DCIT, Ludhiana V. M/s Cremica Industries (P) Ltd., Ludhiana

ITA 597/CHANDI/2012

• Counselvise Citation: 59721514 RSA 2012
• Duration Of Justice: 3 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SIDHU SH SUBHASH AGGARWAL
• Keywords: Unexplained expenditure
• Section: 69C; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 597/CHD/2012 ASSESSMENT YEAR:2005-06 DCIT VS. CREMICA INDUSTRIES (P)LTD. CIRCLE III, JALANDHAR BYE PASS LUDHIANA LUDHIANA SOLAN PAN NO. AAACC6718J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. D. S. SIDHU RESPONDENT BY : SH. SUBHASH AGGARWAL DATE OF HEARING : 15/09/2015 DATE OF PRONOUNCEMENT : 27/11/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. CIT(A)- II, LUDHIANA DATED 16.03.2012 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 16,426/- MADE ON ACCOUNT OF UNE XPLAINED SALES DUE TO DIFFERENCE IN OPENING STOCK AS PER RECORDS A ND AS PER AUDIT REPORT AS POINTED OUT DURING SPECIAL AUDIT U/S 142( 2A) OF THE INCOME TAX ACT, 1961 WHEREAS DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE ATTRIBUTED THE DIFFERENCE IN STOCK TO THE TYPOGRAPHICAL MISTAKE AND THIS EXPLANATION OF ASSESSEE HAS BEEN I GNORED BY THE LD. CIT(A). 2. THAT THE LD. CI'I'(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 16,63,754/- MADE ON ACCOUNT OF UNACCOUNTED EXPENDITURE IN PURCHASE OF RAW MATERIAL OF 1.38,646 .15 KG. AS POINTED OUT DURING SPECIAL AUDIT U/S 142(2A) OF THE INCOME TAX ACT, 1961 WHEREAS THE LD. CIT(A) HAS FAILED TO APPRECIAT E THE LOGICAL CONCLUSION OF THE A.O. THAT BY SUPPRESSING RAW MATE RIAL CONSUMPTION THE ASSESSEE HAS SUPPRESSED CORRESPONDI NG SALE, THEREBY SUPPRESSING THE PROFITS. SINCE THE ASSESSEE IS SUPPRESSING THE EXPENSES ON RAW MATERIAL, THERE IS NO QUESTION OF SHOWING THESE EXPENSES EITHER IN THE P&L ACCOUNT OR IN THE COMPUT ATION. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BREADS, BUNS AND RUSKS. DURING THE IMPUGNED ASSESSMENT YEAR, RETURN DECLARING LOSS OF RS. 77,49,198/- AND BOOK P ROFIT U/S 115JB OF RS. 60,280/- WAS FILED BY THE ASSESSEE ON 31.10.2005. ASSESSMENT U/S 143(3) WAS FRAMED ON THE ASSESSEE VIDE ORDER DATED 27.08.2008 AT A LOSS OF RS. 44,03,697/- AFTER MAKING VARIOUS ADDITIONS AMOUNTING TO RS. 33,45,496/-. LD. CIT(A) VIDE HIS ORDER DATED 16.03.2012 PARTIALLY ALLOWED THE APPEAL OF THE ASSE SSEE AGAINST WHICH THE REVENUE FILED THE PRESENT APPEAL BEFORE US. 4. IN GROUND NO. 1 THE REVENUE HAS CHALLENGED THE D ELETION OF ADDITION OF RS. 16,426/- MADE ON ACCOUNT OF UNEXPLAINED SALES D UE TO DIFFERENCE IN OPENING STOCK AS PER RECORDS AND AS PER AUDIT REPOR T AS POINTED OUT DURING SPECIAL AUDIT CARRIED OUT U/S 142(2A) OF THE INCOME TAX ACT, 1961 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE S PECIAL AUDITORS APPOINTED U/S 142(2A) OF THE ACT, POINTED OUT IN THEIR REPORT THA T THERE WAS DISCREPANCY IN THE OPENING STOCK OF BREAD BEING UNDERSTATED BY RS. 16, 426/- THE A.O. HELD THE SAME AS UNACCOUNTED SALE OF BREAD AND ADDED THE SAM E TO THE TOTAL INCOME OF THE ASSESSEE. 6. DURING APPELLATE PROCEEDINGS, THE ASSESSEE PLEAD ED THAT THERE WAS ABSOLUTELY NO DIFFERENCE IN THE OPENING STOCK OF BR EAD AND POINTED OUT THAT THE SAME HAD BEEN CLEARLY EXPLAINED TO THE LD. A.O. DUR ING ASSESSMENT PROCEEDINGS. THE ASSESSEE FURTHER CONTENDED THAT TH E UNDERSTATEMENT OF OPENING STOCK BY THE ASSESSEE IF ANY WOULD CAUSE TH E PROFIT TO INCREASE AND THE LD. A.O. OUGHT TO HAVE REDUCED THE PROFIT OF THE AS SESSEE TO THAT EXTENT. HE THEREFORE, PLEADED THAT ADDITION MADE ON ACCOUNT OF OPENING STOCK WAS PRINCIPALLY INCORRECT 7. LD. CIT(A) AFTER CONSIDERING THE ASSESSEE SUBMIS SIONS DELETED THE ADDITION MADE BY HOLDING AT PARA 6.3 OF HIS ORDER AS FOLLOWS :- 3 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISS ION. THE FACT REMAINS THAT THE FIGURE OF OPENING STOCK TAKEN IN T HE CURRENT ASSESSMENT YEAR IS THE SAME FIGURE AS WAS TAKEN AS CLOSING STOCK FOR THE LAST ASSESSMENT YEAR AND THIS FIGURE HAS BEEN D ULY ACCEPTED BY THE DEPARTMENT DURING THE LAST ASSESSMENT YEAR/AS S UCH, I DO NOT AGREE WITH THE FINDING OF THE AO THAT THE OPENING S TOCK FIGURE IN THE CURRENT ASSESSMENT YEAR HAD BEEN UNDER STATED. MOREOVER, AS SUBMITTED BY THE AR OF THE APPELLANT, IF A.O'S CONT ENTION IS ACCEPTED, THE PROFIT OF THE APPELLANT SHALL STAND R EDUCED TO THAT EXTENT AND NOT BE INCREASED. THE ADDITION MADE ON T HIS GROUND IS ACCORDINGLY DELETED . 8. BEFORE US LD. DR RELIED UPON THE ORDER OF THE AO AND STATED THAT THERE WAS A VARIANCE IN THE OPENING STOCK OF BREAK AND RU SK, WHICH HAD NEITHER BEEN PROPERLY EXPLAINED NOR SUBSTANTIATED BY THE ASSESSE E. LD. AR ON THE OTHER HAND REITERATED THE PLEADINGS MADE BEFORE THE LD. CIT(A) AND FURTHER PLACED RELIANCE ON THE ORDER OF THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE AUTHORITY BELOW. 10. WE FIND THAT THE LD. CIT(A) HAS GIVEN A CLEAR F INDING OF FACT THAT THE FIGURE OF OPENING STOCK TAKEN IN CURRENT YEAR IS THE SAME AS THE FIGURE OF CLOSING STOCK FOR THE PRECEDING ASSESSMENT YEAR, WHICH HAS BEEN A CCEPTED BY THE DEPARTMENT IN ASSESSMENT PROCEEDINGS FOR THAT YEAR. IN VIEW OF THE AFORESTATED FACT, WE FIND THAT THERE IS NO OCCASION FOR THE REV ENUE TO CONTEST THE VALUE OF OPENING STOCK NOW TAKEN BY THE ASSESSEE IN THE IMPU GNED ASSESSMENT YEAR. HAVING ONCE ACCEPTED THE VALUE OF STOCK, IN THE PRE CEDING YEAR, THE REVENUE CANNOT NOW AGAIN CHALLENGE THE SAME IN ANOTHER YEAR . MOREOVER, WE FIND THAT THE UNDERVALUATION OF OPENING STOCK PRINCIPALLY RES ULT IN INCREASE IN THE PROFITS OF THE ASSESSEE AND THE LD. A.O. SHOULD HAVE REDUCED T HE PROFITS TO THAT EXTENT RATHER THAN MAKING AN ADDITION OF THE SAME. TAKING INTO CONSIDERATION, THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND NO INFIRMITY IN ORDER OF LD. CIT(A), DELETING THE ADDITION MADE. WE THERE FORE, HOLD THAT THE ADDITION OF RS. 16,426/- MADE ON ACCOUNT OF UNDERVALUATION O F OPENING STOCK HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). 4 11. THIS GROUND OF APPEAL RAISED BY THE REVENUE IS THEREFORE DISMISSED. 12. IN GROUND NO. 2 THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS. 16,63,754/- MADE ON ACCOUNT OF UNACCOUNTED EXPENDIT URE IN PURCHASE OF RAW MATERIAL OF 1,38,646 KGS. AS POINTED OUT DURING SPE CIAL AUDIT U/S 142(2A) OF THE INCOME TAX ACT, 1961. 13. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE SPECIAL AUDITORS IN THEIR REPORT OBSERVED THAT THE TOTAL PRODUCTION OF THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR WAS 62,81,884.825 KGS. THE SPECIAL AUDITORS WORKED OUT THE TOTAL RAW MATERIAL REQUIRED FOR THE ABOVE PRODUCTION AT 4 6,95,256.156 KG. IT WAS FURTHER OBSERVED BY THE SPECIAL AUDITORS THAT THE A SSESSEE HAD SHOWN TOTAL RAW MATERIAL CONSUMPTION OF RS. 45,56,610 KG. THUS IT W AS POINTED OUT BY THE SPECIAL AUDITORS THAT THE ASSESSEE HAD SHOWN LESS CONSUMPTI ON OF RAW MATERIAL TO THE EXTENT OF RS. 1,38,646.156 KG. WHEN CONFRONTED WITH THE SAME DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE EXPLAINED THAT THE VARIAN CE COULD BE EXPLAINED TO BE ON ACCOUNT OF THE FACT THAT THE RECIPE USED FOR THE CALCULATION RELATED TO ONLY ONE TYPE OF BREAD, BUN AND RUSK WHILE THE SAME ACTUALLY VALUED DEPENDING UPON THE WEIGHT AND VARIETY OF THE PRODUC T. THE ASSESSEE FURTHER CONTENDED THAT THE CALCULATIONS OF THE SPECIAL AUDI TORS WERE WRONG AND THE WEIGHT OF THE BREAD TAKEN WAS ALSO WRONG. THE ASSE SSEE STATED THAT THE ENTIRE CALCULATION DONE BY THE SPECIAL AUDITORS WAS ON EST IMATE BASIS USING STANDARD RECIPES, WHILE THERE WERE DIFFERENT RECIPES FOR DIF FERENT VARIETIES OF BREADS, RUSK AND BUNS. 14. THE ASSESSEE CONTENDED THAT THE NORMAL VARIATIO N BETWEEN STANDARD CONSUMPTION AND ACTUAL CONSUMPTION IS AROUND 5% WHI LE THAT POINTED OUT BY THE SPECIAL AUDITORS WORKED OUT TO ONLY 3%. THUS, T HE ASSESSEE CONTENDED THAT THERE WAS NO VARIATION AS SUCH. 5 THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE B Y STATING THAT THE REASON GIVEN WERE FRIVOLOUS AND MADE AN ADDITION RS. 16,63 ,754/- ON ACCOUNT OF UNACCOUNTED RAW MATERIAL BY HOLDING AT PARA 13.3 OF HIS ORDER. THE ASSESSEE'S CONTENTIONS ARE CONSIDERED CAREFULL Y. THIS IS A COMPLETELY FRIVOLOUS REASONING ON THE PART OF THE ASSESSEE SINCE AS STAT ED ABOVE, THE FIGURES ARE NOT ARRIVED AT THROUGH PHYSICAL VERIFICATION OF THE PRO CESS, RATHER, THEY ARE LIFTED FROM THE BOOKS OF ACCOUNTS AS SUPPLIED BY THE ASSESSEE. MOREOVER, THE ASSESSE'S UNIT IS AN EXCISABLE UNIT, HENCE, SUCH ARGUMENT THAT THE RA W MATERIAL AND STOCK ARE NOT PROPERLY MAINTAINED, IN FACT, GOES AGAINST THE ASSE SSEE AND PUTS THE QUESTION MARK ON THE RELIABILITY OF THE BOOKS OF ACCOUNT MAI NTAINED BY THE ASSESSEE. MOREOVER FROM THE ACCOUNTS OF THE ASSESSEE IT IS NO T VISIBLE THAT WHAT HAS HAPPENED TO THE DIFFERENCE OF 1,38,646.156 KGS OF R AW MATERIAL. IN THE ABSENCE OF ANY EXPLANATION, IT IS LOGICALLY INFERRED THAT THIS MATERIAL HAS ALSO BEEN SOLD AFTER CONVERSION INTO BREAD, BUN OR RUSK, THUS, MAKING UN ACCOUNTED SALE OUTSIDE THE BOOKS OF ACCOUNTS. HENCE, THIS UNACCOUNTED RAW MATE RIAL OF 1,38,646.156 KG OF RAW MATERIAL IS ADDED AS UNACCOUNTED EXPENDITURE U/ S 69C @ RS.12/KG RESULTING IN AN ADDITION OF RS. 16,63,754/-. I AM SATISFIED T HAT THE ABOVE ACT OF THE ASSESSEE IS WILLFUL ATTEMPT TO CONCEAL INCOME BY THE ASSESSE E, HENCE, PENALTY PROCEEDINGS U/S 271 (1)( C) ARE BEING INITIATED SEPARATELY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. 15. BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITT EN SUBMISSIONS REITERATING THE CONTENTIONS MADE BEFORE THE A.O. AND REPRODUCED IN THE ORDER OF THE CIT(A) AT PARA 8.2 AS FOLLOWS:- THIS GROUND IS AGAINST ADDITION MADE ON ACCOUNT OF 138646.156 KGS OF SHORTAGE ALLEGED IN RAW-MATERIAL USED IN THE MANUFACTURE OF BREAD & RUSKS. THE SAID ADDITION APPEARS TO HAVE BEEN MADE ON ACCOUNT OF LA CK OF UNDERSTANDING ON THE PART OF THE A.O. ON ONE HAND A.O IS HOLDING THA T THERE WAS SHORTAGE IN THE AVAILABILITY OF RAW MATERIAL AND ON THE OTHER HAND MAKING AN ADDITION ON ACCOUNT OF SALE OF BREAD OUTSIDE THE BOOKS OF ACCOU NT THEREBY BLOWING HOT AND COLD IN THE SAME BREATH. IN OTHER WORDS THE LEARNED A.O. IS MAKING AN ADDITION ON ACCOUNT OF ALLEGED SALE OF BREAD OUTSIDE THE BOOKS MANUFACTURED OUT OF NON- EXISTENT RAW MATERIAL. THE A.O HAS NO EVIDENCE OF M AKING ANY SALE OUTSIDE THE BOOKS. THE SHORT CONSUMPTION OF RAW MATERIAL HAS BE EN WORKED OUT ON THE BASIS OF ARITHMETIC CALCULATION WHICH IS NEVER THE CASE P RACTICALLY. THIS SEEMS TO BE PENALIZING THE ASSESSEE COMPANY FOR BEING MORE EFFI CIENT BY MAKING SAVING IN CONSUMPTION IN RAW MATERIAL THROUGH MODIFICATION ON RECIPE. YOUR HONOURS KIND ATTENTION IS ALSO INVITED TO THE EXPLANATIONS GIVEN TO A.O. VIDE OUR REPLY DATED 04.08.2008 IN ANY CASE IF A.O'S CONTENTION IS ACCEPTED THAT TH ERE IS SHORT CONSUMPTION OF RAW MATERIAL, THE PROFIT OF THE ASSESSEE SHALL STAN D REDUCED TO THAT EXTENT AND NOT BE INCREASED IN ABSENCE ANY EVIDENCE AGAINST TH E ASSESSEE. HENCE, ADDITION ON ACCOUNT UNDER STATEMENT OF CONSUMPTION IN RAW MATERIALS IS COMPLETELY AGAINST THE LAW AND FACTS OF THE CASE AN D DESERVES TO BE DELETED. ' 6 16. LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUB MISSIONS DELETED THE ADDITION MADE BY HOLDING AT PARA 8.3 OF HIS ORDER AS FOLLOWS:- 8.3 I HAVE CAREFULLY CONSIDERED APPELLANTS SUBMIS SION AND PERUSED THE FACTS AS BROUGHT OUT IN THE ASSESSMENT ORDER. THE FACT RE MAINS THAT THE APPELLANT HAD CLAIMED TOTAL CONSUMPTION OF RAW MATERIAL OF 455661 0 KG. THE FACT ALSO REMAINS THAT THE TOTAL PRODUCTION AS SHOWN BY THE APPELLANT AND AS TAKEN BY THE SPECIAL AUDITOR REMAINS THE SAME I.E 62,81,884.825 KG. THIS FIGURE HAS NOT BEEN DISPUTED BY THE AO. THE SPECIAL AUDITOR CALCULATED FOR PRODU CTION OF 62,81,884.825 KGS, THE CONSUMPTION OF RAW MATERIAL SHOULD HAVE BEEN 469525 6.156 KG. THUS THE SPECIAL AUDITOR CALCULATED THAT THE APPELLANT SHOULD HAVE A CTUALLY USED MORE RAW MATERIAL THAN WHAT WAS CLAIMED BY THE APPELLANT IN THE BOOKS OF ACCOUNTS. THE AO HAS HELD THAT THIS MATERIAL HAS BEEN SOLD AFTER CONVERSION INTO BREADS, BUNS OR RUSKS THUS MAKING UNACCOUNTED SALE OUTSIDE THE BOOK S. THIS OBSERVATION OF THE AO IS SELF CONTRADICTORY. ON THE ONE HAND AO HAS HELD THAT THE CONSUMPTION OF RAW MATERIAL SHOWN BY THE APPELLANT IN BOOKS OF ACCOUNT S IS LESS THAN THE ACTUAL CONSUMPTION REQUIRED AND ON THE OTHER HAND THE AO H AS HELD THAT THERE WAS EXCESS UNACCOUNTED PRODUCTION WHICH WAS SOLD OUT OF BOOKS. AS PER AOS OWN FINDINGS, THE RAW MATERIAL USED BY THE APPELLANT, A S RECORDED IN BOOKS OF ACCOUNTS, WAS NOT SUFFICIENT TO PRODUCE THE RECORDE D PRODUCTION. THEREFORE, BY NO STRETCH OF IMAGINATION COULD IT HAVE RESULTED IN EXCESS PRODUCTION OVER AND ABOVE THE PRODUCTION RECORDED IN BOOKS OF ACCOUNTS WHICH COULD HAVE BEEN SOLD BY THE ASSESSEE OUT OF BOOKS. THERE IS NO WAY THE APPELLANT COULD HAVE PRODUCED THE STOCK IN EXCESS OF RECORDED PRODUCTION FOR SALE OUTSIDE THE BOOKS OF ACCOUNT. IT IS NOT THE AOS CASE THAT THE CONSUMP TION OF RAW MATERIAL SHOWN IN BOOKS OF ACCOUNTS WAS MORE THAN THE ACTUAL CONSUMPT ION FROM WHICH AO COULD HAVE INFERRED THAT THE EXCESS RAW MATERIAL CONSUMED WAS USED FOR PRODUCING PRODUCTS SOLD OUTSIDE THE BOOKS OF ACCOUNTS. THE ADDITION HAS BEEN MADE UNDER THE HEAD UNACCOUNT ED EXPENDITURE. THE APPELLANT HAS NOT CLAIMED THAT THIS EXPENDITURE WAS INCURRED BY IT. THE APPELLANT HAS NOT CLAIMED THIS EXPENDITURE IN COMPUTATION OF ITS INCOME. AS SUCH, WHEN THERE WAS NO EXPENDITURE, THERE IS NO GROUND TO HOL D THAT THE EXPENDITURE WAS UNACCOUNTED. IF THE APPELLANT HAD ACTUALLY INCURRED THIS EXPENDITURE THERE IS NO REASON WHY THE APPELLANT WOULD NOT HAVE RECORDED TH E SAME IN THE BOOKS OF ACCOUNT AS IT IS AN ALLOWABLE EXPENDITURE AND WOULD BE ALLOWED IN COMPUTING THE PROFITS OF THE APPELLANT THUS REDUCING THE PROF ITS. IT IS NOT THE AOS CASE THAT THE EXPENDITURE WAS OTHERWISE NOT ALLOWABLE. AO HAS NOT GIVEN ANY REASON OR JUSTIFICATION FOR HOLDING THAT THE APPELLANT HAD AC TUALLY INCURRED THIS EXPENDITURE BUT NOT RECORDED THE SAME IN ITS BOOKS OF ACCOUNTS. KEEPING IN VIEW THE AFORESAID FACTS, THE ADDITION MADE BY THE AO ON THI S ACCOUNT IS DELETED. THIS GROUND OF THE APPELLANT IS THEREFORE, ALLOWED. 17. BEFORE US LD. DR RELIED UPON THE FINDINGS OF TH E A.O. WHILE LD. AR RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND ALSO RELIED UPON THE ORDER OF LD. CIT(A). 18. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRE SENTATIVES OF BOTH THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AS ALSO THE DOCUMENT PLACE BEFORE US. 19. THE FACTS EMERGING IN THE PRESENT CASE ARE THAT THE TOTAL PRODUCTION OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR WAS R S. 62,81,884.825/- KG. 7 AGAINST WHICH, THE ASSESSEE HAS SHOWN RAW MATERIAL CONSUMPTION OF 45,56,610 KG. THE REVENUE, RELYING UPON THE CALCULATION OF TH E SPECIAL AUDITOR HAS CONTENDED, THAT THE ASSESSEE HAS USED 46,95, 256 KG . OF RAW RAW MATERIAL AND HAS THUS MADE PURCHASE OF THE SURPLUS RAW MATERIAL OUTSIDE THE BOOKS OF ACCOUNTS WARRANTING AN ADDITION OF RS. 16,63,754/- BEING UNACCOUNTED EXPENDITURE U/S 69C OF THE ACT. THE REVENUE HAS FUR THER CONTENDED THAT THIS UNACCOUNTED RAW MATERIAL HAS BEEN CONVERTED INTO BR EAD, BUNS AND RUSK AND SOLD OUTSIDE THE BOOKS OF THE ASSESSEE. 20. WE FIND THAT THIS FINDING OF THE REVENUE IS SEL F CONTRADICTORY, WHERE ON THE ONE HAND IT HAS ALLEGED THAT RAW MATERIAL CONSUMPTI ON SHOWN BY THE ASSESSEE WAS NOT SUFFICIENT TO PRODUCE THE RECORDED PRODUCTI ON, ON THE OTHER HAND, IN THE SAME BREATH IT HAS BEEN HELD THAT THE ASSESSEE MUST HAVE PRODUCED EXCESS GOODS OUT OF THESE RAW MATERIALS PURCHASED OUT OF T HE BOOKS OF THE ASSESSEE AND SOLD THE SAME ALSO OUTSIDE THE BOOKS OF THE ASS ESSEE. BESIDES IT IS AN UNDISPUTED FACT THAT THE SPECIAL AUDITORS HAD USED A STANDARD FORMULA FOR CALCULATING THE RAW MATERIAL CONSUMED, WHILE THE AS SESSEE HAS CONTENDED THAT PRACTICALLY THERE CANNOT BE A STANDARD FORMULA FOR THE SAME AND THAT THE QUANTITY OF RAW MATERIAL CONSUMED VARIES WITH THE D IFFERENT VARITIES OF PRODUCTS MANUFACTURED. LD. AR HAS ALSO CONTENDED THAT A VARI ATION OF 5% IN CONSUMPTION OF RAW MATERIAL IS A NORMAL FEATURE, WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE. WE THEREFORE FIND THAT THE VARIATION IN TH E CONSUMPTION OF RAW MATERIAL BEING 3% IS WELL WITHIN THE ACCEPTED NORMA L RANGE AND THEREFORE CALLS FOR NO ADDITION TO BE MADE ON THIS ACCOUNT. WE ALS O FIND THAT THE ADDITION MADE IS HYPOTHETICAL BASED ON IMPRACTICAL MATHEMATI CAL CALCULATIONS AND NO COGENT EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE R EVENUE TO PROVE THAT THE ASSESSEE HAS MADE UNEXPLAINED EXPENDITURE IN RA W MATERIAL. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) DE LETING THE ADDITION OF RS. 16,63,754/- MADE ON ACCOUNT OF UNEXPLAINED EXPENDIT URE IN RAW MATERIAL. 8 21. THIS GROUND OF APPEAL OF THE REVENUE IS THEREFO RE DISMISSED. 22. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27/11/2015 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 27/11/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR