AND STOCK POSITION . VII. MONTHLY RETURN OF SALES AND PURCHASES ARE ALSO FURNISHED TO THE SALES- TAX DEPARTMENT. VIII. THE EXCISE DEPARTMENT MONITORS AND CONTROLS P HYSICAL MOVEMENT OF MATERIAL. IX. WHEN THE STRIPS ARE ISSUED FOR PRODUCTION, A ST RIP TRANSFER REPORT IS PREPARED IN WHICH IT IS MENTIONED WHAT TYPE OF PROD UCTS ARE TO BE MADE AND THE PROBABLE NUMBER OF PIECES THAT CAN BE CUT FROM THE STRIPS. X. IN THE PROCESS OF MANUFACTURING OF THE PRODUCTS, THERE ARE OCCASIONS WHEN STRIPS ARE PARTLY USED FOR THE PRODUCT MENTION ED IN THE STR AND UNUSED PART IS USED FOR SOME OTHER PRODUCT IN THE SAME CAT EGORY. WASTAGE ALSO OCCURS, WHICH IS TREATED AS SCRAP. THEREFORE, THE PROBABLE NUMBER OF PIECES THAT CAN BE MADE FROM THE STRIP MENTIONED IN THE RE PORT IS ONLY AN ESTIMATE AND NOT THE FIGURE OF ACTUAL PRODUCTION. XI. THE ASSESSING OFFICER COMPARED THE FIGURES MENT IONED IN THESE REPORTS WITH THE ACTUAL PRODUCTION AND NOTICED DISCREPANCIE S. XII. ANOTHER REGISTER CALLED THE BFC (BLANKING, FOR MING AND COINING) REGISTER IS MAINTAINED, WHICH SHOWS ACTUAL QUANTIT Y OF BLANKS PRODUCED FOR MAKING BEARINGS. IF THE ACTUAL PRODUCTION IN THE B FC REGISTER IS COMPARED, THE DISCREPANCIES ALMOST DISAPPEAR. XIII. THE APPELLANT MAINTAINS THE FOLLOWING REGISTE RS: 1. GOODS RECEIPT NOTES (GRNS) ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 10 2. GRN REGISTER 3. PURCHASE REGISTER 4. MATERIAL STOCK LEDGERS 5. ISSUE VOUCHERS 6. POWER PRODUCTION REGISTER (MANUAL) 7. BI-METAL STRIP PRODUCTION REGISTER (MANUAL) 8. DAILY PRODUCTION REPORT AND MATERIAL TRANSFERRED TO PRODUCTION REGISTER 9. MATERIAL TRANSFERRED FROM PRODUCTION FOR PACKING 10. EXCISE GATE PASS CUM INVOICE (EXCISE) 11. MONTHLY EXCISE RETURNS (RT -12) 12. DAILY STOCK ACCOUNT IN RG-1 (EXCISE) 13. SALES REGISTER XIV. PACKING OF THE BEARINGS, WASHERS AND BUSHES PR ODUCED, IS OUTSOURCES TO A THIRD PARTY, NAMELY, STERLING ENGINEERING, SH IRGAON, KOLHAPUR. THERE IS A RECORD OF PRODUCTS SENT FOR PACKING ON DAILY BASI S. THIS RECORD ALSO CORROBORATES THE PRODUCTION RECORDS. AS PER RULE 5 7F(4) OF THE CENTRAL EXCISE RULES, THE APPELLANT HAS TO PREPARE A CHALLAN WHICH ACCOMPANIES THE MATERIAL TILL ITS RETURN TO THE COMPANY. WHEN THE MATERIAL IS RETURNED, THE QUANTITY IS ENDORSED ON THE BACK OF THE CHALLAN AND THE QUANTIT Y IS RECORDED IN THE DAILY STOCK ACCOUNT IN RG-I REGISTER. XV. THE PRODUCTION FIGURES ARE ALSO CORROBORATED BY THE BILLS RAISED BY STERLING ENGINEERING, WHICH IS ON THE BASIS OF NUMB ER OF PIECES PACKED. XVI. THE FOLLOWING RECORDS ARE IMPORTANT FROM THE P RODUCTION POINT OF VIEW: . BFC REGISTER . DAILY PRODUCTION REPORT . CHALLANS UNDER THE EXCISE RULE 57F . DAILY STOCK ACCOUNT AND RG-1 REGISTER . MONTHLY EXCISE RETURN ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 11 XII. THE APPELLANT HAD EXPLAINED THAT THE PRODUCTIO N FIGURES CANNOT BE VERIFIED FROM THE STR. 8. THE A.O. WHILE REJECTING THE BOOKS OF ACCOUNT HA S GIVEN MORE EMPHASIS ON THE REGISTER, NAMELY THE STRIP TRANSFER REPORT ABOU T WHICH THE SUBMISSION OF THE ASSESSEE REMAINED THAT IT ONLY CONTENTS AN ESTIMATE OF THE NUMBER OF BEARINGS ETC., THAT CAN BE CUT FROM THE STRIP. THE MAIN GRIEVANC E OF THE A.O REMAINED THAT INSTEAD OF ACTUAL OPERATIONAL RECORD, ONLY COMPUTER IZED SHEETS RELATING TO PRODUCTS MANUFACTURED WERE PRODUCED FOR EXAMINATION AND TH AT ASSESSEE COULD NOT LINK ACTUAL CONSUMPTION OF RAW MATERIALS AND THE PRODUCT ION OF FINISHED GOODS. THE SUBMISSION OF THE ASSESSEE IN THIS REGARD REMAINED THAT THE RAW MATERIAL I.E. STRIPS WERE PURCHASED IN KILOGRAMS WHEREAS, THE FINAL PRO DUCT I.E. BEARINGS WERE SOLD IN PIECES AND NOT IN WEIGHT, THEREFORE, IT WAS DIFFICU LT TO CORRELATE THE WEIGHT OF THE RAW MATERIAL WITH PRODUCTION. THE A.O REJECTED THE SU BMISSION WITHOUT ASSIGNING ANY REASON. THE A.O. HAS ALSO NOT MENTIONED IT SPECIF ICALLY AS TO WHICH RECORDS ASKED BY THE A.O WERE NOT PRODUCED BY THE ASSESSEE. THE ALLEGATION OF THE A.O REMAINED THAT ALL THE PRODUCTION RECORDS WERE NOT PRODUCED. IN OUR VIEW, THE ALLEGATION IS GENERAL IN NATURE ESPECIALLY WHEN, AS NOTED ABOVE, THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAD MAINTAINED THE GOODS RECEIPT NOTE, GTN REGISTER, PURCHASE REGISTER, MATERIAL STOCK LEDGERS, ISSUE VOUCHERS, P OWER PRODUCTION REGISTER, BI-METAL STRIP PRODUCTION REGISTER, DAILY PRODUCTION REPORT AND MATERIAL TRANSFERRED TO PRODUCTION REGISTER, MATERIAL TRANSFERRED FROM PROD UCTION FOR PACKING, EXCISE GATE PASS CUM INVOICE, MONTHLY EXCISE RETURNS, DAILY STO CK ACCOUNT IN RG -1 AND SALE REGISTER HAS NOT BEEN REBUTTED BEFORE US. 9. HAVING GONE THROUGH THE ABOVE CITED DECISIONS, W E FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF R.B. JESSARAM FATE HCHAND VS. CIT (SUPRA) ON THE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 12 ISSUE OF MAINTAINABILITY OF ASSESSEES ACCOUNT BOOK S HAS BEEN PLEASED TO HOLD AS UNDER IN ITS CONCLUDING PARA NO. 4. THE ASSESSEES ACCOUNT BOOKS ARE TO BE ACCEPTED, UNLESS, ON VERIFICATION, THEY DISCLOSED ANY FAULTS OR DEFECTS, WHICH CANNOT BE REASONABLY AND SATISFACTORILY EXPLAINED BY THE ASSESSEE. ALL THE OTHER TRANSACTIONS, EXCEPT THE CASH TRANSACTIONS, WHICH WERE VERIFIABLE, HAVE BEEN VERIFIED AND SCRUTINIZED BY THE INCOME-TAX OFFICER AND THERE IS NOTHING WRONG WHATSOEVER FOUND WITH THEM. AS TO THE CASH TRANSACTIONS ALSO, THE QUANTITY OF SUGAR SOLD HAS NOT BEEN DISPUTED. THE RATES AT WHICH SUGAR W AS SOLD WERE NOT SUCH AS WOULD EXCITE SUSPICION BY REASON OF BEING LOWER THA N THE PREVAILING MARKET RATES. THE NAMES OF THE CUSTOMERS ARE ALSO ENTERED IN RESPECT OF THE TRANSACTION. ALL THAT IS NOT DONE IS THAT THE ADDR ESSES ARE NOT ENTERED AND ON ENQUIRY THE ASSESSEE WAS UNABLE TO SUPPLY THE ADDRE SSES. SINCE, HAVING REGARD TO THE NATURE OF THE TRANSACTIONS AND THE M ANNER IN WHICH THEY HAD BEEN EFFECTED, THERE WAS NO NECESSITY WHATSOEVER FO R THE ASSESSEE TO HAVE MAINTAINED THE ADDRESSES OF CASH CUSTOMERS, THE FAI LURE TO MAINTAIN THE SAME OR TO SUPPLY THEM AS AND WHEN CALLED FOR CANNOT BE REGARDED AS A CIRCUMSTANCE GIVING RISE TO A SUSPICION WITH REGARD TO THE GENUINENESS OF THE TRANSACTIONS. THE TRIBUNAL, THEREFORE, WAS NOT RIG HT, IN OUR OPINION, IN SETTING ASIDE THE ORDER OF THE APPELLATE ASSISTANT COMMISSI ONER AND RESTORING THAT OF THE INCOME-TAX OFFICER. THERE ARE NO CIRCUMSTANCES DISCLOSED IN THE CASE NOR IS THERE ANY EVIDENCE OF MATERIAL ON RECORD WHICH W OULD JUSTIFY . THE REJECTION OF THE BOOKS RESULTS 10. IN THE CASE OF M. DURAIRAJ VS. CIT (SUPRA), THE HONBLE KERALA HIGH COURT WHILE DISSENTING FROM THE DECISION OF HONBLE CALCU TTA HIGH COURT IN THE CASE OF HOWRAH TRADING COMPANY VS. CIT (SUPRA) RELIED UPON BY THE A.O HAS BEEN PLEASED TO HOLD AS UNDER : ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 13 22. WHETHER THE ACCOUNTS OF THE ASSESSEE ARE MAINTA INED ACCORDING TO THE METHOD REGULARLY EMPLOYED BY HIM, WHETHER THEY ARE CORRECT AND COMPLETE, AND WHETHER THE INCOME CAN BE PROPERLY COMPUTED F ROM THE ACCOUNTS ARE ALL PURE QUESTIONS OF FACT. THE APPELLATE TRIBUNAL S FINDING ON THESE MATTERS ARE NOT LIABLE TO ATTACK FOR WANT OF SUFFICIENCY OF MATERIALS. BUT IF THE FINDINGS ARE NOT SUPPORTED BY ANY MATERIALS OR IF THE MATERI ALS RELIED ON ARE IRRELEVANT OR THEY ARE SUCH THAT NO TRIBUNAL CAN REASONABLY CO ME TO SUCH FINDINGS ON THE SAID MATERIALS, THEN A QUESTION OF LAW WOULD A RISE, AND THE HIGH COURT WOULD BE JUSTIFIED IN HOLDING THAT THE FINDINGS CA NNOT BE SUSTAINED ON ANY MATERIALS. IN THE INSTANT CASE, THE APPELLATE TRIB UNAL HAS FOUND THAT THE PROFITS DISCLOSED BY THE ASSESSEE WERE LOW WHEN CO MPARED TO OTHER SIMILAR TRADERS. THE ASSESSEE GAVE AN EXPLANATION FOR THE SAME. THE TRIBUNAL HAS NOT FOUND THAT THE EXPLANATION WAS NOT TRUE; AND AL L THAT IT HELD WAS THAT ITS CORRECTNESS COULD NOT BE VERIFIED. REGARDING THE N ON-MAINTENANCE OF STOCK REGISTER, THE ASSESSEES CASE IS THAT HE BUYS RICE IN TERMS OF THE NUMBER OF BAGS AND ALSO SELLS IT IN THE SAME MANNER, AND THAT THE STOCK REGISTER IS, THEREFORE, MAINTAINED IN TERMS OF THE NUMBER OF B AGS PURCHASED AND THE NUMBER OF BAGS SOLD. THIS CASE HAS BEEN APPARENTLY ACCEPTED BY THE APPELLATE TRIBUNAL AND THE SUBORDINATE AUTHORITIES. THERE IS NO CASE THAT THE ASSESSEE HAS FOR THE PURPOSE OF SALE REPACKED THE BAGS AND INCREASED THEIR NUMBER BY REDUCING THEIR CONTENTS. IN A WHOLESALE BUSINESS LIKE THAT OF THE ASSESSEE, WHO BUYS AND SELLS IN TERMS OF THE NUMBER OF BAGS, MAINTENANCE OF A STOCK REGISTER IN TERMS OF WEIGHT IS A VERY LABOR IOUS PROCESS. AS OBSERVED IN THE BOMBAY HIGH COURT IN R.B. JESSARAM FATEHCHAND V . COMMISSIONER OF INCOME-TAX, THERE IS NO NEED TO HAVE COMPLETE PARTI CULARS OF THE NAMES AND ADDRESSES OF CUSTOMERS IN THE CASE OF CASH TRANSACT IONS, AND THE ABSENCE OF SUCH PARTICULARS IN THE SALE BILLS WOULD NOT BE A G ROUND FOR NOT ACCEPTING THE BOOKS OF ACCOUNT OF AN ASSESSEE. AS ALREADY STATED , THE ASSESSEE HAS ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 14 ADMITTEDLY MAINTAINED HIS ACCOUNTS ACCORDING TO TH E METHOD REGULARLY EMPLOYED BY HIM, AND THE PROFITS AND GAINS OF THE B USINESS CAN BE PROPERLY COMPUTED FROM HIS ACCOUNTS. THERE IS NO FINDING T HAT THE PURCHASES HAVE BEEN EXAGGERATED OR THE SALES HAVE BEEN SUPPRESSED, OR THAT ANY TRANSACTION HAS NOT COME INTO THE ACCOUNTS. IN THESE CIRCUMSTAN CES, THE GROUNDS STATED BY THE APPELLATE TRIBUNAL ARE NEITHER VALID NOR REL EVANT IN REJECTING THE ACCOUNTS OF THE ASSESSEE. QUESTION NO. 1 IN THE REF ERENCE IS, THEREFORE, ANSWERED IN THE NEGATIVE AND IN FAVOUR OF THE ASSE SSEE. 11. THE HONBLE KERALA HIGH COURT WAS PLEASED TO HO LD FURTHER THAT WHAT IS RELEVANT TO CONSIDER IN SUCH CASES IS WHETHER THE ASSESSEES ACCOUNTS ARE MAINTAINED ACCORDING TO THE METHOD REGULARLY EMPLOY ED BY HIM; WHETHER THEY ARE CORRECT AND COMPLETE, AND WHETHER THE INCOME CAN BE PROPERLY COMPUTED FROM THE ACCOUNTS. ABSENCE OF THE STOCK REGISTER IS NOT BY ITSELF A GROUND TO REJECT THE ACCOUNTS. IF A PURCHASER BUYS RAW MATERIALS BY WEI GHT, AND HE SELLS HIS PRODUCTS BY LENGTH, THE STOCK REGISTER, IN RESPECT OF THE PURCH ASES, CAN ONLY BE WEIGHT AND, IN RESPECT OF THE SALES, IT CAN ONLY BE BY LENGTH. IN THE CASE OF THE PRODUCTS, THE WEIGHT MAY HAVE NO RELEVANCY; AND THE TALLYING OF THE STOCK MAY BE POSSIBLE ONLY BY WEIGHT AND LENGTH. AT ANY RATE, THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO MAINTAIN A STOCK REGISTER BY WEIGHT AND NON MAINTE NANCE OF SUCH A STOCK REGISTER BY ITSELF IS NO GROUND TO REJECT HIS ACCOUNT, HELD THE HONBLE KERALA HIGH COURT. 12. IN THE CASE OF HOWRAH TRADING CO. VS. CIT (SUPR A) RELIED UPON BY THE A.O, THE HONBLE CALCUTTA HIGH COURT HAS BEEN PLEASED TO UPHOLD THE ACTION OF THE A.O TO PROCEED UNDER PROVISO TO SECTION 13 OF THE I.T. ACT 1922 WITH THIS OBSERVATION THAT DIFFERENT STANDARDS WERE EMPLOYED IN SHOWING RAW M ATERIAL PURCHASED AND GOODS PRODUCED FROM THEM, THEREFORE, PROFIT COULD NOT BE PROPERLY DEDUCED FROM METHOD OF ACCOUNTING. THE HONBLE CALCUTTA HIGH COURT JUS TIFIED THE REJECTION OF THE ACCOUNTS BY THE ITO UNDER SUCH CIRCUMSTANCES. AS W E HAVE DISCUSSED ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 15 HEREINABOVE, THE HONBLE KERALA HIGH COURT IN THE C ASE OF M. DURAIRAJ VS. CIT (SUPRA) RELIED UPON BY THE LD. A.R DID NOT AGREE W ITH THE SAID DECISION OF HONBLE CALCUTTA HIGH COURT. THE HONBLE KERALA HIGH COURT HAS RATHER AGREED WITH THE DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COUR T IN THE CASE OF R.B. JESSARAM FATEHCHAND VS. CIT (SUPRA) RELIED UPON BY THE LD. A .R. 12.1. IN THE CASE OF CIT VS. JAS JACK ELEGANCE EXP ORTS (SUPRA), THE HONBLE DELHI HIGH COURT VIDE PARA NO.5 HAS BEEN PLEASED TO HOLD AS UNDER : 5. SEC. 145(3) OF THE ACT PROVIDES FOR ASSESSMENT IN THE MANNER PRESCRIBED IN S. 144 OF THE ACT, WHERE THE AO IS NO T SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE EITHER THE METHOD OF ACCOUNTING PROVIDED IN SUB-S. (1) OR THE ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-S. (2) HAVE NOT BEEN REGULARL Y FOLLOWED BY THE ASSESSEE. THIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESS EE HAD NOT FOLLOWED EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING STIPULATED IN SUB-S. (1) OF S. 145 OF THE ACT. THIS IS ALSO NOT THE CASE OF THE REVENU E THAT THE CENTRAL GOVERNMENT HAD NOTIFIED ANY PARTICULAR ACCOUNTIN G STANDARDS TO BE FOLLOWED BY MANUFACTURERS AND EXPORTERS OF READY MADE GARMENTS. HENCE, THE SECOND PART OF SUB-S. (3) OF S. 145 DOES NOT AP PLY TO THIS CASE. AS NOTED BY THE CIT(A) AS WELL AS BY THE TRIBUNAL, THE AO HA D NOT POINTED OUT ANY DEFECT IN THE ACCOUNTS BOOKS MAINTAINED BY THE ASSE SSEE, WHICH, ADMITTEDLY, WERE PRODUCED BEFORE THE AO FOR HIS CONSIDERATION. THIS IS ALSO NOT THE FINDING OF THE AO THAT THE ACCOUNT OF THE ASSESSEE WAS NOT COMPLETE. NO PROVISION EITHER IN THE ACT OR IN THE RULES REQUIR ING AN ASSESSEE CARRYING BUSINESS OF THIS NATURE, TO MAINTAIN A STOCK REGIS TER, AS A PART OF ITS ACCOUNTS HAS BEEN BROUGHT TO OUR NOTICE. AS REGARDS NON-PROD UCTION OF STOCK REGISTER, THE ASSESSEE HAS GIVEN AN EXPLANATION WHICH HAS BEE N ACCEPTED NOT ONLY BY THE CIT(A) BUT ALSO BY THE TRIBUNAL AND BOTH OF T HEM HAVE GIVEN A CONCURRENT FINDING OF FACT THAT MAINTAINING STOCK REGISTER WAS NOT FEASIBLE CONSIDERING THE NATURE OF THE BUSINESS BEING RUN B Y THE ASSESSEE WHICH WAS ENGAGED IN THE BUSINESS OF MANUFACTURING READYMADE GARMENTS BY PURCHASING FABRIC WHICH WAS THEN SUBJECTED TO EMBRO IDERY, DYEING AND FINISHING AND THEN CONVERTED INTO READYMADE GARMENT S BY STITCHING. SEC. 145(3) OF THE ACT THEREFORE COULD NOT HAVE BEEN APP LIED BY THE AO TO THE PRESENT CASE. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 16 13. WE THUS COME TO THE CONCLUSION THAT IF A PURCH ASER BUYS RAW MATERIAL BY WEIGHT AND HE SELLS HIS PRODUCT BY LENGTH, THE STOC K REGISTER, IN RESPECT OF THE PURCHASES, CAN ONLY BE BY WEIGHT AND IN RESPECT OF THE SALES, IT CAN ONLY BE BY LENGTH. IN THE CASE OF THE PRODUCTS, THE WEIGHT M AY HAVE NO RELEVANCY; AND THE TALLYING OF THE STOCK MAY BE POSSIBLE ONLY BY WEIGH T AND LENGTH. AT ANY RATE, THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO MAINTAIN A STOCK REGISTER OF SUCH PRODUCTS BY WEIGHT AND THE NON-MAINTENANCE OF SUCH A STOCK REG ISTER BY ITSELF IS NO GROUND TO REJECT HIS ACCOUNTS. 14. IN THE PRESENT CASE BEFORE US, THE LD CIT(A) HA S CATEGORICALLY OBSERVED THAT THE A.O WAS NOT JUSTIFIED IN HOLDING THAT THE ASSE SSEE DID NOT PRODUCE THE BOOKS BEFORE THE A.O. THE SAME HAS NOT BEEN REBUTTED BY THE REVENUE BEFORE US. THE ASSESSEE COMPANY MANUFACTURED AUTOMOBILE ENGINE PAR TS FROM BI-METAL STRIPS CONSISTING OF STEEL STRIP WHICH IS EQUATED WITH CO PPER ON ONE SIDE. THESE STRIPS ARE IN THE ROLLS WHICH ARE CUT BY MACHINE INTO SMALL PI ECES FROM WHICH THE BEARINGS, BUSHES, AND WASHERS ARE MANUFACTURED BY FURTHER OP ERATIONS. THE ROLLS ARE OF DIFFERENT TYPES WHICH ARE MANUFACTURED BY THE ASSES SEE IN THE STRIP MAKING DEPARTMENT. WHEN THE ROLLS (STRIPS) ARE GIVEN TO T HE PRODUCTION DEPARTMENT, THE STRIP MANUFACTURING DEPARTMENT ESTIMATES THE NUMB ER OF BLANKS REQUIRED FOR BEARINGS, BUSHES, AND WASHERS OF A PARTICULAR TYPE WHICH ARE EXPECTED TO BE PRODUCED FROM THAT ROLL. A BLANK MEANS A SMALL STR IP CUT FROM THE ROLL OF THE SIZE REQUIRED FOR A PARTICULAR BEARING, BUSH AND WASHER . THE LD. A.R. HAS GIVEN AN EXAMPLE THAT IF A PARTICULAR BEARING FOR TATA TRUCK S IS REQUIRED TO BE MANUFACTURED OUT OF THE ROLL, THE STRIP MAKING DEPARTMENT GIVES THE ESTIMATE OF THE NUMBER OF BLANKS WHICH CAN BE PRODUCED FROM THE ROLL FOR THES E TATA BEARINGS AND THEY ARE ENTERED IN THE REGISTER. IT IS SIMPLY AN ESTIMATE . IT WAS SUBMITTED THAT NORMALLY, IT HAPPENS THAT A PARTICULAR ROLL BEING SO BIG IN SIZE IS NOT USED ENTIRELY FOR MANUFACTURING ONE PARTICULAR TYPE OF BLANK, WHEN IT IS LOADED ON THE PRODUCTION ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 17 MACHINE WHICH MANUFACTURES THE BLANKS, VERY OFTEN IT IS USED FOR MAKING BLANKS FOR DIFFERENT SIZES OF BEARINGS AND NOT ONE SIZE OF BEA RING ONLY. HENCE, THOUGH THE ESTIMATED FIGURE RATING IN THE STRIP TRANSFER REGIS TER FOR THE NUMBER OF BLANKS OF PARTICULAR SIZE WHICH ARE EXPECTED FROM THE ENTIRE ROLL, IN REALITY, THE ROLL IS CUT INTO DIFFERENT SIZES OF BLANKS DEPENDING UPON THE PRODU CTION REQUIREMENT AND SUCH BLANKS PRODUCED ARE MENTIONED IN THE BFC REGISTER ( BLANKING FORMATION AND COINING REGISTER). THE ASSESSEE HAS GIVEN THE STRIP TRANSF ER REGISTER (STR) FROM PAGES 1 TO 67 IN THE PAPER BOOK AND BFC REGISTER FOR BEARINGS FROM PAGES 68 TO 96 OF THE PAPER BOOK. 15. IT IS THE CASE OF A.O THAT FIRST OF ALL, THE A SSESSEE HAS NOT PRODUCED ALL THESE REGISTERS DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AND SECONDLY, THAT HE HAS TAKEN THE FIGURE OF BLANKS MENTIONED IN THE STR RE GISTER AS THE CORRECT FIGURES OF THE BLANKS PRODUCED AND TRIED TO JUDGE THE SHORTAG E OF PRODUCTION VIS--VIS THESE FIGURES. HE FOUND THAT IN THE BEARINGS AND WASHERS , THE ASSESSEE HAS SHOWN MORE PRODUCTION THAN THE NUMBER OF BLANKS MENTIONED IN T HE STR REGISTERS WHILE HE FOUND THAT AS REGARDS BUSHES, THE PRODUCTION IS LES SER THAN THE NUMBER OF BLANKS IN THE STR REGISTER. IT WAS MENTIONED THAT THE TYPES OF PRODUCTS MANUFACTURED BY THE ASSESSEE ARE VERY LARGE IN NUMBER. THE ASSESSEE MAN UFACTURES ABOUT 580 TYPE OF BEARINGS. THE A.O HELD THAT WHEN THE PRODUCTION IS HIGHER IN THE CASE OF BEARINGS AND WASHERS, THE ASSESSEE MUST HAVE USED THE UNACC OUNTED RAW MATERIAL I.E. THE STRIPS FOR MAKING SUCH EXTRA PRODUCTION, AND THEREF ORE, HE MAKES AN ADDITION ON ACCOUNT OF SUCH EXTRA RAW MATERIAL ESTIMATED. AS R EGARDS THE BUSHES, THE A.O HELD THAT THE ASSESSEE MIGHT HAVE SOLD SOME PRODUCTION O UTSIDE THE BOOK AND THEREFORE, HE MAKES AN ADDITION. ACCORDINGLY, THE A.O MADE AN ADDITION IN RESPECT OF THE PRODUCTION OF ALL THE ITEM. 16. LD CIT(A) HELD THAT THE PRODUCTION IN BEARINGS AND WASHERS IS MORE THAN THE NUMBER OF BLANKS AND THEREFORE, NO ADDITION IS REQU IRED. AS REGARDS BUSHES, HE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 18 HOLDS THAT THERE WAS A SHORTFALL IN PRODUCTION COMP ARED TO THE BLANKS AS PER THE STR REGISTER AND THEREFORE, HE HAS SUSTAINED THE AD DITION OF RS. 14,30,025/-. THE ASSESSEE HAS QUESTIONED THIS ADDITION OF RS.14,30,0 25/- IN ITS CROSS OBJECTION WHICH WE WILL DEAL SIMULTANEOUSLY SEPARATELY IN SUCCEEDIN G PARAGRAPHS, WHILE DEALING WITH THE CONNECTED GROUND NO. 3. 17. THE ASSESSEE HAS CLARIFIED THAT THE FIGURE OF B LANKS IN THE STR REGISTER IS AN APPROXIMATE FIGURE FOR PARTICULAR TYPE OF BLANKS AN D ACTUALLY IN THE PRODUCTION DEPARTMENT, THE BI-METAL ROLLS ARE USED FOR PRODUCI NG DIFFERENT TYPES OF BLANKS AND HENCE THE FIGURES OF THE BLANKS PRODUCED CAN NOT TA LLY WITH THE ESTIMATED FIGURE OF BLANKS IN THE STR REGISTER. THE NEXT POINT IS THAT THE PRODUCTION SHOWN IN RESPECT OF BEARINGS AND WASHERS IS MORE THAN THE PRODUCTION OF BLANKS AS PER THE STR REGISTER. THIS SHOWS THAT THE ASSESSEE DID NOT HAVE ANY INTENTION TO SUPPRESS THE PROFIT. THE ASSESSEE HAS MAINTAINED THE RECORDS IN CLUDING THE DAY TO DAY PRODUCTION REGISTER AND ALL SALES AND PURCHASES ARE VOUCHED A ND THEY ARE SUBJECT TO CHECKING BY THE EXCISE DEPARTMENT AND NO DEFECTS HAS BEEN P OINTED OUT BY THEM. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SHANKA R RICE CO. VS. ITO (SUPRA) HAS HELD THAT WHEN AN ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNT DULY AUDITED, MAINTAINS STATUTORY REGISTERS, ITS PURCHASE AND SAL E ARE REGULATED BY STATUTORY PROVISIONS AND ITS PURCHASERS DULY ACCEPTED BY THE EXCISE & TAXATION DEPARTMENT, ACCOUNTS COULD NOT BE REJECTED MERELY ON CONJUNCTU RES AND SURMISES. WE ARE ALSO HAVING NO REASON TO DOUBT THE SUBMISSION OF TH E LD. A.R. THAT THE EXCESS/SHORTAGE IN THE MANUFACTURING OPERATION IS A NORMAL PHENOMENA IN THE TYPE OF MANUFACTURING THE ASSESSEE IS INVOLVED. WE ALSO DO NOT FIND REASON TO DOUBT THE EXPLANATIO N OF THE ASSESSEE THAT THE STR PRODUCTION FIGURES WERE ESTIMATED AND SECONDLY, THE STRIPS ARE USED FOR MAKING DIFFERENT TYPE OF ITEMS WHEN THE PRODUCTION PROCESS IS ON AND HENCE, RECONCILIATION ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 19 OF PRODUCTION WITH THE STR REGISTER, FIGURES OF BLA NKS IS NOT POSSIBLE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE A.O WA S NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND RESORTED TO MAKE VARIOUS ADDI TIONS MAINLY FOR DISCREPANCIES IN THE STR AND THE ACTUAL PRODUCTION OF 3 TYPES OF ITEMS VIS., BEARING, BUSHES AND WASHERS, ESPECIALLY WHEN THERE IS NO DISPUTE THAT T HE ACCOUNTS OF THE ASSESSEE ARE MAINTAINED ACCORDING TO THE METHOD REGULARLY EMPLOY ED BY IT AND NO OTHER DEFECTS AS DISCUSSED ABOVE HAS BEEN ALLEGED OBSTRUCTING IN COMING TO THE CONCLUSION THAT THE BOOKS ARE NOT CORRECT AND COMPLETE TO DEDUCE IN COME PROPERLY. 18. IN SUMMARY WE ARE OF THE VIEW THAT FROM THE PR ODUCTION POINT OF VIEW, THE MAINTENANCE OF BFC REGISTER, DAILY PRODUCTION REPOR T, CHALLAN UNDER THE EXCISE RULE 57F, DAILY STOCK ACCOUNT AND RG -1 REGISTER, AND MO NTHLY EXCISE RETURN ACCEPTED BY EXCISE DEPTT. ARE IMPORTANT. IN THIS REGARD SEVER AL DECISIONS HAVE BEEN CITED INCLUDING THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SHANKAR RICE CO. VS. ITO (SUPRA) HOLDING THAT WHEN AN ASSESSEE MAINTAINS RE GULAR BOOKS OF ACCOUNT DULY AUDITED, MAINTAINS STATUTORY REGISTERS, ITS PURCHAS E AND SALE ARE REGULATED BY STATUTORY PROVISIONS AND ITS PURCHASES DULY ACCEPTE D BY THE EXCISE & TAXATION DEPARTMENT, ACCOUNTS COULD NOT BE REJECTED INVOKING THE PROVISIONS OF S. 145(3), MERELY ON CONJUNCTURES AND SURMISES. WE ALSO OBSE RVED THAT THE MAIN ADDITION MADE BY THE A.O IS FOR THE DISCREPANCY IN THE STR ( STRIP TRANSFER REGISTER) AND THE ACTUAL PRODUCTION OF BEARINGS, BUSHES AND WASHERS A ND THE G.P. ADDITION BY REJECTION OF THE ACCOUNT. THE WHOLE OF THE ACCOUNT S ARE NOT REJECTED BY THE A.O. ONLY THE REASONABLENESS OF THE MANUFACTURING RESU LTS AND GROSS PROFIT HAS BEEN CONSIDERED BY THE A.O. THE A.O HAS MADE THE ADDITI ON IN RESPECT OF 3 TYPES OF PRODUCTION VIS., BEARINGS, BUSHES AND WASHERS. THE LD. CIT(A) HAS ALSO CONSIDERED THE CORRECTED STR AND THE BFC REGISTER (BLANKING, F ORMING AND COINING REGISTER MANUALLY KEPT BY THE ASSESSEE) AND HAS SUSTAINED AD DITION OF RS.14,30,025/- MADE TOWARDS UNACCOUNTED BUSHES WHILE DELETING THE ADDIT ION MADE FOR BEARINGS AND WASHERS AND HAS ALSO DELETED THE ADDITION MADE FOR G.P. CONSIDERING THE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 20 REASONABLENESS OF THE G.P WHEN COMPARED TO G.P SHO WN FOR EARLIER 2 YEARS. THE LD CIT(A) HAS TAKEN NOTE OF VARIOUS REGISTERS ETC., MA INTAINED, BESIDES REGULAR COMPUTERIZED ACCOUNTS MAINTAINED. THE ASSESSEE MAD E DETAILED SUBMISSION BEFORE THE LD CIT(A) WHICH WAS FORWARDED TO THE A.O. FOR H IS REMAND REPORT. AFTER CONSIDERING ALL MATERIAL ASPECTS DISCUSSED HEREINAB OVE, WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY COME TO THE CONCLUSION THAT TH E A.O WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. IT IS PERTINENT TO MENTION OVER HERE THAT THE ASSESSEES DAY TO DAY PRODUCTION REGISTER AS WELL AS WHOLESALES A ND PURCHASES ARE SUBJECT TO CHECKING BY THE EXCISE DEPARTMENT. WE ARE THUS OF THE VIEW THAT MAINLY FOR SOME DISCREPANCIES IN THE STR AND THE ACTUAL PRODUCTION OF 3 TYPES VIZ., BEARINGS, BUSHES AND WASHERS, THE A.O WAS NOT JUSTIFIED IN REJECTIN G THE BOOKS OF ACCOUNTS WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE MADE IN THIS REGARD. IN THE CASE OF R.B. JESSARAM FATEHCHAND VS. CIT (SUPRA) THE HONBLE BO MBAY HIGH COURT, HAS BEEN PLEASED TO HOLD THAT JUST DUE TO EXCESS LOSS, THE B OOKS OF ACCOUNT CANNOT BE REJECTED WHEN THERE IS NO OTHER DEFECT IN THE BOOKS. THE A. O IN THE PRESENT CASE HAS RELIED UPON THE DECISION IN THE CASE OF HOWRAH TRADING C O. (SUPRA) WHEREIN IT WAS HELD THAT IF MATERIAL IS IN DIFFERENT QUANTITY AND THE PRODUCTION IS ACCOUNTED IN DIFFERENT NUMBERS, THE BOOKS CAN BE REJECTED. THIS VIEW HAS NOT BEEN APPROVED BY THE HONBLE COURTS INCLUDING HONBLE BOMBAY HIGH COURT, IN THEIR LATER DECISIONS. IN THE CASE OF M. DURAIRAJ VS. CIT (SUPRA) , THE HONBLE KERALA HIGH COURT DID NOT APPRECIATE THE DECISION IN THE CASE OF HOWRAH TRADI NG COMPANY. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CHHAJER PACKAGING C OMPANY (SUPRA) HAS ALSO FOLLOWED THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF M. DURAIRAJ VS. CIT (SUPRA). THE HONBLE DELHI HIGH COURT IN ITS RECENT DECISION IN THE CASE OF CIT VS. JAS JACK ELEGANCE EXPORTS (SUPRA) HAS BEEN PLEASED TO APPROVE THE ORDER OF THE TRIBUNAL THAT THE AO HAD NOT FOUND ANY DEFECT IN TH E BOOKS OF ACCOUNTS AND MAINTENANCE OF STOCK REGISTER WAS NOT FEASIBLE CONS IDERING THE NATURE OF BUSINESS OF THE ASSESSEE SINCE FABRIC WAS MEASURED IN METRES AN D WAS THEREAFTER STITCHED TO MAKE GARMENTS WHICH HAD TO BE COUNTED IN PIECES, TH US IT COULD NOT HAVE BEEN A ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 21 GROUND FOR REJECTING BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND INFIRMITY IN THE FIRS T APPELLATE ORDER WHEREBY THE LD CIT(A), IN OUR VIEW, HAS RIGHTLY HELD THE REJECTIO N OF BOOKS OF ACCOUNT BY THE A.O AS UNJUSTIFIED. THE GROUND NO. 1 IS ACCORDINGLY REJEC TED. GROUND NO.2 19. THE A.O. MADE ADDITION OF RS. 14,54,975/- ON AC COUNT OF LOW GROSS PROFIT PERCENTAGE. HE HAS DISCUSSED THIS ISSUE IN PARA NO . 19 OF THE ASSESSMENT ORDER. THE A.O OBSERVED THAT IN COMPARISON TO IMMEDIATELY PRECEDING YEAR, THERE WAS DECLINE OF 2.68% IN THE GROSS PROFIT RATE DURING T HE YEAR. DURING THE YEAR, THE ASSESSEE HAS SHOWN GROSS PROFIT RATE AT 41.97%. TH E A.O TOOK THE COST OF PRODUCTION OF THE CURRENT YEAR AND GROSSED UP THE SAME BY APPLYING THE GROSS PROFIT PERCENTAGE OF THE EARLIER YEAR AND THEREBY W ORKED OUT THE FIGURE OF TURNOVER AT RS. 1,432/77 LACS. THE DIFFERENCE BETWEEN THIS FIGURE AND ACTUAL TURNOVER, WHICH IS RS. 28.85 LACS WAS TREATED AS UNACCOUNTED TURNOV ER. THE A.O HAD, HOWEVER, REDUCED THE ABOVE AMOUNT BY RS. 14,30,025/- WHICH W AS THE UNACCOUNTED TURNOVER FOUND IN CASE OF PRODUCTION OF BUSHES. THUS, THE N ET ADDITION REMAINED AT RS.14,54,975/-. 20. THE CONTENTION OF THE ASSESSEE BEFORE THE LD CI T(A) REMAINED THAT THE ADDITION IS BASED ON GUESS WORK. THE COMPARISON HA S BEEN MADE WITH ONLY PRECEDING YEAR FIGURES, WHEREAS COMPARISON, IF ANY, SHOULD HAVE BEEN MADE WITH THE AVERAGE PERCENTAGE OF GROSS PROFIT FOR THE EARL IER YEARS. IT WAS POINTED OUT THAT THE AVERAGE PERCENTAGE OF GROSS PROFIT FOR THE EARL IER YEARS WAS 41.63% WHEREAS THE GROSS PROFIT DURING THE CURRENT YEAR AT 41.97% IS M ARGINALLY HIGH. CONSIDERING THIS SUBMISSION, THE LD CIT(A) CAME TO THE CONCLUSION T HAT THE ADDITION MADE ON ACCOUNT OF LOW GROSS PROFIT PERCENTAGE IS PURELY ON ADHOC BASIS WITHOUT ANY EVIDENCE TO SUPPORT THE SAME. HE OBSERVED FURTHER THAT THE A.O HAS NOT GIVEN ANY REASON WHY THE LAST YEARS GROSS PROFIT PERCENTAGE HAS BEEN TAKEN AS SACROSANCT. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 22 HE NOTED FURTHER THAT THE GROSS PROFIT PERCENTAGE O F THE A.Y. 1999-2000 AT 40.1% WAS ALMOST SAME AS THE CURRENT YEAR. THE LD CIT(A) HAS ACCORDINGLY DELETED THE ADDITION OF RS. 14,54,975/- MADE ON ACCOUNT OF LOW GROSS PROFIT PERCENTAGE. HE HAS, HOWEVER, SUSTAINED THE ADDITION OF RS. 14,30,0 25/- MADE ON ACCOUNT OF SHORTFALL IN PRODUCTION IN BUSHES COMPARED TO THE B LANKS AS PER THE STR REGISTER. THE SAME HAS BEEN QUESTIONED BY THE ASSESSEE. 21. CONSIDERING THE SUBMISSIONS OF THE PARTIES, WE FIND THAT THE AVERAGE G.P RATE OF 41.63% OF EARLIER YEARS AS OBSERVED BY THE LD C IT(A) HAS NOT BEEN REBUTTED BEFORE US. WE THUS FIND THE G.P RATE SHOWN AT 41.9 7% DURING THE YEAR IS BETTER THAN THE AVERAGE G.P. RATE OF EARLIER YEARS. EVEN THE G.P RATE FOR THE A.Y. 1999- 2000 WAS 42.11% AND THUS, G.P RATE SHOWN AT 41.97% DURING THE YEAR CANNOT BE CONSIDERED VERY LOW. IF THE ADDITION OF RS. 14,30, 025/- SUSTAINED BY THE LD CIT(A) IS CONSIDERED, THE EFFECTIVE G.P WOULD WORK OUT TO 43% . WE ARE ALSO OF THE VIEW THAT IT CANNOT BE EXPECTED THAT THE G.P. WOULD REMAIN CO NSTANT FOR ALL THESE YEARS. UNDISPUTEDLY, THE A.O HAS NOT MADE ADDITION WITH RE FERENCE TO ANY STANDARD FIXED IN THE INDUSTRY OR IN ANY OTHER COMPARABLE CASE BUT WITH A PARTICULAR YEARS GROSS PROFIT TO THE EXCLUSION OF OTHER ASSESSMENT YEARS, WHERE UNDER SIMILAR PERCENTAGE OF GROSS PROFIT WERE DECLARED. UNDER THESE CIRCUMS TANCES, WE ARE OF THE VIEW THAT THE LD CIT(A) HAS RIGHTLY HELD THAT THE A.O WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 14,54,975/- ON ACCOUNT OF LOW GROSS PROFIT PERC ENTAGE. THE SAME IS UPHELD. 22. GROUND NO. 2 IS REJECTED. GROUND NO.3 (DEPARTMENT) & ADDL. CROSS OBJECTION ( C.O. NO.45/PN/08) 23. THE A.O. CALCULATED THE AMOUNT OF EXCESS PRODU CTION AT RS. 68,77,423/- AND TREATED THE SAME AS UNACCOUNTED EXPENDITURE. THE A .O. ADDED THIS AMOUNT U/S. 69C OF THE ACT. IT WAS STATED THAT THE STRIP TRANS FER REPORT STATE THE NUMBER OF ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 23 BLANKS GENERATED BY THE METAL STRIP OR COIL. THE N UMBER OF BLANKS ACCORDING TO THE REPORT DID NOT MATCH WITH THE ACTUAL PRODUCTION AS SHOWN BELOW : PRODUCT NO. OF BLANKS PRODUCTION DIFFERENCE I. BEARING LINE 2110877 2454315 ( - )343438 II. BUSHES LINE 3568425 345023 114402 III. WASHER LINE 1463406 1709590 ( - )246184 IN THE BEARING LINE AND WASHER LINE, THE PRODUCTION FIGURES WERE HIGHER THAN NUMBER OF BLANKS MENTIONED IN THE REPORT. IN THE BUSH LIN E, THE PRODUCTION FIGURE WAS LOWER THAN THE NUMBER OF BLANKS. A.O. DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT SOME OF THE STRIPS WOULD HAVE BEEN USED FOR OTHER P RODUCTS NOTING THAT THE BLANKS WHICH ARE PREPARED ARE PRODUCT SPECIFIC AND CANNOT BE INTERCHANGEABLE. IN THE CASE OF EXCESS PRODUCTION THAN THE NUMBER OF BLANKS, THE A.O WAS OF THE VIEW THAT UNACCOUNTED MATERIAL MUST HAVE BEEN UTILIZED FOR MA KING THE EXTRA PRODUCTS. THE COST OF BEARINGS AND WASHERS WAS ESTIMATED AT 76% O F THE AVERAGE SELLING PRICE. THE EXCESS NUMBER OF BEARINGS AND WASHERS WAS MULTI PLIED BY THE COST TO FIND OUT TOTAL VALUE OF THE EXCESS PRODUCTION AT RS. 67,77,4 23/-. 24. IN THE CASE OF BUSH LINE, THE NUMBER OF BLANKS WAS MORE THAN THE PRODUCTION OF BUSHES BY 1,14,402 NUMBERS. THIS ITSELF WAS HEL D TO BE UNACCOUNTABLE PRODUCTION. BY MULTIPLYING THIS NUMBER WITH THE AVE RAGE RATE OF RS. 12.50, AN AMOUNT OF RS. 14,30,026/- WAS CALCULATED AS UNACCOU NTED SALES ASSUMING AGAIN THAT THE UNACCOUNTED PRODUCTION MUST HAVE BEEN SOLD OUT OF THE BOOKS. AFTER DISCUSSING THE CASE IN DETAILS, THE LD CIT(A) HAS DELETED THE ADDITION OF RS. 58,77,423/- IN RESPECT OF UNACCOUNTED CONSUMPTION O F MATERIAL IN RESPECT OF BEARINGS AND WASHERS. HE, HAS, HOWEVER SUSTAINED TH E ADDITION OF RS. 14,30,025/- ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 24 MADE ON ACCOUNT OF SHORTFALL IN PRODUCTION OF BUSHE S. THE REVENUE HAS QUESTIONED THE ACTION OF THE LD CIT(A) IN DELETING THE ADDITIO N OF RS. 58,77,423/- WHEREAS THE ASSESSEE IN ITS CROSS OBJECTION HAS OBJECTED THE SU STENANCE OF ADDITION OF RS. 14,30,025/-. 25. WE HAVE HEARD AND CONSIDERED THE ARGUMENTS ADV ANCED BY THE PARTIES IN VIEW OF ORDERS OF AUTHORITIES BELOW AND MATERIAL A VAILABLE ON RECORD. 26. IN SUPPORT OF THE GROUND (NO.3), THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. THE CONTENTION OF THE LD A. R., ON THE OTHER HAND, REMAINED THAT WHEN THE LD CIT(A) HAS HELD THE REJECTION OF B OOKS OF ACCOUNT BY THE A.O AS UNJUSTIFIED AND HAS DELETED THE SEVERAL ADDITIONS M ADE BY THE A.O ON THE BASIS OF SOME UNTENABLE DISCREPANCIES POINTED OUT IN THE BOO KS OF ACCOUNTS, HE WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 14,30, 025/- MADE ON ACCOUNT OF SHORTFALL IN PRODUCTION OF BUSHES. THE LD. A.R. REITERATED HI S SUBMISSIONS MADE HEREINABOVE IN GROUND NO. 1,IN SUPPORT OF HIS ARGUMENTS THAT TH E BOOKS OF ACCOUNTS WERE PROPERLY MAINTAINED BY THE ASSESSEE AND THAT THE LD CIT(A) HAS RIGHTLY HELD THE ACTION OF THE A.O AS UNJUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND THEREBY MAKING SEVERAL ADDITIONS. 27. IN PRECEDING PARAGRAPHS WE HAVE ALREADY DISCUSS ED IN BRIEF THE ACTION OF THE A.O IN MAKING THE ADDITIONS IN QUESTION ON ACCOUNT OF UNACCOUNTED CONSUMPTION OF MATERIAL IN RESPECT OF BEARINGS AND WASHERS AS WELL AS THE ADDITION MADE ON ACCOUNT OF SHORTFALL IN PRODUCTION OF BUSHES. WE FIND SUB STANCE IN THE CONTENTION OF LD. A.R. THAT WHEN BOOKS OF ACCOUNTS WERE PROPERLY MAI NTAINED BY THE ASSESSEE TO ENABLE THE A.O TO DEDUCE THE CORRECT INCOME OF THE ASSESSEE ON THE BASIS OF THOSE BOOKS OF ACCOUNT, THERE WAS NO REASON FOR MAKING AN Y ADDITIONS IN QUESTION. WE WOULD STILL LIKE TO EXAMINE VALIDITY OF ADDITION IN QUESTION MADE AND SUSTAINED BY THE AUTHORITIES BELOW. THE GIST OF SUBMISSION OF THE A SSESSEE AGAINST THE ADDITIONS IN ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 25 QUESTION MENTIONED IN PARA NO. 14 OF THE FIRST APP ELLATE ORDER IS BEING REPRODUCED HEREUNDER FOR A READY REFERENCE : 14. THE APPELLANT MADE DETAILED SUBMISSIONS VIDE IT S LETTER DATED 06/07/2004. THE GIST OF THE SUBMISSIONS IS AS UNDER : A) AT TIMES, A COIL OR STRIP ISSUED IS USED PARTLY FOR A PARTICULAR PRODUCT AND THE REMAINING STRIP IS CONSUMED FOR A DIFFERENT PR ODUCT. B) THE BLANKS ARE SUBJECTED TO VARIOUS PROCESSES SUCH AS MILLING, CHANNELING, STAMPING, ROLLING, FORMING, SAWING BORING, TIN PLAT ING, CLEANING, FLATTENING ETC., BEFORE THE FINAL PRODUCT IS MADE. SOME AMOUN T OF WASTAGE TAKES PLACE AT EACH STAGE. C) THE STRIP TRANSFER REPORT IS NOT THE REPORT OF ACTU AL PRODUCTION BUT A MERE MENTION OF THE TYPE OF PRODUCT AND THE LIKELY NUMB ER OF PIECES THAT COULD BE PRODUCED FROM THE STRIP. D) MAKING A COMPARISON OF THE ACTUAL PRODUCTION WITH T HE NUMBER OF BLANKS IN THE STRIP TRANSFER REPORT WOULD NOT GIVE A CORRE CT PICTURE. E) IN A NUMBER OF INSTANCES, THE STRIP TRANSFER REPORT DOES NOT MENTION THE NUMBER OF BLANKS THAT COULD BE PRODUCED. THIS WOUL D ALSO CONTRIBUTE TO THE DIFFERENCE IN ACTUAL PRODUCTION DATA. F) THE STRIP TRANSFER REPORT DOES NOT TAKE INTO ACCOUN T THE PRODUCTION OUT OF OPENING STOCK. G) SIMPLY BY FILLING UP THE BLANKS WHEREVER PRESENT IN THE STRIP TRANSFER REGISTER WITH THE PROBABLE NUMBER OF BLANKS THAT CO ULD BE PRODUCED FROM THE STRIP MENTIONED, THE FIGURES WORKED OUT AS UNDE R AFTER ADJUSTING FOR OPENING STOCK AND CLOSING STOCK OF BLANKS: ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 26 ------------------------------------------- --------------------------------------------------- -- NET QNTY. AS EXC ESS SHORTAGE PERCENTAGE QUANTITY PER BOOKS ------------------------------------------ --------------------------------------------------- -- BEARINGS 2134782 2454315 31953 3 -- -- BUSHES 3555244 3454023 -- 101221 2.84% THRUST WASHERS 1736814 17,09,590 -- 27224 1.56% --------------------------------------------- --------------------------------------------------- H) THE COMPANY MAINTAINS A BFC REGISTER WHICH SHOWS TH E QUANTITY OF BLANKS ACTUALLY USED FOR BEARINGS. THE DATA IS RECORDED M ANUALLY ON A DAILY BASIS. AS PER THIS REGISTER, TOTAL PRODUCTION OF B EARINGS WAS 2413402. BY ADJUSTING THE OPENING AND THE CLOSING STOCKS, THE N UMBER OF BEARINGS WORKS OUT TO 2467447 WHEREAS THE NUMBER OF BEARING S AS PER BALANCE SHEET IS A LITTLE LESS AT 2454315. THUS, THE DIFFE RENCE BETWEEN THE BLANKS AND THE BEARINGS IS MARGINAL I.E. 13132 OR 0.53%. I) THE APPELLANT COMPANY HAS OUTSOURCED THE PACKING OF THE PRODUCTS MANUFACTURED. MATERIAL SENT OUT FOR PACKING IS ACC OMPANIED BY CHALLAN UNDER RULE 57F(4) OF THE CENTRAL EXCISE RULES AND T HE MATERIAL RECEIVED BACK IS ENDORSED ON THE BACK OF THE CHALLAN. J) PACKER RAISES BILLS ON THE BASIS OF THE NUMBER OF P RODUCTS PACKED. ACCORDING TO THESE BILLS, THE PRODUCTION FIGURES AR E AS UNDER: A. BEARINGS 2454315 B. BUSHES 3450023 C. WASHERS 1709540 THESE FIGURES TALLY WITH THE FIGURES OF BLANKS ACCO RDING TO THE STRIP TRANSFER REGISTER AFTER FILLING UP THE BLANK COLUMN S. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 27 THE COMMENT OF THE LD CIT(A) IN PARA NO. 16 OF THE FIRST APPELLATE ORDER ON THE ISSUE IS VERY IMPORTANT WHICH IS BEING REPRODUCED HEREUND ER : 16. THE ASSESSING OFFICER IS NOT CONSISTENT IN HIS APPROACH BY CONCLUDING BOTH IN THE CASE OF SHORTAGE OF FINISHED GOODS COM PARED TO BLANKS AS WELL AS EXCESS OF BLANKS OVER FINISHED GOODS AS UNACCOUNTED PRODUCTION. IF IT IS ASSUMED THAT A LOWER PRODUCTION OF FINISHED GOODS COMPARED TO THE BLANKS IS EVIDENCE OF UNACCOUNTED PRODUCTION, THE REVERSE PO SITION WHERE FINISHED GOODS ARE HIGHER THAN THE BLANKS CANNOT LEAD TO THE SAME CONCLUSION. HOWEVER, THIS IS EXACTLY WHAT HAS BEEN DONE. IN TH E CASE OF BEARINGS AND WASHERS, THE NUMBER OF ITEMS PRODUCED IS HIGHER THA N THE NUMBER OF BLANKS ISSUED. THE ASSESSING OFFICER HAS ASSUMED THAT UN ACCOUNTED MATERIAL HAD BEEN UTILIZED FOR UNACCOUNTED PRODUCTION. AN ADDITI ON HAS BEEN MADE ON THIS ACCOUNT. THE ASSESSING OFFICER HAS NOT CONSIDERED THE FACT THAT IF THIS IS ACTUALLY THE CASE, THE APPELLANT HAS ACTUALLY DEBIT ED NO COST IN RESPECT OF HIGHER PRODUCTION OR IN OTHER WORDS, THE ENTIRE SA LE CONSIDERATION OF THESE ITEMS REPRESENTED PROFIT. IT IS DIFFICULT TO IMAGI NE THAT A BUSINESSMAN WOULD DECLARE A HIGHER PRODUCTION AND EVENTUALLY SELL OFF SUCH GOODS WHILE SUPPRESSING THE COST. WHILE IN THE REVERSE SCENARI O, WHERE THE FINISHED GOODS ARE LESS THAN THE NUMBER OF BLANKS CONSUMED, IT CAN REASONABLY BE ESTIMATED THAT THERE WAS SOME SUPPRESSION OF ITEMS PRODUCED. THE LD CIT(A) IN PARA NO. 17 HAS NOTED THAT VIDE REPLY DATED 26 TH MARCH, THE ASSESSEE HAD SUBMITTED THAT STRIPS PRODUCED ARE REC ORDED IN THE HISTORY PRODUCTION REGISTER. FROM THIS REGISTER, THE ISSUE OF STRIPS IS MADE FOR PRODUCTION OF BEARING, BUSHES AND WASHERS. THE LD CIT(A) HAS THEREAFTER NO TED THAT, THUS, IT COULD NOT BE SAID THAT NO RECORD REGARDING PRODUCTION OF STRIPS IS MAINTAINED. HE HAS FURTHER MENTIONED THAT THE ASSESSEE HAS NOT ACTUALLY EXPLAI NED THE DISCREPANCY IN NUMBERS AT THE TIME OF ASSESSMENT, WHICH WAS DUE TO LACK OF TIME, AS A PERIOD OF 3 4 DAYS ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 28 WAS NOT ENOUGH TO RECONCILE THE FIGURE ON THE BASIS OF EXAMINATION OF THE ENTIRE PRODUCTION RECORD FOR THE YEAR. THE LD CIT(A) HAS FURTHER MENTIONED THAT DURING THE APPELLATE PROCEEDINGS, SOME RECONCILIATION WAS CARRIED OUT, ON WHICH, THE A.O WAS REQUIRED TO FURNISH HIS REPORT. THE LD CIT(A) HAS FURTHER MENTIONED THAT THE A.OS REPORT DOES NOT DISPROVE THE FIGURES OR ARGU MENTS GIVEN BY THE ASSESSEE. 28. IT WAS SUBMITTED THAT THE BFC REGISTERS ACTUALL Y SHOWS THE QUANTITY OF BLANKS AND THE BEARINGS ACTUALLY PRODUCED. THE DATA IS MA NUALLY RECORDED ON A DAILY BASIS IN THESE REGISTERS. ACCORDING TO THE BFC REGISTER, THE TOTAL BEARINGS PRODUCED DURING THE YEAR WORKS OUT TO RS.24,13,402/- AND AFTER ADJU STING FOR OPENING AND CLOSING STOCK IT WORKS OUT TO RS. 24,67,447/- AS AGAINST TH E NUMBER IN THE BALANCE SHEET WHICH IS RS. 24,54,315/-. THE DIFFERENCE ACCORDING TO ASSESSEE IS ONLY 0.53%. THIS COULD BE TAKEN AS A WASTAGE OR LOSS IN PRODUCTION. IT WAS FURTHER SUBMITTED THAT THERE WAS INDEPENDENT DATA AVAILABLE WITH REGARD TO BLANKS WHICH WERE ISSUED ON PARTICULAR DATES OF PRODUCTION OF FINISHED GOODS. IT WAS POINTED OUT THAT IN THE CALCULATION, THE A.O HAS NOT ADJUSTED THE FIGURE TA KEN FROM THE STRIP TRANSFER REGISTER WITH THE OPENING AND CLOSING STOCK OF BLANKS. HE H AS ALSO NOT CONSIDERED THE REJECTION AND WASTAGE FIGURES WHICH ARE INEVITABLE IN ANY PRODUCTION PROCESS. IT WAS OBSERVED BY THE LD CIT(A) THAT AFTER ADJUSTMENTS OF CLOSING AND OPENING STOCK AND AFTER FILLING IN THE BLANKS WITH RELEVANT FIGURES, THERE IS A SLIGHT REDUCTION IN THE ALLEGED EXCESS PRODUCTION IN BEARINGS BUT IN THE CA SE OF 2 ITEMS, I.E. BUSHES AND WASHERS, THERE IS A SHORTAGE, WHEREAS IN THE WORKIN G MADE BY THE A.O, THERE WAS AN EXCESS PRODUCTION OF WASHERS AS WELL AS FOR BEAR INGS. 29. A COMPARATIVE ANALYSIS OF THE FIGURES AS PER TH E STRIP TRANSFER REGISTER, AFTER MAKING THE NECESSARY ADJUSTMENTS AND THE FIGURES A S PER BFC REGISTER (BEARINGS), THE RESULTS REPRODUCED BY THE LD CIT(A) AT PAGE NO . 12 OF THE FIRST APPELLATE ORDER HAS BEEN SHOWN AS UNDER : ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 29 -------------------------------------------------- --------------------------------------------------- - BLANKS FO R BLANKS FOR BLANKS FOR BEARINGS BUSHES WASHERS STR BLANKS 21,10,877 35,68,425 14,63,406 CORRECTED STR 21,34,782 35,55,244 17,36,814 BFC 24,67,447 -- -- PRODUCTION 24,54,315 34,54,023 17,09,590 DIFFERENCE AS PER ASST ORDER 3,43,438 (-)1,14,402 2,46,181 AS PER CORRECTED STR 3,19,533 (-)1,01,221 (-) 27,224 AS PER BFC REGISTER 13,132 -- -- --------------------------------------------------- --------------------------------------------------- THE LD CIT(A) NOTED THAT THE DIFFERENCE FOUND IN TH E CASE OF BEARINGS IS ALMOST REDUCED TO NIL IF THE BFC FIGURES ARE TAKEN INTO A CCOUNT. AS REGARDS WASHERS, HE OBSERVED THAT IF THE CORRECT FIGURES OF THE STRIP TRANSFER REGISTER ARE TAKEN, THE EXCESS PRODUCTION ACTUALLY TURNS INTO A SHORTAGE. IN THE CASE OF BUSHES, HOWEVER, HE NOTED THAT THE DIFFERENCE OR THE SHORTFALL IN PR ODUCTION IS ONLY SLIGHTLY REDUCED AFTER MAKING NECESSARY ADJUSTMENTS OF THE FIGURES I N THE STRIP TRANSFER REGISTER. THE LD CIT(A) DID NOT ACCEPT THE EXPLANATION OF TH E ASSESSEE IN THIS REGARD THAT THE STRIPS OF THE BLANK ARE SOMETIMES DIVERTED FOR OTHER PRODUCTS. THE LD CIT(A) HAS THUS DELETED THE ADDITION OF RS. 58,77,423/- M ADE ON ACCOUNT OF UNACCOUNTED CONSUMPTION OF MATERIAL IN RESPECT OF BEARINGS AND WASHERS. HE HAS, HOWEVER, SUSTAINED THE ADDITION OF RS. 14,30,025/- MADE ON A CCOUNT OF SHORTFALL IN PRODUCTION OF BUSHES. 30. AS DISCUSSED IN THE PRECEDING PARAGRAPHS, THE R EVENUE HAS NOT BEEN ABLE TO REBUT THE BASIS ON WHICH THE LD CIT(A) HAS DELETED THE ADDITION OF RS. 58,77,423/- MADE IN RESPECT OF UNACCOUNTED CONSUMPTION OF MATER IAL FOR BEARINGS AND WASHERS. WE THUS DO NOT FIND REASON TO INTERFERE WITH THE FI RST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD. THE GROUND NO. 3 IS THUS REJEC TED. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 30 31. SO FAR AS ADDITION OF RS. 14,30,025/- MADE AND SUSTAINED ON ACCOUNT OF SHORTFALL IN PRODUCTION OF BUSHES (QUESTIONED IN C. O. NO. 45/PN/08) IS CONCERNED, THE CONTENTION OF THE LD. A.R REMAINED THAT THE A.O HAD MADE THE ADDITION ON THE PRESUMPTION THAT THE ASSESSEE MIGHT HAVE SOLD SOME PRODUCTION OUTSIDE THE BOOKS. THE LD CIT(A) HAS CATEGORICALLY OBSERVED THAT THE A .O WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD NOT PRODUCED THE BOOKS BEFORE THE A.O AND HELD THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESSEE BY HIM AS UNJU STIFIED.. THE FURTHER CONTENTION OF THE LD A.R REMAINED THAT FIGURE OF BLANKS IN TH E STR REGISTER IS AN APPROXIMATE FIGURE FOR PARTICULAR TYPE OF BLANKS AND ACTUALLY I N THE PRODUCTION DEPARTMENT, THE BI- METAL ROLLS ARE USED FOR PRODUCING DIFFERENT TYPE O F BLANKS AND HENCE, THE FIGURE OF BLANKS PRODUCED CANNOT TALLY WITH THE ESTIMATED FI GURES OF BLANKS IN THE STR REGISTER. THUS, THE PRODUCTION SHOWN IN RESPECT OF BEARINGS AND WASHERS IS MORE THAN THE PRODUCTION OF BLANKS AS PER THE STR REGI STER. THIS SHOWS THAT ASSESSEE DID NOT HAVE ANY INTENTION TO SUPPRESS THE PROFIT. IT WAS SUBMITTED THAT RECORD OF THE ASSESSEE ARE PROPERLY MAINTAINED INCLUDING THE DAY TO DAY PRODUCTION REGISTER AND ALSO OF SALES, AND PURCHASES ARE VOUCHED WHICH ARE SUBJECT TO CHECKING BY THE EXCISE DEPARTMENT AND NO DEFECTS HAVE BEEN POINTED OUT THEREIN BY THEM. 32. IT WAS SUBMITTED THAT THE EXCESS/SHORTAGE IN TH E MANUFACTURING OPERATION IS A NORMAL PHENOMENA. IN ABSENCE OF SPECIFIC REBUTTA L OF THIS MATERIAL SUBMISSION OF THE LD. A.R., WE ARE OF THE VIEW THAT THE ADDITION OF RS. 14,30,025/- MADE ON ACCOUNT OF SHORTFALL IN PRODUCTION OF BUSHES SUSTAI NED BY THE LD CIT(A) IS NOT CALLED FOR ESPECIALLY WHEN THE LD CIT(A) HAS ALSO CONCURRE D WITH THE CONTENTION OF THE ASSESSEE THAT BOOKS OF ACCOUNT WERE PROPERLY MAINTA INED BY THE ASSESSEE AND THAT THE A.O WAS NOT JUSTIFIED IN REJECTING THE SAME. 33. IN RESULT ADDITIONAL OBJECTIONS (RAISED IN C.O. NO. 45/PN/2008) ARE ALLOWED. GROUND NO. 4 ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 31 34. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDE R WHEREBY THE LD CIT(A) HAS GRANTED RELIEF OF RS. 1,82,000/- ON ACCOUNT OF DISC OUNT, RS. 25,39,883/- ON ACCOUNT OF COUPON ENCASHMENT AND RS. 6,00,000/- ON ACCOUNT OF MARKET EXPENSES. 35. WE HAVE HEARD AND CONSIDERED ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF AUTHORITIES BELOW AND MATERIAL AVAILABLE ON RECORD. 36. THE A.O DISALLOWED DISCOUNT OF RS. 1,82,208/- F OR DISCREPANCY BETWEEN THE DISCOUNT AMOUNT CLAIMED AT RS. 14,91,057 AND DETAIL S THEREOF GIVEN IN ANNEXURE 15 ONLY TO THE EXTENT OF RS. 13,08,849/- 37. THE A.O ALSO DISALLOWED COUPON ENCASHMENT EXPEN SES OF RS. 25,39,883/- AS UNVERIFIABLE IN THE ABSENCE OF ADDRESSES IN THE LIS T FURNISHED. 38. THE A.O ALSO DISALLOWED MARKET EXPENSES OF RS. 6,00,000/- OUT OF RS. 12,00,000/- PAID TO MENON PISTONS LTD., A SISTER CO NCERN AS UNREASONABLE EXPENSES. 39. THE LD CIT(A) HAS DELETED THE ADDITION OF RS. 1 ,82,208/- MADE OUT OF THE CLAIMED DISCOUNT AMOUNT ACCEPTING THE EXPLANATION O F THE ASSESSEE IN THIS REGARD. THE ASSESSEE EXPLAINED THAT THE DETAILS OF RS. 13,0 8,849/- GIVEN WERE FOR DISCOUNT IN RESPECT OF BEARINGS, BUSHES AND WASHERS DIVISION O F THE ASSESSEE. THE BALANCE OF DISCOUNT EXPENSES OF RS. 1,82,208/- PERTAINS TO THE CYLINDER TRADING DIVISION OF THE ASSESSEE WHICH EXPENSES WERE DEBITED TO THAT DIVISI ON ACCOUNT. THE DETAILS OF THE SAID EXPENSES OF RS. 1,82,202/- WERE FURNISHED BEFO RE THE LD CIT(A). THE SUBMISSION OF THE ASSESSEE REMAINED THAT THE DETAI LS OF THE DISCOUNT EXPENSES OF RS. 1,82,208/- WAS FORWARDED BY THE LD CIT(A) TO TH E A.O FOR HIS COMMENT. THE A.O. FURNISHED HIS REMAND REPORT TO THE LD CIT(A), THE A.O. ONLY VOICED HIS GRIEVANCES THAT THESE DETAILS WERE NOT GIVEN TO HI M DURING THE ASSESSMENT ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 32 PROCEEDINGS AND HENCE THE NEW EVIDENCE SHOULD NOT B E ENTERTAINED. THE LD CIT(A) HAS OBSERVED THAT THE DETAILS GIVEN DOES NOT CONST ITUTE NEW EVIDENCE. HE FOUND THE DIFFERENCE FOR WHICH THE ADDITION WAS MADE BY T HE A.O WAS PROPERLY EXPLAINED. THE LD CIT(A) HAS DEALT WITH THIS ISSUE IN PARA NO S. 35 TO 40 ON PAGE NOS. 17 & 18 OF THE FIRST APPELLATE ORDER. WE DO NOT FIND INFIR MITY IN THE ACTION OF LD CIT(A) IN DELETING THE ADDITION OF RS.1,82,208/- UNDER THE AB OVE DISCUSSED FACTS AND CIRCUMSTANCES. THE FIRST APPELLATE ORDER IN THIS R EGARD IS THUS UPHELD. 40. THE A.O DISALLOWED COUPON ENCASHMENT EXPENSES O F RS. 25,39,883/- AS UNVERIFIABLE IN THE ABSENCE OF ADDRESSES IN THE LIS T FURNISHED. THE LD CIT(A) HAS DELETED THE SAME WITH THIS OBSERVATION THAT DURING THE REMAND PROCEEDINGS, THE ASSESSEE FURNISHED A FULL LIST OF THE COUPON ENCASH MENT WITH NAMES AND ADDRESSES TO THE A.O UNDER ITS LETTER DT. 7.12.2004 (COPY MAD E AVAILABLE AT PAGE NOS. 241 TO 245 OF THE PAPER BOOK). THE A.O IN HIS REMAND REPO RT CLAIMED THAT FULL ADDRESSES WERE NOT FURNISHED. THE A.O, HOWEVER, MADE VERIFIC ATION OF ONE OF THE PAYMENT OF RS.2,21,420/- AND FOUND IT TO BE GENUINE. LTD. CIT (A) HAS OBSERVED THAT THE REMAND REPORT WAS SUBMITTED ON 27.9.2006 BUT THE A .O DID NOT AVAIL THE OPPORTUNITY TO VERIFY THE OTHER PAYMENTS. THE LD C IT(A) AFTER CONSIDERING THE MERITS OF THE A.OS REMAND REPORT, HELD THAT THE CO UPONS ENCASHMENT EXPENSES ARE REASONABLE AS COMPARED TO EARLIER YEARS, THAT THESE DID NOT INCLUDE EXPENSES TO SALES OF EARLIER YEARS AND IN THE CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE WAS NOT JUSTIFIED AND HE HAS DELETED IT. THE LD CIT(A) HAS PASSED A DETAILED ORDER ON THE ISSUE IN PARA NOS. 46 TO 50 ON PAGE NOS. 21 TO 23 O F THE FIRST APPELLATE ORDER. THE FIRST APPELLATE ORDER IN THIS REGARD IS COMPREHENSI VE AND REASONED ONE, HENCE WE ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD. 41. THE A.O DISALLOWED MARKET EXPENSES OF RS. 6,00, 000/- OUT OF RS. 12,00,000/- PAID TO MENON PISTONS , A SISTER CONCERN, AS UNREAS ONABLE EXPENSES. THE LD CIT(A) HAS DELETED THE SAME. THE EXPLANATION OF THE ASSE SSEE IN THIS REGARD REMAINED ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 33 THAT THE ASSESSEE HAD USED MARKETING NET WORK OF ME NON PISTON LTD., TO MARKET ITS PRODUCT FOR WHICH THE CLAIMED EXPENSES WAS INCURRED VIDE AN AGREEMENT WITH MENON PISTONS. A.O DID NOT DISPUTE THIS FACT. THE A.O FELT THAT THE SISTER CONCERN OF MENON PISTON MIGHT HAVE UTILIZED FREE OF CHARGE THE SERVICES OF THE EMPLOYEES OF THE ASSESSEE FOR ITS OWN BUSINESS. IN THE REMAND REPO RT, THE A.O HAS ACCEPTED THAT THE ASSESSEE COMPANY DOES NOT HAVE ANY MARKETING INFRAS TRUCTURE OF ITS OWN. THE LD CIT(A) HAS HELD THAT THE A.OS ALLEGATION THAT THE SERVICES OF ASSESSEES EMPLOYEES MIGHT HAVE BEEN UTILIZED BY THE SISTER CONCERN MENO N PISTONS WAS WITHOUT ANY BASIS AND EVIDENCE. HE FOUND THAT THE MARKETING EXPENSES HAVE BEEN PAID TO THE SISTER CONCERN MENON PISTON AT THE AGREED RATE AS PER THE WRITTEN AGREEMENT, A COPY WHEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 218 TO 220 OF THE PAPER BOOK. IN VIEW OF THIS FACT, A PARTIAL DISALLOWANCE OF THE M ARKETING EXPENSES MADE AT RS. 6,00,000/- HAS BEEN DELETED BY THE LD CIT(A). WE FIND THAT THE LD CIT(A) HAS PASSED A DETAILED ORDER IN THIS REGARD IN PARA NOS. 46 TO 50 AT PAGE NOS. 21 TO 23 OF THE FIRST APPELLATE ORDER WHICH IS COMPREHENSIVE AN D REASONED ONE. UNDER THESE CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFERE WIT H THE FIRST APPELLATE ORDER IN THIS REGARD. GROUND NO. 5 42. THE A.O DISALLOWED RS. 4,85,055/-, THE CLAIMED DEDUCTION U/S. 80IB ON THE SALE OF SCRAPS, WHICH HAS BEEN ALLOWED BY THE LD. C IT(A). 43. IN THIS REGARD, WE ALSO FIND STRENGTH FROM TH E FOLLOWING DECISIONS RELIED UPON BY THE LD. A.R. TO JUSTIFY THE ACTION OF THE LD. CI T(A) : 1) ACIT V/S. MAXCARE LABORATORIES LTD., 92 ITD 11 (CUTTACK) 2) ITO V/S. KIRAN ENTERPRISES, 92 TTJ 104 (CHD.) 3) DCIT V/S. HARJIVANDAS JOOTABHAI ZAVERI & OTHERS , 258 ITR 785 (GUJ) 4) DCIT V/S. CORE HEALTHCARE LTD., 308 ITR 263 (GU J) ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 34 5) ACIT V/S. BIOTECH MEDICALS PVT. LTD., 119 ITD 1 43 (HYD.) IN THE ABSENCE OF ANY DISSENTING DECISION, WE DO NO T FIND INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS REGARD. THE SAME IS UPHELD . THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF CUMMINS INDIA LTD. V/S DCIT, ITA NO. 1700/PN/2004, ORDER DATED 22 ND JUNE 2007 (COPY SUPPLIED) HAS HELD THAT SALE OF SC RAP IS INHERENT PART OF THE BUSINESS OF THAT ASSESSEE AND CANNOT BE DIVORCED T HERE-FROM AND TREATED AS UNRELATED TO THE MAIN BUSINESS ACTIVITY OF THE ASS ESSEE. IN THE CASE OF FEENER INDIA LTD. V/S. CIT, 241 ITR 803 (MAD.), IT IS HELD THAT SALE OF SCRAP GENERATED IN MANUFACTURING PROCESS IS TO BE TAKEN AS INCOME DERI VED FROM THE INDUSTRIAL UNDERTAKING. APPLYING THE SAID RATIO OF DECISION W E ARE OF THE VIEW THAT THE LD CIT(A) WAS ALSO JUSTIFIED IN ALLOWING THE CLAIMED D EDUCTION ON THE PROFIT EARNED OUT OF SALE OF SCRAPS/EMPTY BARRELS. THE FIRST APPELLA TE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUND NO. 5 IS THUS REJECTED. 44 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. C.O. NO. 45/PN/2008 45. THE ASSESSEE HAS OBJECTED THE FIRST APPELLATE O RDER MAINLY ON THE BASIS THAT LD CIT(A) HAS ERRED IN NOT ALLOWING CLAIMED DEDUCTI ON U/S. 80IB OF RS. 17,49,427/- IN RESPECT OF INTEREST INCOME ON FIXED DEPOSITS WIT H BANKS. 46. BESIDES ABOVE, THE ASSESSEE HAS ALSO MOVED AN A PPLICATION FOR ALLOWING THE ADJUDICATION OF THE FOLLOWING ADDITIONAL OBJECTIONS : 1] THE LEARNED CIT(A) ERRED IN SUSTAINING THE ADDI TION OF RS. 14,30,025/- ON ACCOUNT OF SHORT FALL IN THE PRODUCTION OF BUSHE S. 2] FURTHER, THE LEARNED CIT(A) FAILED TO APPRECIAT E THAT :- ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 35 A. IN THE STR REGISTER, THE NUMBER OF BLANKS WAS N OTED ON AN APPROXIMATE BASIS AND THE SAME COULD NOT BE CONSIDE RED TO BE THE ACTUAL QUANTITY PRODUCED. B. IN THE MANUFACTURING OPERATION, THERE WAS ALWAY S A WASTAGE AND HENCE, IT WAS GROSSLY INCORRECT TO HOLD THAT TH E NUMBER OF BUSHES TO BE MANUFACGTURED MUST BE EQUAL TO THE NUMBER OF BLANKS IN THE STR REGISTER. C. THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY W ERE NOT DEFECTIVE AND HENCE, THERE WAS NO REASON TO MAKE AN Y ADDITION. 3] THE RESPONDENT SUBMITS THAT IT HAS MAINTAINED ALL THE RECORDS PROPERLY AND THEY ARE SUBJECT TO THE CHECK BY THE EXCISE AUT HORITIES AND HENCE, NO SUCH ADDITION IS REQUIRED TO BE MADE IN ITS HAN DS. 47. IN SUPPORT OF THE ABOVE APPLICATION, THE LD. A. R. SUBMITTED THAT THE ISSUE RAISED THEREIN GOES TO THE ROOT OF THE MATTER AND ADJUDICATION OF WHICH DOES NOT REQUIRE CONSIDERATION OF FRESH MATERIAL OUTSIDE THE RECORD. IN THIS REGARD, HE CITED THE FOLLOWING DECISIONS : 1. NATIONAL THERMAL POWER CO. LTD. VS. CIT (1998), 22 9 ITR 383 (SC) 2. AHMEDABAD ELECTICITY CO. LTD. VS. ORA. (1993 199 ITR 351 (BOM) (FB). 48. THE LD. D.R. OBJECTED THE ABOVE ADDITIONAL OBJE CTION/ADDITIONAL GROUND BY THE ASSESSEE FOR THE ADJUDICATION OF THE TRIBUNAL ON TH E BASIS THAT THESE HAVE BEEN RAISED AT A BELATED STAGE BEFORE THE TRIBUNAL. 49. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THA T THE ISSUE RAISED IN THE ABOVE ADDITIONAL OBJECTIONS/GROUNDS IS CONFINED TO THE SOLE QUESTION AS TO WHETHER THE LD CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDIT ION OF RS.14,30,025/- ON ACCOUNT OF SHORTFALL IN THE PRODUCTION OF BUSHES. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THIS ISSUE WAS ALRE ADY ADDRESSED UPON BY THE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 36 AUTHORITIES BELOW, HOWEVER, THE ASSESSEE HAD NOT RA ISED THIS OBJECTION AT THE TIME OF FILING OF ITS CROSS OBJECTION. IT IS ALSO AN UNDIS PUTED FACT THAT ADJUDICATION OF THE ISSUE DOES NOT NEED CONSIDERATION OF FRESH MATERIAL OUTSIDE THE RECORD. WE THUS ALLOW THE ADJUDICATION OF THE ADDITIONAL OBJECTION/ GROUND RAISED FOR THE ADJUDICATION OF THE BENCH TO MEET OUT THE END OF JUSTICE. 50. THE FIRST OBJECTION IS REGARDING DENIAL OF THE CLAIMED DEDUCTION U/S. 80 IB OF RS. 17,49,427/- IN RESPECT OF INTEREST INCOME ON FI XED DEPOSITS WITH BANKS. 51. THE RELEVANT FACTS ARE THAT THE A.O DID NOT ALL OW THE CLAIMED DEDUCTION U/S. 80 IB IN RESPECT OF INTEREST ON FIXED DEPOSIT OF R S. 39,43,911/- WITH BANK. THE LD CIT(A) HAS UPHELD THE SAME ON THE BASIS THAT INTER EST INCOME FROM DEPOSITS IN THE BANKS FOR OBTAINING LETTERS OF CREDIT CANNOT BE SAI D TO BE DERIVED FROM THE EXPORTS BUSINESS AND THEREFORE, NOT ENTITLED TO EXEMPTION AS HELD IN THE CASE OF CIT VS. MENON IMPEX PVT. LTD., 259 ITR 403 (MAD.). THE LD CIT(A) HAS ALSO CITED OTHER DECISION IN SUPPORT. THE CONTENTION OF THE LD A.R. BEFORE US, HOWEVER, IS THAT ONLY THE NET INTEREST SHOULD BE TAXED AND NOT THE GROSS INTEREST SINCE THERE IS NEXUS BETWEEN THE EXPENDITURE INCURRED AND INTEREST EARNE D. IN SUPPORT, HE REFERRED PAGE NO. 265 AND 266 OF THE PAPER BOOK I.E. COPY OF A LETTER FROM THE BANK TO THE EFFECT THAT THE SOURCES OF FIXED DEPOSITS WERE FRO M THE CC ACCOUNT. IN THIS REGARD, THE LD. A.R ALSO CITED THE DECISION OF PUNE BENCH O F THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCIATE VS. JCIT, ITA NO. 1417/PN/206, A. Y. 2003-04, ORDER DT. 27 TH APRIL 2011 (COPY SUPPLIED) ON AN IDENTICAL ISSUE. 52. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTI FY THE FIRST APPELLATE ORDER. 53. HAVING GONE THROUGH THE CITED DECISION OF THE P UNE BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT (SUPRA), WE FIND THAT ON AN IDENTICAL ISSUE THE TRIBUNAL AGREEING WITH THE CONTENTION OF THE A SSESSEE THAT THE QUANTUM OF ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 37 INTEREST INCOME FOR THE TAX PURPOSE HAS TO BE DETER MINED IN ACCORDANCE WITH THE COMPUTATION PROVISION BY ALLOWING THE EXPENDITURE INCURRED BY WAY OF INTEREST WHICH BEARS NEXUS WITH THE INTEREST RECEIVED, THE M ATTER HAS BEEN SET ASIDE TO THE FILE OF THE A.O TO DECIDE THE ISSUE AFRESH AFTER A FFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO ESTABLISH NEXUS BETWEEN THE RECE IPT AND PAYMENT AS PER DETAILS MADE AVAILABLE. FOLLOWING THE SAID DECISION, IN TH E PRESENT CASE BEFORE US, WE SET ASIDE THE MATTER TO THE FILE OF THE A.O TO DECIDE T HE ISSUE AFRESH AS DIRECTED IN THE CASE OF BRAHMA ASSOCIATE VS JCIT (SUPRA) WHILE GIV ING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO ESTABLISH NEXUS BETWEEN THE RECE IPT AND PAYMENTS AS PER THE DETAILS MADE AVAILABLE BY THE ASSESSEE BEFORE HIM, AND IF THE ASSESSEE SUCCEEDS IN ESTABLISHING THE NEXUS THEN TAX THE NET INCOME ONLY .. THE OBJECTION IS THUS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ADDITIONAL OBJECTION/GROUND 54 WE HAVE ALREADY DEALT WITH THE ISSUE RAISED HERE INABOVE WHILE DEALING WITH THE CONNECTED GROUND NO.3 OF THE APPEAL (ITA NO. 46 8/PN/2007 PREFERRED BY THE REVENUE ) IN PARAS 30 AND 31. FOLLOWING THE DECIS ION TAKEN THEREIN, WE DIRECT THE A.O TO DELETE THE ADDITION OF RS. 14,30,025/- MADE ON ACCOUNT OF SHORTFALL IN THE PRODUCTION OF BUSHES AS LD CIT(A) HAS FAILED TO AP PRECIATE THAT IN THE STR REGISTER, THE NUMBER OF BLANKS WAS NOTED ON AN APPROXIMATE BA SIS AND THE SAME COULD NOT BE CONSIDERED TO BE THE ACTUAL QUANTITY PRODUCED. IT IS ALSO AN UNDISPUTED FACT THAT IN THE MANUFACTURING OPERATION, THERE IS ALWAYS A W ASTAGE AND HENCE IT WAS INCORRECT TO HOLD THAT THE NUMBER OF BUSHES TO BE MANUFACTURED MUST BE EQUAL TO THE BLANKS IN THE STR REGISTER. THE BOOKS OF ACCOU NT OF THE ASSESSEE COMPANY WERE ALSO PROPERLY MAINTAINED AND THEY WERE SUBJECT TO T HE CHECK UP BY THE EXCISE AUTHORITIES AND NO DEFECT WAS FOUND BY THEM THEREIN . THE ADDITIONAL OBJECTION/GROUND IS ACCORDINGLY ALLOWED. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 38 55. IN RESULT, CROSS OBJECTION IS ALLOWED. ITA NO. 881/PN/2008, 882/PN/2008 & 883/PN/2008 56. IN THESE APPEALS, THE REVENUE HAS QUESTIONED FI RST APPELLATE ORDER ON THE FOLLOWING GROUNDS THAT THE LD CIT(A) HAS ERRED IN : 1. HOLDING THAT THE BOOKS OF ACCOUNTS AS PROPER THOUGH THE A.O HAS RIGHTLY POINTED OUT THAT NUMBER OF DEFECTS IN THE BOOKS OF ACCOUNT RENDERING THEM LIABLE FOR REJECTION ; 2. GRANTING RELIEF ( OF RS. 21,09,852/- IN A.Y. 2000-0 1, RS.11,29,180/- IN A.Y. 2002-03 AND RS. 33,89,913/- IN A.Y. 2005-06) ON PRO DUCTION ; AND LASTLY 3. ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S. 80 IA/8 0 IB ON INCOME FROM SCRAP SALES. 57. IN SUPPORT OF THE ABOVE GROUNDS, THE LD. D.R. HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER AND HAS ADOPTED THE SAME AR GUMENTS ADVANCED BY HIM ON IDENTICAL ISSUE HEREINABOVE IN ITA NO. 468/PN/2007. THE LD. A.R. HAS ALSO ADOPTED THE SAME ARGUMENTS AS ADVANCED BY HIM IN THE SAID A PPEAL FOR THE A.Y. 2001-02. HE ALSO SUBMITTED THAT NO NEW FACTS ARE THERE DURIN G THE A.YS. 2000-01, 2002-03 AND 2005-06 , FOR WHICH, LD CIT(A) HAS PASSED A COM MON ORDER. GROUND 1, 2 & 3 58. DURING THE YEARS UNDER CONSIDERATION, THE ASSES SMENT HAS BEEN FRAMED U/S. 147 R.W.S. 143(3) OF THE ACT. THE RE-OPENING PROCE EDINGS WERE INITIATED ON THE BASIS OF ADDITION MADE IN THE A.Y. 2001-02 ON ACCOU NT OF UNACCOUNTED PRODUCTION/SALES AND UNACCOUNTED CONSUMPTION OF MAT ERIAL. THE OTHER REASONS NOTED ARE THAT IN THE A.Y. 2003-04, ADDITION ON ACC OUNT OF ESTABLISHMENT CHARGES PAID TO SISTER CONCERN WAS UPHELD BY THE LD CIT(A) AND IN THE A.Y. 2000-01, THE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 39 EXCESS DEDUCTION U/S. 80 I (4) WAS ALLOWED. THE BO OKS OF ACCOUNT HAVE BEEN REJECTED BY THE A.O MAINLY ON THE GROUND THAT QUAN TITY OF BLANKS PRODUCED WAS MUCH HIGHER THAN THE NUMBER OF ITEMS SHOWN AS PROD UCED IN THE FINAL ACCOUNTS AND THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE WI TH EVIDENCE. THE A.O. WAS NOT SATISFIED WITH THE RECONCILIATION AND EXPLANATION FURNISHED BY THE ASSESSEE TOWARDS THE ALLEGED DIFFERENCE SINCE THE SAME WERE NOT SUPP ORTED WITH EVIDENCE. THE A.O, THUS, REJECTED THE BOOKS OF ACCOUNT AND FRAMED THE ASSESSMENT RESULTING INTO SEVERAL ADDITIONS. ONE OF THOSE ADDITIONS WAS ADDIT ION MADE ON ACCOUNT OF UNACCOUNTED PRODUCTION. THE SAME HAS BEEN DELETED BY THE LD CIT(A) AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. THE REVENUE HAS ALSO QUESTIONED THE ACTION OF THE LD CIT(A) IN ALLOWING THE CLAIMED DEDUCTION U/S. 80IA/80 IB, INCOME FROM SCRAP SALES. 59. THE LD CIT(A) AFTER DISCUSSION THE CASE IN DET AIL HAS ALSO HELD THAT THE BOOKS OF ACCOUNTS WERE PROPERLY MAINTAINED, HENCE THE A.O WAS NOT JUSTIFIED IN REJECTING THE SAME AND MAKING ADDITIONS ON ESTIMATION BASIS. ALL THESE ABOVE ISSUES UNDER SIMILAR FACTS AND CIRCUMSTANCES HAVE BEEN DECIDED B Y US HEREINABOVE IN ITA NO. 468/PN/2007 PREFERRED BY THE REVENUE IN A.Y. 2001- 02. THE LD CIT(A) HAS DEALT WITH THESE ISSUES IN DETAIL IN THAT A.Y. 2001-02. WE HAVE ALSO DISCUSSED THESE ISSUES IN DETAIL WHILE ADJUDICATING THE SAME. WE T HUS FOLLOWING THE DECISION TAKEN THEREIN ON THESE IDENTICAL ISSUES UPHOLD THE ACTION OF THE LD CIT(A) IN HOLDING THAT THE BOOKS OF ACCOUNTS HAVE BEEN PROPERLY MAINTAINED BY THE ASSESSEE AND THERE WAS NO OCCASION ON THE PART OF THE A.O TO REJECT THE SAME AND TO MAKE ADDITION ON ACCOUNT OF UNACCOUNTED PRODUCTION. WE HAVE ALSO UP HELD THE DECISION OF THE LD CIT(A) IN ALLOWING THE CLAIMED DEDUCTION U/S. 80IA ON INCOME FROM SCRAP SALE. WE THUS DO NOT FIND REASON TO INTERFERE WITH THE FIRS T APPELLATE ORDER DURING THE YEARS UNDER CONSIDERATION ON THE ISSUES. THE SAME IS UPH ELD. THE GROUND NO.1, 2 AND 3 ARE THUS REJECTED. IN RESULT APPEALS ARE DISMISSED. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 40 ITA NO. 469/PN/2007 AND C.O. NO. 44/PN/2008 60. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDE R ON THE GROUNDS THAT THE LD CIT(A) HAS ERRED IN : 1) HOLDING THE BOOKS OF ACCOUNT AS PROPER THOUGH THE A .O HAD RIGHTLY POINTED OUT NUMBER OF DEFECTS IN THE BOOKS OF ACCOUNTS REND ERING THEM LIABLE FOR REJECTION; 2) GROUND GRANTING RELIEF OF RS. 38,76,166/- IN RESPEC T OF ADDITION MADE ON ACCOUNT OF UNACCOUNTED PRODUCTION OF RS. 58,64,102/ - ; AND 3) ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S. 80IA/ I B OF THE ACT IN RESPECT OF INCOME FROM SCRAP SALE, EMPTY BARREL SALE. GROUND NOS. 1 & 2 61. THE ASSESSEE HAS OBJECTED THE FIRST APPELLATE O RDER MAINLY ON THE BASIS THAT THE LD CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM O F THE ASSESSEE TO ALLOW DEDUCTION U/S. 80IB IN RESPECT OF INTEREST INCOME ON FIXED D EPOSITS WITH BANKS AMOUNTING TO RS. 49,01,921/-. IN ALTERNATIVE, IT HAS BEEN CONTE NDED THAT EXCLUSION OF INTEREST INCOME FOR THE PURPOSE OF DEDUCTION U/S. 80IB BE RE STRICTED TO THE NET AMOUNT OF INTEREST INCOME OF RS.12,61,484/-. 62. BESIDES, THE ASSESSEE HAS ALSO MOVED APPLICATIO N FOR ALLOWING THE ASSESSEE TO RAISE THE FOLLOWING ADDITIONAL CROSS OBJECTIONS AND ADJUDICATION OF THE BENCH : 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE WAS TAGE/REJECTION OF 2% IS REASONABLE AND THE ADDITION SHOULD BE MADE FOR THE WASTAGE/REJECTION ABOVE THE LEVEL OF 2%. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 41 2] FURTHER, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT:- A. IN THE STR REGISTER, THE NUMBER OF BLANKS WAS NOTED ON AN APPROXIMATE BASIS AND THE SAME COULD NOT BE CONSIDE RED TO BE THE ACTUAL QUANTITY PRODUCED. B. IN THE MANUFACTURING OPERATION, THERE WAS ALWAYS A WASTAGE AND HENCE, IT WAS GROSSLY INCORRECT TO HOLD THAT THE NU MBER OF BUSHES TO BE MANUFACTURED MUST BE EQUAL TO THE NUMBER OF B LANKS IN THE STR REGISTER. 3] THE RESPONDENT SUBMITS THAT IT HAS MAINTAINED AL L THE RECORDS PROPERLY AND THEY ARE SUBJECT TO THE CHECK BY THE EXCISE AUT HORITIES AND HENCE, NO SUCH ADDITION IS REQUIRED TO BE MADE IN ITS HAND S. IN SUPPORT OF THE ABOVE APPLICATION, THE LD A.R. S UBMITTED THAT THE ISSUE RAISED IN THE ADDITIONAL CROSS OBJECTION IS BASED UPON THE MA TERIAL ALREADY AVAILABLE ON RECORD AND ALREADY DEALT BY THE AUTHORITIES BELOW. IT AL SO GOES TO THE ROOT OF THE MATTER AFFECTING THE MAIN ADDITION MADE AND SUSTAINED BY T HE AUTHORITIES BELOW ON ACCOUNT OF EXCESS PRODUCTION, HENCE THE SAME MAY BE ALLOWED FOR ADJUDICATION OF THE BENCH. 63. THE LD. D.R. OPPOSED THE ABOVE APPLICATION. 64. WE FIND THAT THE ADJUDICATION OF THE ISSUE RAI SED IN THE ABOVE ADDITIONAL CROSS OBJECTION DOES NOT NEED CONSIDERATION OF ANY FRESH MATERIAL OUTSIDE THE RECORD AND THE ASSESSEE IS ACTUALLY AGGRIEVED BY THE ACTION O F THE AUTHORITIES BELOW WHILE DEALING WITH THE ISSUE. WE THUS TO MEET THE END O F JUSTICE, ALLOW THE ADJUDICATION OF THE ISSUE RAISED IN THE ABOVE ADDITIONAL CROSS O BJECTION. GROUND NOS. 1 & 2 (REVENUE) AND ADDITIONAL CROSS OB JECTIONS (ASSESSEE) 65. THE RELEVANT FACTS ARE THAT THE A.O REJECTED TH E BOOKS OF ACCOUNTS FOR DEFECTS SIMILAR TO THOSE POINTED OUT IN THE A.Y. 2001-02 IN PARA NOS. 7.1 AND 7.2 OF THE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 42 ASSESSMENT ORDER. FOR THE REASONS GIVEN IN THE FIR ST APPELLATE ORDER FOR THE A.Y. 2001-02, THE LD. CIT(A) HELD THAT THE A.O WAS NOT J USTIFIED IN REJECTING THE BOOKS OF ACCOUNTS. THE RELEVANT PARA NOS. OF THE FIRST APPE LLATE ORDER ARE 6, 7 & 8. 66. BY REJECTING THE BOOKS OF ACCOUNTS, THE A.O HAS MADE ADDITIONS FOR ALLEGED EXCESS PRODUCTION OF BEARING, BUSHES AND WASHERS ON THE BASIS OF REASONABLENESS OF THE PRODUCTION OF END PRODUCTS FROM BLANKS OBTAINE D FROM CUTTING COILED STRIPS. THE LD CIT(A) HAS ALSO CONSIDERED THE SIMILAR MATERIAL FOR CONSIDERING THE REASONABLENESS OF THE PRODUCTION OF THE END PRODUCT S BUT HAS FURTHER GIVEN AN ALLOWANCE FOR REJECTION OF THE BLANKS AT VARIOUS PR OCESS OF PRODUCTION. THE LD CIT(A) HAS NOT DELETED THE ENTIRE ADDITIONS. THUS, THE REVENUE HAS QUESTIONED THE ACTION OF THE LD CIT(A) IN HOLDING THE BOOKS OF ACC OUNTS OF THE ASSESSEE AS PROPERLY MAINTAINED AND IN GIVING THE PART RELIEF TO THE AS SESSEE TOWARDS THE ADDITION MADE BY THE A.O ON ACCOUNT OF THE ALLEGED UNACCOUNTED PR ODUCTION. THE ASSESSEE HAS QUESTIONED THE FIRST APPELLATE ORDER IN SUSTAINING THE ADDITION WITH THIS OBSERVATION THAT WASTAGE/REJECTION OF 2% IS REASONABLE AND THE ADDITION SHOULD BE MADE FOR THE WASTAGE/REJECTION EXCEEDING 2%. THE ASSESSEE HAS F URTHER CONTENDED THAT THE LD CIT(A) HAS FAILED TO APPRECIATE THAT IN THE STR REG ISTER, THE NUMBER OF BLANKS WAS NOTED ON AN APPROXIMATE BASIS AND THE SAME COULD NO T BE CONSIDERED TO BE THE ACTUAL QUANTITY PRODUCED. THE LD CIT(A) HAS FAILED TO APPRECIATE FURTHER THAT IN THE MANUFACTURING OPERATION, THERE IS ALWAYS A WASTAGE AND HENCE, IT WAS GROSSLY INCORRECT TO HOLD THAT THE NUMBER OF BUSHES TO BE M ANUFACTURED MUST BE EQUAL TO THE NUMBER OF BLANKS IN THE STR REGISTER. THE FURT HER CONTENTION OF THE LD. A.R. REMAINED THAT THE ASSESSEE HAS MAINTAINED ALL THE R ECORDS PROPERLY AND THEY ARE SUBJECT TO THE CHECK BY THE EXCISE AUTHORITY AND HE NCE NO SUCH ADDITION IS REQUIRED TO BE MADE IN ITS HANDS. 67. SO FAR AS MAINTAINABILITY OF BOOKS OF ACCOUNT ETC., BY THE ASSESSEE COMPANY TO ADDUCE CORRECT INCOME IS CONCERNED, WE HAVE ALRE ADY DEALT WITH AN ISSUE UNDER ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 43 ALMOST SIMILAR FACTS AND CIRCUMSTANCES WHILE DISPOS ING OF THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE FOR THE A.Y. 20 01-02 HEREINABOVE. FOLLOWING THE DECISION TAKEN IN THIS REGARD, WE DO NOT FIND I NFIRMITY IN THE FIRST APPELLATE ORDER IN HOLDING THE MAINTENANCE OF BOOKS OF ACCOUNT BY THE ASSESSEE AS PROPER AND THAT THE A.O WAS NOT JUSTIFIED IN REJECTING THE BOO KS OF ACCOUNTS. 68. THE A.O AFTER REJECTING THE BOOKS OF ACCOUNT HA D MADE ADDITION OF RS. 58,64,102/- ON ACCOUNT OF UNACCOUNTED PRODUCTION HO LDING THAT 99953 BEARINGS, 241831 BUSHES AND 4328 WASHERS WERE PRODUCED IN EXC ESS AS COMPARED TO THE BLANKS GENERATED. FOR THIS EXCESS QUANTITY, THE A. O ESTIMATED ADDITION TAKING THAT IT MUST HAVE BEEN SOLD AT AVERAGE SELLING PRICE. ADDIT IONS WERE FOR BEARINGS AT RS. 90,91,063/-, FOR BUSHES AT RS. 38,30,603/- AND FOR WASHERS AT RS. 42,436/-. THE LD CIT(A) WORKED OUT THE PERCENTAGE OF THE EXCESS PROD UCTION WHICH ACCORDING TO HIM WAS 3.64% TOWARDS BEARINGS, 4.80% TOWARDS BUSHES A ND 0.21% TOWARDS WASHERS. HE CONSIDERED THAT ESTIMATED 2% OF THE BLANKS GENE RATED WOULD POSSIBLY BE REJECTED AT THE PROCESSING OF THE BLANKS ETC., AND THEREFORE, FOR THE EXCESS OVER 2% WAS CONSIDERED AS EXCESS PRODUCTION. ON THIS BASIS , THERE WAS EXCESS PRODUCTION OF BEARINGS AND BUSHES ONLY, AND THE EXCESS PRODUCTION IN WASHES WAS BELOW 2%. FOR SUCH EXCESS PRODUCTION, THE LD CIT(A) HAS ESTIMATED THE ADDITION BY MULTIPLYING THE EXCESS PRODUCTION AS WORKED OUT BY HIM OVER 2% AT T HE AVERAGE COST PRICE, HOLDING THAT IN THE ABSENCE OF ANY INSTANCE OF SALE OUT OF BOOKS, THE EXCESS PRODUCTION MUST HAVE BEEN LEFT IN THE STOCK. ON THIS BASIS, H E RETAINED THE ADDITION TO THE EXTENT OF RS. 568974/- FOR EXCESS PRODUCTION OF BEA RINGS AND OF RS. 14,18,962 FOR EXCESS PRODUCTION OF BUSHES, TOTALING TO RS.19,87,9 36/- THEREBY GIVING REDUCTION OF RS. 38,76,166/-. 69. WE ARE OF THE VIEW THAT THERE WAS NO NEED TO SU STAIN ANY ADDITION BY THE LD CIT(A) ON ACCOUNT OF UNACCOUNTED PRODUCTION ESPECIA LLY WHEN THE LD CIT(A) CAME ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 44 TO THE CONCLUSION THAT BOOKS OF ACCOUNTS WERE PROPE RLY MAINTAINED BY THE ASSESSEE. WHILE SUSTAINING THE ADDITION OF RS. 19,87,936/- ON ACCOUNT OF EXCESS PRODUCTION OF BEARINGS AND BUSHES, THE LD CIT(A) HAS NOT CONSIDER ED ANY NEW EVIDENCE BUT THE MATERIAL ALREADY AVAILABLE ON RECORD. HE HAS ALSO TAKEN THE SAME FIGURE OF BLANKS AND FURNISHED PRODUCTS THERE-FROM AS WORKED OUT BY THE A.O. HE, HOWEVER, CONSIDERING THE POSSIBILITY OF SOME REJECTIONS AT V ARIOUS STAGES AND PROCESS OF PRODUCTION OF THE END PRODUCTS, HAS CONSIDERED FURT HER DEDUCTION OF 2% FROM THE SO-CALLED SHORTAGE IN THE PRODUCTION IN ADDITION TO THE REJECTION OF THE FINISHED GOODS BY QUALITY ASSURANCE DEPARTMENT OF THE ASSES SEE. ON THIS BASIS, THE LD CIT(A) HAS FOUND THAT STILL THERE IS SHORTAGE IN TH E PRODUCTION AS SHOWN COMPARED TO THE BLANKS GENERATED AND THEREFORE, AFTER FINDING T HAT THE ASSESSEE HAS NO SATISFACTORY EXPLANATION FOR SUCH DIFFERENCE, HE HA S TAKEN THAT TO THAT EXTENT THE ASSESSEE MUST HAVE PRODUCED FINISHED GOODS, WHICH W ERE NOT SHOWN IN THE ACCOUNTS. THE LD CIT(A) HELD THAT SUCH EXCESS PR ODUCTION WILL REASONABLY HAVE TO BE TAKEN AS CLOSING STOCK AS THERE WAS NO INSTANCE OF ANY SALE OUTSIDE THE BOOKS. HE, ACCORDINGLY, APPLIED THE COST PRICE TO SUCH EXC ESS PRODUCTION OF BEARINGS AND BUSHES AND RETAINED ADDITION TO THE EXTENT OF RS.19 ,87,936/- WHILE NOT RETAINING ANY ADDITION FOR WASHERS AS THE WASTAGE WAS LESS T HAN 2%. WE THUS FIND THAT THE LD CIT(A) HAS SUSTAINED SOME ADDITION ON ACCOUNT O F EXCESS PRODUCTION OF BEARINGS AND BUSHES MERELY ON THE BASIS OF SOME PO SSIBILITY. HE HAS FAILED TO APPRECIATE THAT IN THE STR REGISTER, THE NUMBER OF BLANKS WAS NOTED ON AN APPROXIMATE BASIS AND THE SAME COULD NOT BE CONSIDE RED TO BE THE ACTUAL QUANTITY PRODUCED. HE ALSO FAILED TO APPRECIATE THAT IN THE MANUFACTURING OPERATION, THERE WAS ALWAYS A WASTAGE AND HENCE, IT WAS INCORRECT TO HOLD THAT THE NUMBER OF BUSHES TO BE MANUFACTURED MUST BE EQUAL TO THE NUMBER OF B LANKS IN THE STR REGISTER. THE LD CIT(A) FURTHER FAILED TO APPRECIATE THAT WHEN H E HIMSELF HAS VERIFIED THAT THE ASSESSEE HAS MAINTAINED ALL THE RECORDS PROPERLY W HICH ARE SUBJECT TO CHECK BY THE EXCISE AUTHORITY AND HENCE, NO SUCH ADDITION IS REQ UIRED TO BE MADE. WE ARE THUS OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN SU STAINING THE ADDITION OF ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 45 RS.19,87,936/- WHILE DELETING THE ADDITION OF RS. 3 8,76,166/- MADE ON ACCOUNT OF UNACCOUNTED PRODUCTION. WE THUS WHILE UPHOLDING TH E RELIEF GRANTED BY THE LD CIT(A) IN VIEW OF OUR DECISION ON AN IDENTICAL ISSU E IN THE MATTER FOR THE A.Y. 2001- 02 HEREINABOVE, DIRECT THE A.O TO DELETE THE ADDITI ON OF RS. 19,87,936/- SUSTAINED BY THE LD CIT(A) ON ESTIMATE BASIS. THE GROUND NOS. 1 & 2 OF THE APPEAL PREFERRED BY THE REVENUE ARE REJECTED AND ADDITIONA L CROSS OBJECTION RAISED BY THE ASSESSEE ARE ALLOWED. 70. THE MAIN OBJECTION RAISED IN THE CROSS OBJECTION BY THE ASSESSEE IS AGAINST THE ACTION OF THE LD CIT(A) IN UPHOLDING TH E DISALLOWANCE OF THE CLAIMED DEDUCTION U/S. 80IB IN RESPECT OF INTEREST INCOME O N FIXED DEPOSITS WITH BANKS AMOUNTING TO RS.49,01,921/-. IN ALTERNATIVE, THE A SSESSEE HAS CONTENDED THAT EXCLUSION OF INTEREST INCOME FOR THE PURPOSE OF DED UCTION U/S. 80IB BE RESTRICTED TO NET AMOUNT OF INTEREST INCOME OF RS.12,61,484/-. 71. SO FAR AS MAIN OBJECTION IS CONCERNED, WE FULLY CONCUR WITH THE ORDERS OF THE AUTHORITIES BELOW THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S. 80IB IN RESPECT OF INTEREST INCOME EARNED ON FIXED DEPOSIT WITH BANKS AMOUNTING TO RS.49,01,921/- SINCE THERE IS NO DIRECT AND IMMEDIA TE RELATION BETWEEN THE INTEREST INCOME AND THE MAIN BUSINESS OF PRODUCTION OF THE A SSESSEE. THUS, THE INTEREST INCOME IN QUESTION CANNOT BE TREATED AS INCOME DERI VED FROM THE BUSINESS OF THE ASSESSEE. WE, HOWEVER, FIND SUBSTANCE IN THE ALTER NATIVE CONTENTION OF THE ASSESSEE THAT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/ S. 80IB, THE EXCLUSION OF NET AMOUNT OF INTEREST INCOME SHOULD BE CONSIDERED IF THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS BETWEEN THE INTEREST EARNED AND INTEREST PAID. AN IDENTICAL ISSUE HAS BEEN DECIDED BY US IN THE MATTERS FOR A.Y. 2001-02 HEREINABOVE. FOLLOWING THE DECISION TAKEN THEREIN, WE SET ASIDE THE MATTER TO THE FILE OF THE A.O WITH DIRECTION TO ALLOW THE ABOVE ALTERNATIVE CONTENTION IF THE AS SESSEE IS ABLE TO ESTABLISH NEXUS ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 46 BETWEEN THE INTEREST PAID AND INTEREST EARNED BEFOR E HIM. THE OBJECTION IS THUS PARTLY ALLOWED FOR STATISTICAL PURPOSES.. 72. IN RESULT, APPEAL PREFERRED BY THE REVENUE IS D ISMISSED AND CROSS OBJECTION IS PARTLY ALLOWED. ITA N OS. 532/PN/2007 AND 773/PN/2009 73. IN THESE APPEALS, THE REVENUE HAS QUESTIONED FI RST APPELLATE ORDER ON THE FOLLOWING GROUNDS THAT THE LD CIT(A) HAS ERRED IN : 1) HOLDING THAT THE BOOKS OF ACCOUNT ARE PROPER THOUG H THE A.O HAD RIGHTLY POINTED OUT NUMBER OF DEFECTS IN THE BOOKS OF ACCOU NTS RENDERING THEM LIABLE FOR REJECTION; AND 2) DELETING THE ADDITION (OF RS. 21,90,768/- IN A.Y. 2004-05 AND RS.10,28,787/- IN A.Y. 2006-07/-) ON ACCOUNT OF UNA CCOUNTED PRODUCTION. 74. WE HAVE ALREADY DECIDED THE ISSUES RAISED IN TH E ABOVE GROUNDS DEALING WITH IN DETAIL IN THE MATTERS FOR THE A.Y. 2001-02 UPHOL DING THE ACTION OF THE LD CIT(A) IN THIS REGARD. IN BRIEF, THE A.O HAS NOT SPECIFICALL Y POINTED OUT ANY DEFECT OTHER THAN THE FACT THAT THE CONSUMPTION OF RAW MATERIAL IS IN KILOGRAMS AND RECORD OF PRODUCTION IS IN NUMBERS. A.O HAS NOT REJECTED TH E BOOK COMPLETELY BUT HAS ONLY MADE THE ADDITION BY REJECTING THE ASSESSEES CLAI M FOR WASTAGE OF BLANK ETC., AT VARIOUS STAGES PRIOR TO REJECTION OF FINISHED GOODS BY THE QUALITY ASSURANCE DEPARTMENT OF THE ASSESSEE. THE LD CIT(A) AFTER DI SCUSSING THE CASES OF THE PARTIES INCLUDING REMAND REPORT OF THE A.O ON THE SUBMISSIO N OF THE ASSESSEE MADE BEFORE HIM, HAS HELD THAT THE ASSESSEE HAD MAINTAINED BOOK S OF ACCOUNT PROPERLY AND REJECTION OF BOOKS OF ACCOUNT BY THE A.O WAS NOT JU STIFIED. DEALING WITH THE ISSUE IN DETAIL UNDER SIMILAR FACTS AND CIRCUMSTANCES IN THE A.Y. 2001-02 HEREINABOVE, WE ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 47 HAVE UPHELD THE ACTION OF THE LD CIT(A). FOLLOWING THE DECISION TAKEN THEREIN ON THE ISSUE, WE DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER IN THIS REGARD DURING THE YEAR. THE SAME IS UPHELD. THE GROUND N O. 1 IS ACCORDINGLY REJECTED. 75. THE A.O WORKED OUT THE EXCESS OF BLANKS AVAILAB LE FOR PRODUCTION OF BEARINGS, BUSHES AND WASHERS, REJECTING THE CLAIM THAT BESIDE S THE REJECTION AT FINAL STAGE BY THE QUALITY ASSURANCE DEPARTMENT OF THE ASSESSEE, THERE WERE REJECTIONS AT VARIOUS STAGES OF PRODUCTION OF UNFINISHED ARTICLES. HE H ELD THAT EXCESS AVAILABLE MUST HAVE BEEN CONVERTED INTO FINISHED GOODS AND THUS PRODUCE D EXCESS QUANTITY OF THESE ARTICLES AND ALSO MUST HAVE BEEN SOLD. THE A.O AP PLIED THE AVERAGE SELLING PRICE FOR SUCH ARTICLES AND MADE ADDITION ON ACCOUNT OF B EARING, BUSHES AND WASHERS. 76. THE LD CIT(A) FOUND THAT THE ALLEGED EXCESS BLA NKS AS COMPARED TO THE PRODUCTION SHOWN IN THE BALANCE SHEET I.E. DIFFEREN CE AS WORKED OUT BY THE A.O COULD BE TAKEN AS WASTAGE OF BLANKS FIRSTLY ON THE PRODUCED PRODUCTS PRIOR TO THE STAGE OF REJECTION OF FINISHED ARTICLES BY THE QUAL ITY ASSURANCE DEPARTMENT. HE FURTHER FOUND THAT SUCH WASTAGE WAS WELL BELOW 2% WHICH HE HELD TO BE REASONABLE PERCENTAGE OF WASTAGE AND THEREFORE, HE DELETED THE ENTIRE ADDITION MADE FOR THE 3 TYPES OF PRODUCTS. WE FIND THAT THE FIRST APPELL ATE ORDER ON THE ISSUE IS COMPREHENSIVE AND REASONED ONE AND BESIDES, THERE W AS NO NEED OF MAKING ANY ADDITION ON ACCOUNT OF THE ALLEGED UNACCOUNTED PRO DUCTION ESPECIALLY WHEN THE BOOKS OF ACCOUNT ETC., WERE PROPERLY MAINTAINED BY THE ASSESSEE WHICH WERE ALSO SUBJECT TO CHECK UP BY THE EXCISE DEPARTMENT. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUND NO. 2 IS ACCORD INGLY REJECTED. 77. IN RESULT, APPEALS ARE DISMISSED. ITA NO. 908/PN/2008 & C.O. NO. 30/PN/2009 AND ITA N O. 909/PN/2008 & C.O. NO. 31/PN/2009 ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 48 78. THE ASSESSEE HAS QUESTIONED THE FIRST APPELLATE ORDER WHEREBY THE LD CIT(A) HAS CONFIRMED THE DENIAL OF DEDUCTION U/S. 80IB IN RESPECT OF INTEREST INCOME AMOUNTING TO RS. 12,31,700 IN A.Y. 2000-01 AND RS. 39,43,911/- IN A.Y. 2002-03 ON SEVERAL GROUNDS. THE ASSESSEE HAS ALSO PREFERRED CROSS OBJECTIONS I N THESE A.YS. RAISING OBJECTION AGAINST THE FIRST APPELLATE ORDER ON THE BASIS THAT THE LD CIT(A) IN ALTERNATIVE SHOULD HAVE AT LEAST ALLOWED NETTING OF INTEREST EARNED AND INTEREST PAID FOR THE PURPOSE OF EXCLUSION FROM THE COMPUTATION OF DEDUCTION U/S. 80 IB. SINCE THE ISSUE RAISED IN THE GROUNDS OF APPEAL AND CROSS OBJECTIONS ARE CONNECTED, BOTH ARE BEING ADJUDICATED UPON SIMULTANEOUSLY. 79. WE HAVE ALREADY DEALT WITH THE ISSUE RAISED IN THE ABOVE GROUND IN C.O. NO. 45/PN/2008 HEREINABOVE. FOLLOWING OUR DECISION THE REIN ON AN IDENTICAL ISSUE, WE PRINCIPALLY DO NOT FIND INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD AS INCOME EARNED ON DEPOSITS CANNOT BE TREATED AS D ERIVED FROM THE MAIN INCOME OF THE ASSESSEE. HENCE, THERE IS NO QUESTION OF ALLOW ING THE CLAIMED DEDUCTION U/S. 80 IB THEREUPON. WE, HOWEVER, ALLOW THE ALTERNATIVE P LEA TAKEN IN THIS REGARD BY THE LD. A.R. WITH DIRECTION TO THE A.O TO ALLOW THE EXC LUSION OF NET AMOUNT OF INTEREST INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 80 IB IF THE ASSESSEE IS ABLE TO ESTABLISH THE NEXUS BETWEEN THE INTEREST E ARNED AND INTEREST PAID. WE THUS SET ASIDE THE MATTER IN THIS REGARD TO THE FILE OF THE A.O. 80. IN RESULT, THESE APPEALS ARE DISMISSED AND C ROSS OBJECTIONS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA . NO 468/PN/2007 & C.O.45/PN/2008 ETC., MENON BEARINGS LTD. A.Y. 2001-02 ETC., PAGE OF 49 49 81. IN SUMMARY, ITA NOS. 468, 469/PN/2007, 881 TO 8 83/PN/2008 AND 533/PN/2007, 773/PN/2009, 908 & 909/PN/2008 ARE DIS MISSED ; C.O. NOS. 30 & 31/PN/2009 ARE ALLOWED FOR STATISTICAL PURPOSES; AN D C.O. NOS. 44 & 45/PN/2008 ARE PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05TH SEPTEMBER 2011. SD/- SD/- ( D. KARUNAKARAO ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 05TH SEPTEMBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I/II, KHOLAPUR /CIT (CENTRAL) PUNE 4. THE CIT(A)- KOLHAPUR 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE