Dy. CIT, Circle-1, Jalgaon V. Sanjay Soya Pvt. Ltd., Jalgaon

ITA 781/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2473 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HITENDRA NINAWE
• Keywords: Gross profit estimation; Corroborative evidences
• Section: 14A; 131; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.781/PN/2013 #& & / ASSESSMENT YEAR : 2009-10 DY.CIT, CIRCLE-1, JALGAON . / APPELLANT V/S SANJAY SOYA PVT. LTD., C/O. S.K. OIL MILL COMPOUND, SHIVAJI NAGAR, OLD DHULE ROAD, JALGAON PAN NO. AAHCS9916M . / RESPONDENT . / ITA NO.786/PN/2013 #& & / ASSESSMENT YEAR : 2009-10 SANJAY SOYA PVT. LTD., C/O. S.K. OIL MILL COMPOUND, SHIVAJI NAGAR, OLD DHULE ROAD, JALGAON PAN NO. AAHCS9916M . / APPELLANT V/S DY.CIT, CIRCLE-2, NASHIK . / RESPONDENT / ASSESSEE BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI HITENDRA NINAWE / ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE REV ENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DIRECT ED AGAINST THE ORDER DATED 30-01-2013 OF THE CIT(A)-II, NASHIK RELATIN G TO ASSESSMENT YEAR 2009-10. FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. / DATE OF HEARING :09.02.2016 / DATE OF PRONOUNCEMENT:30.03.2016 2 ITA NOS.781 AND 786/PN/2013 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING A ND TRADING OF EDIBLE OIL AND ITS ALLIED PRODUCTS. IT FILED ITS RETUR N OF INCOME ON 30-09-2009 DECLARING TOTAL INCOME OF RS.32,87,850 /-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOT ED THAT THE ASSESSEE HAS MANUFACTURED REFINED COTTON SEED OIL AS WELL AS REFINED SOYABEAN OIL. IT HAS ALSO TRADED COTTON SEED REFINED AND RBD PALMOLEIN OIL. THE AO COMPARED THE TRADING RESULTS OF THE ASSESSEE FO R THE IMPUGNED ASSESSMENT YEAR WITH THAT OF THE PRECEDING YEAR WHICH IS AS UNDER : F.Y. 2007 - 08 (A.YR 2008-09) F.Y. 2008 - 09 (A.Y. 2009-10) SALES 91.15 CRORES 110.73 CRORES G.P. 3.01 CRORES (3.3%) 2.72 CRORES (2.46%) N.P. 0.55 CRORES (0.6%) 0.22 CRORES (0.5%) 2.1 FROM THE ABOVE CHART, THE AO NOTED THAT THE GROS S PROFIT OF THE ASSESSEE HAS DECREASED FROM 3.30% TO 2.46% AND NET PRO FIT FROM 0.6% TO 0.5%. IN THE COMPARABLE CASE OF BHAGWATI REFINERY PVT. LTD. PACHORA, HE NOTED THAT THE ABOVE ASSESSEE HAS SHOWN GROSS PROFIT AT 2.5% FOR THE CURRENT YEAR AND 3.77% FOR PREVIOUS YEAR. TH E MAIN REASON FOR FALL IN GROSS PROFIT RATE IN THAT CASE WAS LOSS O CCURRED ON ACCOUNT OF TRADING OF PALMOLEIN OIL. IF THE LOSS OCCURRED ON A CCOUNT OF TRADING OF PALMOLEIN OIL IS REDUCED, THEN PERCENTAGE OF GROS S PROFIT IN THAT CASE WILL BE AT 3.01 %. LOOKING TO THESE FACTS, THE AO ASKED THE ASSESSEE TO EXPLAIN WITH SUPPORTING EVIDENCE TO ESTABLISH THAT THE CLAIMED FALL IN GROSS PROFIT AND NET PROFIT RATE IS JUSTIFIABLE. 2.2 IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE VIDE ITS SUBMISSION DATED 5-12-2011 SUBMITTED AS UNDER (WHICH HA S BEEN REPRODUCED BY THE AO AT PARA 2 OF HIS ORDER) 3 ITA NOS.781 AND 786/PN/2013 THERE ARE MANY FACTORS RESPONSIBLE FOR PROFITABILIT Y. PRICE FLUCTUATION IS VERY IMPORTANT FACTOR WHICH AFFECTS PROFITABILITY DIRECTLY. AS COMPARED TO LAST YEAR, STOCK OF FINISHED GOODS IS REDUCED NEAR ABOUT BY RS.50 LACS. TOTAL COST OF INVENTORY I N ALL IS REDUCED BY RS.81 LACS APPROXIMATELY. THIS IS MAINLY DUE TO PRICE FLUCTUATION. FACTORS INFLUENCING THE PRICES- 1) OIL SEED PRODUCTION DOMESTICALLY- 2) SUPPLY- DEMAND AND PRICE SCENARIO OF SUBSTITUTE OILS VIZ. PALM OIL, COTTON SEED OIL. 3) GOVERNMENT EXPORT IMPORT POLICY. 4) CRUSH MARGIN BETWEEN MEAL, OIL AND SEED. 5) INTERNATIONAL SOYA OIL PRICE MOVEMENT. 6) OIL PRICES ARE MARKET DRIVEN AND NOT IN THE CONT ROL OF ANY INDIVIDUAL/ INSTITUTION. ALL ABOVE FACTORS HAVE CONTRIBUTED IN REDUCED GROSS AND NET PROFIT OF THE ORGANIZATION ... ' 3. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO THE AO, IN ABSENCE OF PRODUC TION REGISTER AND DETAILS OF RECORDS FOR DAMAGES OF PACKING AND PACKAGIN G MATERIAL AND IN ABSENCE OF DETAILS OF SCRAP INCOME GENERATED OUT O F SALE OF DAMAGED GOODS, THE SHOWN TRADING RESULT CANNOT BE ACCE PTED. HE ISSUED A SUMMON U/S. 131 TO M.D. OF THE ASSESSEE COMPANY MR. VINOD AGRAWAL TO PRODUCE DIFFERENT REGISTERS. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE AO NOTED THAT THE PURCH ASES ARE NOT SUPPORTED BY PROPER EVIDENCE. NO INWARD REGISTERS ARE MAINTAINED AS THEY WERE NOT PRODUCED. NO FREIGHT EXPENDITURE VOUCHER S WERE ALSO PRODUCED. IN VIEW OF NON-PRODUCTION OF DETAILS AS CALLED FOR BY HIM THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE COMP ANY BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JCIT REPORTED IN 288 ITR 19. CONSIDERING THE FA CT THAT THE ASSESSEE COMPANY HAS SHOWN LESS GROSS PROFIT & LESS NET PROFIT BY 4 ITA NOS.781 AND 786/PN/2013 0.55% & 0.10% RESPECTIVELY, THE AO DETERMINED THE SUPPRESSION ON ACCOUNT OF GROSS PROFIT @ 0.55% & NET PROFIT @0.10% ON T HE TOTAL TURNOVER OF RS.110,73,47,328/-. HE ACCORDINGLY MADE ADDI TION OF RS. 60,90,410/- & RS. 11,07,347/- RESPECTIVELY TO THE TOTAL INC OME OF THE ASSESSEE ON ACCOUNT OF SUPPRESSION OF GROSS PROFIT AND NET PROFIT. 4. THE AO SIMILARLY NOTED FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT THE ASSESSEE HAS SHOWN YIELD OF 92% WHIC H ACCORDING TO HIM IS ON THE LOWER SIDE. HE THEREFORE ASKED THE ASSESSE E TO FURNISH AND PRODUCE PRODUCTION REGISTER, STOCK REGISTER, DETAILS O F EXCISE DUTY AND OCTROI PAID ETC. SO AS TO JUSTIFY THE YIELD PERCENTAGE SHOWN BY HIM. 5. THE AO NOTED THAT THE ASSESSEE DID NOT PRODUCE TH E REGISTERS RELATED TO PRODUCTION, OCCURRENCE OF LOSS, DAMAGED GOODS AS WELL AS MOVEMENT REGISTER OF THE GOODS. SIMILARLY, THE VERIFICATION OF THE VOUCHERS AS WELL AS ITS SUPPORTING EVIDENCES REVEALED THA T THE SHOWN BOOK RESULT CANNOT BE PUT TO VERIFICATION. IT WAS STATED THAT THERE WAS MISTAKE BY THE CHARTERED ACCOUNTANT IN SHOWING THE YIE LD AT 92% ALONG WITH 3CD REPORT. A REVISED CALCULATION SHOWING THE O VERALL PERCENTAGE OF UNIT AT 97% WAS FURNISHED. THE AO COMPARE D THE PERCENTAGE OF YIELD SHOWN BY THE ASSESSEE WITH THAT OF THE PERCENTAGE OF YIELD SHOWN BY THE COMPARABLE CASE M/S. BHAGWATI REFINE RIES LTD. WHICH REVEALED AS UNDER : IN THE CASE OF ASSESSEE IN THE CASE M/S. BHAGWATI REFINERY PVT. LTD. DIFFERENCE COTTON SEED REFINED OIL 97% 98.05% 1.05% SOYABEAN REFINED OIL 93.62% 96.04% 2.42% 6. THE AO SIMILARLY NOTED THAT THE MANUFACTURED OIL IS PA CKED IN TINS AND JARS OF VARIOUS SIZES PARTICULARLY OF 1 KG. 5 KG O R 15 KG OR 1 5 ITA NOS.781 AND 786/PN/2013 LTR/5 LTRS/ L5 LTRS. THE DETAILS OF THE PACKAGING MATERIAL FUR NISHED BY THE ASSESSEE GAVE THE FOLLOWING PICTURE : ITEMS OP.STOCK PURCHASED TOTAL DAMAGE CONSUMED CL. STOCK TINS (15 KG.) 15365 483107 498472 4883 485566 8023 TINS (5 KG) -- -- -- -- 636 -- JAR 860 25700 26560 488 23916 2156 JAR (5 LTRS) -- -- -- -- 70631 -- 7. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DAMAGE OF 4883 TINS OF 15 KGS. HOWEVER, THE DEBIT NOTES AVAILABLE ARE ONLY FOR 755 TINS. NO PROPER RECORD FOR THE DAMAGED TINS IS MAINTAINED BY THE ASSESSEE. NO PROPER RECORD OF ITS SALE AND GENERATION OF INCOME FROM S CRAP IS ALSO MAINTAINED. HE NOTED THAT IN CASE OF 5 LTRS JARS 488 JARS WERE DA MAGED. HOWEVER, NO PROPER RECORD OF DEBIT NOTES FOR THE DAMAG ED JARS ARE MAINTAINED BY THE ASSESSEE. ON BEING ASKED BY THE ASSE SSEE,IT WAS EXPLAINED THAT THE DAMAGED JARS DO NOT GENERATE ANY INCOME LIKE T INS. 8. THE AO SIMILARLY NOTED FROM THE DETAILS FILED BY THE ASSE SSEE RELATING TO THE PURCHASE, DAMAGE AS WELL AS CONSUMPTION O F LABELS DURING THE F.Y.2008-09 THAT NO DISTINCTIVE RECORD GIVING PA RTICULARS OF LABELS REQUIRED TO BE PASTED ON 15 KG TINS/15 LTR JARS O R 5 LTR TIN/5 LTR JAR ARE MAINTAINED AND THESE ARE TOTALLY MIXED. AFTER T AKING INTO ACCOUNT THE CONSUMED TINS AND JARS OF BOTH THE SIZES, T HE NUMBER OF CONSUMED ITEMS WAS CALCULATED BY THE AO AS UNDER : TINS OF 15 KG 485566 TINS OF 5 KG 636 JARS OF 15 KG 23416 JARS OF 5 LTRS 70631 ----------- TOTAL CONSUMPTION 580749 ----------- 9. ACCORDING TO THE AO, IT IS TRUE THAT ALL THESE CONSUM ED TINS OR JARS WILL REQUIRE ONE LABEL PER TIN/JAR. HOWEVER, FROM THE D ETAILS 6 ITA NOS.781 AND 786/PN/2013 FURNISHED ABOUT THE CONSUMPTION OF LABELS HE NOTED THAT THE ASSESSEE HAS CONSUMED ONLY 5,67,760 LABELS AS AGAINST THE CONSUME D TINS AND JARS OF 5,80,749. IN OTHER WORDS 12,989 TINS AND JARS WERE SOLD WITHOUT PASTING THE LABELS WHICH CANNOT BE TRUE. FROM THESE FACTS, THE AO INFERRED THAT NO PROPER RECORD REGARDING YIELD, PACKING MATERIAL ETC. HAVE BEEN MAINTAINED. IT GIVES RISE TO SUSPICION THAT THE PRODUCTION IS SUPPRESSED BY CLAIMING EXCESS SHORTAGE AND IT APPEARS THAT BY SHOWING DAMAGED PACKING MATERIAL, ASSESSEE SOLD T HE SUPPRESSED PRODUCTION IN THE SO CALLED DAMAGED TINS. THIS ACCORDING TO THE AO GETS FURTHER STRENGTHENED FROM THE FACT THAT NO PROPER RECORD OF DAMAGED GOODS AND ITS SALE GENERATING INCOME IS MAINTAINED. 10. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSE SSEE THE AO MADE ADDITION OF RS.30,17,364 AND RS.61,84,400/- ON ACCOUNT OF SUPPRESSED PRODUCTION OF COTTON SEED REFINED OIL AND SOY A REFINED OIL RESPECTIVELY BY OBSERVING AS UNDER : AFTER TAKING INTO ACCOUNT THE OVERALL FACTS, PERCEN TAGE OF EXCESS SHORTAGE SHOWN IS CONSIDERED AT 1 %. THEREFORE, THE SHORTAGES IN EACH PRODUCT AND ITS VALUE IS DETERMINED HEREUNDER- COTTON SEED REFINED OIL : TOTAL PRODUCTION 7184.2410 MT EXCESS CLAIMED SHORTAGE AT 1% WILL BE 71.842 MT VALUE PER MT @ RS.42,000/- RS.30,18,364/- SOYA REFINED OIL TOTAL PRODUCTION 15461.2120 MT EXCESS CLAIMED SHORTAGE AT 1% WILL BE 154.612 MT VALUE PER MT @ RS.40,000/- RS.61,84,400/- THEREFORE, AN ADDITION OF RS.30,17,364/- AND RS.61,84 ,400/- IS MADE ON ACCOUNT OF SUPPRESSED PRODUCTION OF COTTONSEED REFINED OIL AND SOYA REFINED OIL RESPECTIVELY. PENALTY' PROCEEDINGS U/S.271 (1)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND T HEREBY CONCEALMENT OF INCOME. 7 ITA NOS.781 AND 786/PN/2013 10.1 THE AO SIMILARLY NOTED THAT THE ASSESSEE HAS MADE INVESTMENT OF RS.5,01,000/- IN LIC MUTUAL FUND. APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D THE AO MADE ADDITION OF RS.2,505/- TO THE TOTAL INCOME OF THE ASSESSEE. 10.2 THUS THE AO MADE ADDITION OF RS.1,64,02,026/- TO THE T OTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE FOLLOWING : SR. NO. PARTI CULARS PARA NO. AMOUNT 1 ADDITION ON ACCOUNT OF FALL IN GROSS PROFIT RATIO BY 0.55% 4.6 60,90,410 2 ADDITION ON ACCOUNT OF FALL IN NET PROFIT RATIO 5 11,07,347 3 ADDITION ON ACCOUNT ALLEGED EXCESSIVE SHORTAGE @1% OF PRODUCTION OF COTTON SEED REFINED OIL 6.2 30,17,364 4 ADDITION ON ACCOUNT ALLEGED EXCESSIVE SHORTAGE @1% OF PRODUCTION OF SOYA REFINED OIL 6.2 61,84,400 5 ADDITION U/S.14A R.W.RULE 8D 7 2,505 TOTAL 1,64,02,026 11. BEFORE CIT(A) THE ASSESSEE STRONGLY OBJECTED TO THE REJECTION OF BOOK RESULTS BY THE AO. IT WAS SUBMITTED THAT THE ASS ESSEE HAS MAINTAINED DAY TO DAY RECORDS AND THE QUANTITATIVE DETA ILS HAVE BEEN MENTIONED IN TAX AUDIT REPORT WHICH ARE DULY CERTIFIED TO BE TRUE AND FAIR BY THE TAX AUDITOR. THE ASSESSEE HAS ALSO MAINTAINED QUANTITATIVE DETAILS OF PACKING MATERIALS. IT WAS SUBMITTED THAT ALL THE PURCHASES ARE SUPPORTED BY PURCHASE BILLS AND ALL THE PAYMENTS IN R ESPECT OF PURCHASES AND PACKING MATERIALS HAVE BEEN MADE BY ACCO UNT PAYEE CHEQUES ONLY. IT WAS SUBMITTED THAT IN ABSENCE OF PUR CHASES THERE CANNOT BE SALES. 12. AS REGARDS THE ALLEGATION OF THE AO THAT THE BILLS OF S ALES AND PURCHASE, IF COMPARED, SHOW HIGHER GP PERCENTAGE, IT WAS SUBMITTED THAT THIS ALLEGATION OF THE AO IS NOT SUPPORTED BY ANY WO RKING OR DETAILS. THE ASSESSEE WORKED OUT THE GP ON THE BASIS O F SAMPLE SALE 8 ITA NOS.781 AND 786/PN/2013 BILLS AND PURCHASE BILLS AND SUBMITTED THAT THE GP SHOWN B Y THE ASSESSEE IN THE AUDITED ACCOUNTS IS IN COMMENSURATE WITH THE QUANTITATIVE DETAILS MAINTAINED FOR THE WHOLE YEAR. 13. AS REGARDS THE ALLEGATION OF THE AO THAT NO PROPER JUSTIFICATION WAS FILED FOR DAMAGES OF PACKING MATERIAL IS CONCERNED IT WA S SUBMITTED THAT TOTAL NUMBER OF DAMAGED TINS AND JARS IS 5371 OUT OF TOTAL PURCHASES OF 5,08,807 TINS AND JARS WHICH WERE RETU RNED TO THE SUPPLIERS AFTER NOTING THAT THE SAID MATERIALS PURCHASED IS NOT UPTO THE STANDARD. DEBIT NOTES WERE ISSUED TO THE SUPPLIERS WHICH WERE RECORDED IN THE BOOKS OF ACCOUNT AND ALSO BY THE SUPPLIE RS. FURTHER, THE GOODS REJECTED WERE ABOUT 1% ONLY OF THE TOTAL PURCHASES. 14. SO FAR AS THE ALLEGATION OF THE AO THAT THE WORKING O F PURCHASES OF TINS, JARS AND LABELS SHOW THAT THERE IS EXCESS CONSUM PTION OF TINS AND JARS BY 12,289 THAN LABELS AND THAT THE TINS AND JARS CANNOT BE SOLD WITHOUT LABELS IS CONCERNED IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED THE OPENING STOCK AND PURCHASES OF LABELS AT 2,06 ,065 AND 5,36,025 RESPECTIVELY. THEREFORE, IT CANNOT BE UNDERSTOOD AS TO HOW THE AO HELD THAT DURING THE YEAR THE LABELS CONSUMED WE RE 5,60,760. IT WAS SUBMITTED THAT SINCE THE TINS AND JARS SOLD WORKE D OUT BY THE AO ARE MORE THAN THE LABELS CONSUMED, THERE CANNOT BE SUPPRESSION OF SALE. 15. AS REGARDS THE COMPARISON OF BHAGWATI OIL INDUSTRIES FOR COMPARING THE PERCENTAGE OF SHORTAGE IS CONCERNED, IT W AS SUBMITTED THAT THE SAID PARTY IS NOT A COMPARABLE CASE WITH THAT OF THE ASSESSEE. IT WAS SUBMITTED THAT BHAGWATI OIL INDUSTRIES HAS USED G UMMED SOYA RAW OIL WHEREAS THE ASSESSEE HAS USED SOYA SOLVENT RA W OIL WITH GUM WHICH RESULTS HIGHER SHORTAGE BY 3%. FURTHER, THE QUALITY OF THE OIL 9 ITA NOS.781 AND 786/PN/2013 MANUFACTURED BY BHAGWATI REFINERY PVT. LTD. IS INFERIOR AS COM PARED TO THE QUALITY OF OIL REFINED BY THE ASSESSEE. THEREFORE, THE S ALE RATE OF OIL REFINED BY THE ASSESSEE IS MUCH MORE THAN THAT OF BHAGW ATI OIL INDUSTRIES LTD. IT WAS SUBMITTED THAT BECAUSE OF THE A BOVE BHAGWATI OIL INDUSTRIES LTD. HAS BEEN CLOSED. 16. SO FAR AS THE ALLEGATION OF THE AO REGARDING THE FALL ING OF GP RATE AND NP RATE AS COMPARED TO THE PRECEDING YEAR IT WAS SUBMITTED THAT OIL PRICES ARE HIGHLY FLUCTUATING AND HENCE GROSS PROFIT IN T HE BUSINESS OF THE ASSESSEE DEPENDS UPON THE SAID PRICE FLUCTUATION. THEREFORE, THE GROSS PROFIT FOR EACH YEAR CANNOT REMAIN IDENTICAL. IT WAS ARGUED THAT WHEN PURCHASES AND SALES ARE SUPPORTED BY PROPE R BILLS AND QUANTITATIVE RECORDS ARE MAINTAINED NO GP ADDITION CAN BE MADE FOR REDUCTION IN THE GP PERCENTAGE AS COMPARED TO THE PRECEDING YEA R. 17. SO FAR AS RELIANCE OF THE AO ON THE DECISION OF THE HO NBLE SUPREME COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT (SUP RA) IS CONCERNED IT WAS SUBMITTED THAT THE SAID CASE IS NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE AND IS DISTINGUISHABLE. IT WAS SUBMITTED THAT IN THAT CASE THE REJECTION OF BOOK RESULT WAS JUSTIFIED SIN CE THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QUANTITATIVE DETAILS OF THE GOODS TRADED. THERE WAS NO BASIS FOR VALUATION OF CLOSING STOCK. FURTHER, THE LOWER AUTHORITIES INCLUDING THE TRIBUNAL HAVE R ECORDED A FINDING THAT THE PURCHASES TO THE EXTENT OF RS.42 LAKHS W ERE NOT FOUND TO BE GENUINE. THE GP RATE OF THE COMPARATIVE CASES AR E 35% AND 43.8% AS COMPARED TO THE GP RATE OF 13.49% DECLARED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES THE HONBLE SUPREME COURT H ELD THAT REJECTION OF BOOK RESULTS IS JUSTIFIED. HOWEVER, NO SUCH FAC TS EXIST IN THE CASE OF THE ASSESSEE. IT WAS ACCORDINGLY ARGUED T HAT THE DECISION RELIED ON BY THE AO IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 10 ITA NOS.781 AND 786/PN/2013 18. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) HELD THAT THE REASONS GIVEN BY THE AO FOR REJECTING THE BOOKS OF ACCOUNT U/S.145 OF THE ACT IS NOT JUSTIFIED UNDER THE FA CTS AND CIRCUMSTANCES OF THE CASE. WHILE DOING SO HE HELD THAT TH E RELIANCE PLACED BY THE AO ON THE DECISION IN THE CASE OF KANCHWALA GEMS (SUPRA) IS MISPLACED AS THE FACTS OF THE SAID CASE ARE TOT ALLY DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSESSEE. HE FURTHER NO TED THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE ASSESSMEN T ORDER WHICH WARRANTS REJECTION OF BOOK RESULTS. HE ACCORDINGLY HEL D THAT THE AO IS NOT JUSTIFIED IN REJECTING THE AUDITED BOOKS OF ACCOUNT U/ S.145 OF THE I.T. ACT. 19. SO FAR AS ADDITION OF RS.60,90,410/- TO THE GROSS PROFIT AND RS.11,07,347/- TO THE NET PROFIT IS CONCERNED THE LD.CIT(A) DELETED THE SAME BY OBSERVING AS UNDER : 5.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICE D THAT THE APPELLANT HAS MAINTAINED BOOKS' OF ACCOUNTS AND SUPPORTING RECORD INCLUDING STOCK/QUANTITATIVE RECORD IN THE COURSE OF ITS BUSINESS A ND HAS ALSO AUDITED THE SAME. THE BOOK RESULTS HAVE BEEN CERTIFIED BY THE AUDITOR TO BE TRUE AND FAIR. THE AO HAS REJECTED BOOK RESULTS BY STAT ING THE REASONS, WHICH HAVE BEEN REASONABLY REBUTTED BY THE APPELLAN T AS CAN BE NOTED FROM PARA 5 ABOVE. IT HAS ALSO BEEN NOTICED THAT FOR REJECTING THE BOOK RESULTS U/S, 145 OF THE ACT, THE AO HAS RELIED ON THE D ECISION IN THE CASE OF KANCHWALA GEMS VS. JCIT (2007) 288 ITR 10 (SC) STATING THAT THE FACTS OF THE SAID CASE ARE SQUARELY APPLICABLE TO THE CASE OF TH E APPELLANT. IN THE SAID CASE THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QUA NTITATIVE DETAILS OF GOODS TRADED, THERE WAS NO BASIS FOR VALUATI ON OF CLOSING STOCK, THE LOWER AUTHORITIES INCLUDING CIT(A) & TRIBUNAL HA VE RECORDED THE FINDING THAT PURCHASES TO THE EXTENT OF RS.42 LAC WERE NOT FOUND TO BE GENUINE AND G.P. RATE OF COMPARATIVE CASES WAS 35% AN D 43.8% AS AGAINST DECLARED BY THE ASSESSEE AT 13.49%. NO SUCH FACTS EXIST IN THE CASE UNDER APPEAL. IT IS ALSO SETTLED LAW THAT ADDITION ON ACCOUN T OF GROSS PROFIT OR NET PROFIT CANNOT BE MADE ONLY FOR THE REASON THAT THERE IS SOME REDUCTION IN THE PERCENTAGE OF THE SAME COMPARED TO THE PRECEDING YEAR. IT IS ALSO SETTLED LAW THAT IN THE CASES WHERE THE ASSESSEE HAS MAINTA INED STOCK RECORD, PRODUCTION RECORD AND REGULAR BOOKS OF ACCOU NTS WHICH ARE DULY AUDITED, ADDITION TOWARDS FALL IN G.P./N.P. CANNOT B E MADE. THIS PROPOSITION IS SUPPORTED BY THE DECISION IN THE FOLLOWI NG CASES RELIED ON BY THE APPELLANT : 11 ITA NOS.781 AND 786/PN/2013 I) CIT VS. SMT. POONAM RANI (2010) 41 DTR 194, 326 ITR 223 (DEL- HC)- IN THIS CASE THE BOOKS OF ACCOUNTS WERE REJECT ED BY THE AO ON ACCOUNT OF FALL IN GROSS PROFIT. THE AO HAS NOT FOU ND ANY DEFECT IN THE BOOKS OF ACCOUNT. IT HAS BEEN HELD THAT ABSENCE OF STOCK REGISTER ALONE CANNOT BE THE GROUND TO INFER THAT ACCOUNTS ARE INA CCURATE OR' INCORRECT. THE EXPLANATION OF THE ASSESSEE FOR FALL IN GROSS PROFIT IS FOUND TO BE ACCEPTABLE AND HENCE REJECTION OF BOOK RESULTS AND ADDITION WERE HELD TO BE UNJUSTIFIED. II) MALANI RAMJIVAN JAGANNATH VS. ACIT (2009) 316 ITR 120 (RAJ-HC)- IN THIS CASE THE ACCOUNTS AND INVENTORIES OF STOCK HAV E BEEN CORRECTLY MAINTAINED AND REASONABLE EXPLANATION FOR REDUCTION IN PROFIT IN THE RELEVANT YEAR HAS BEEN SUBMITTED. IT WAS HELD THAT REJECTION OF BOOKS OF ACCOUNT WAS UNJUSTIFIED. III) BABU JEWELLERS VS. ITO (2011) 141TTJ 73 (CHD) -IN THIS CASE IT HAS BEEN LAID DOWN THAT BOOKS OF ACCOUNTS CANNOT BE REJ ECTED AND GROSS PROFIT ADDITION CANNOT BE MADE ON ACCOUNT OF FALL I N C.P. IV) RAJASTHAN COMMERCIAL HOUSE VS. DCIT (2004) 86 TTJ 851 (JD) - IN THIS CASE THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STO CK REGISTER AND QUANTITATIVE DETAILS OF GOODS PURCHASED AND SOLD AN D ALSO OF CLOSING STOCK. THEREFORE THE REJECTION OF BOOKS OF ACCOUNT U/S.145 WAS JUSTIFIED. THE GROSS PROFIT ADDITION ON ACCOUNT OF SLIGHT FALL IN GROSS PROFIT RATE HAS BEEN DELETED AS THE ASSESSEE HAS EX PLAINED THE REASONS FOR THE SLIGHT FALL IN GROSS PROFIT RATE. 5.5 IN THE CASE UNDER APPEAL THERE IS SLIGHT FALL IN GROSS PROFIT AS WELL AS NET PROFIT PERCENTAGE COMPARED TO THE PRECEDING YEA R. HOWEVER, THE APPELLANT HAS STATED THAT FLUCTUATION IN THE PRICES OF RAW MATERIAL I.E. SOYABIN, COTTON, SOYABIN OIL AND COTTON SEEDS ETC. HA VE LED TO FALL IN G.P. AND N.P. FURTHER, THE APPELLANT HAS MAINTAINED STOCK/ QUANTITATIVE RECORD AND HAS ALSO MAINTAINED BOOKS OF ACCOUNT AND SUPPORTING RECORD WHICH ARE DULY AUDITED. IT IS A KNOWN FACT THAT THE GROSS PR OFIT AND NET PROFIT PERCENTAGE CANNOT REMAIN CONSTANT FOR ALL DIFFERENT YEARS AS THE SAME DEPENDS UPON MARKET CONDITIONS. I HAVE PERUSED THE REC ORDS OF M/S. BHAGWATI REFINERY (P) L.TD. I FIND THAT THE SAME AO HAS NOT ACCEPTED THE BOOK RESULTS OF THE SAID COMPANY ON THE BASIS OF WHICH H E HAD MADE ADDITIONS IN THE GP IN THE PRESENT CASE. FURTHER, GP I N THE CASE OF M/S. BHAGWATI REFINERY (P) LTD DECREASED FROM 3.77% IN AY 2008-09 TO 2.5% IN AY 2009-10 I.E, DECREASE OF 33.69% OVER THE LAST Y EAR AS AGAINST DECREASE OF 25.45% IN THE CASE OF THE APPELLANT. EVEN IF LOSS SUFFERED BY M/S. BHAGWATI REFINERY (P) LTD. ON SALE OF PALM OIL IS TAKEN INTO ACCOUNT, THERE IS A DECREASE OF GP% BY 20.16 OVER THE LAST YEAR . I FIND THAT M/S BHAGWATI REFINERY (P) LTD SUFFERED LOSS ON SALE OF PALM OIL BECAUSE OF WIDE FLUCTUATIONS IN THE PRICE OF PALM OIL. IN THE PRESENT CASE ALSO THE APPELLANT HAS ASCRIBED LOW GP DUE TO THE PRICE FLUCTUATIONS IN O IL AND OIL SEEDS. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CO NSIDERED VIEW THAT THE AO IS NOT JUSTIFIED IN MAKING GROSS PROFIT ADDITIO N OF RS. 60,90,410/- AND NET PROFIT ADDITION OF RS. 11,07,347/- SIMPLY FOL LOWING THE CASE OF M/S. BHAGWATI REFINERY (P) LTD. WITHOUT EXAMINING THE RE ASONS CITED BY THE APPELLANT FOR FALL IN GP RATE. MOREOVER, WHILE DECI DING THE 4 TH GROUND, ADDITION ON ACCOUNT OF EXCESSIVE SHORTAGE IS BEING PART LY CONFIRMED, WHICH SHALL ALSO RESULT INTO ADDITION TO GROSS PROFIT AND NET PROFIT TO THE EXTENT OF RS. 52,56,740/-. THEREFORE IN VIEW OF THE ABOVE FACT S AND DISCUSSION, NO SEPARATE ADDITION TOWARDS GROSS PROFIT AND NET PROFIT I S REQUIRED. THE ADDITIONS TOWARDS GROSS PROFIT OF RS.60,90,410/- AND N ET PROFIT ADDITION OF 12 ITA NOS.781 AND 786/PN/2013 RS. 11,07,347/- ARE THEREFORE, DELETED. GROUND NOS. 1 & 2 ARE ALLOWED. 20. SO FAR AS ADDITION OF RS.30,17,364/- ON ACCOUNT OF EXCE SSIVE SHORTAGE OF PRODUCTION OF COTTON SEED REFINED OIL, THE LD.C IT(A) DELETED THE SAME BY OBSERVING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICE D THAT IN ORDER TO MAKE ADDITION ON ACCOUNT OF EXCESSIVE SHORTAGE THE AO HAS MENTIONED WORKING OF PURCHASES OF TINS, JARS AND LABELS AS PER WHIC H THERE IS AN EXCESS CONSUMPTION OF TINS AND JARS BY 12289 THAN LABELS. THE AO THEREFORE, CONCLUDED THAT THE TINS AND JARS CANNOT BE SOLD LABELS AND HENCE THE SAID SALE IS REGARDED AS SUPPRESSED SALE OF EXCESSIVE SHOR TAGE CLAIMED. IN THIS REGARD THE APPELLANT HAS SUBMITTED AS UNDER : 'THE AO HAS MENTIONED THAT THE ASSESSEE HAS SOLD 58 0749 JARS AND TINS AND HAS CONSUMED ONLY 567760 LABELS. THE, AO THEREFORE CONCLUDED THAT THE ASSESSEE HAS SOLD THE OIL OUT OF BOOKS AND HENCE CL AIMED MORE SHORTAGE. IN FACT AS PER THE SUBMISSION FILED THE OPENING STOCK AND PURCHASES OF LABELS WERE 206065 AND 536025. THEREFORE IT COULD NOT BE U NDERSTOOD AS TO HOW THE AO HAS HELD THAT DURING THE YEAR THE LABELS CON SUMED WERE 567760. FURTHER AS THE TINS AND JARS SOLD WORKED OUT BY THE AO ARE MORE THAN THE LABELS CONSUMED, THERE CANNOT BE SUPPRESSION OF SAL E'. IN VIEW OF THE ABOVE FACTS POINTED OUT BY THE APPEL LANT, THE ABOVE REASON STATED BY THE AO FOR MAKING ADDITION ON ACCOUNT OF ALLEGED EXCESSIVE CLAIM OF SHORTAGE IS NOT JUSTIFIED. 7.1 ANOTHER REASON CLAIMED BY THE AO IS THAT IN THE C OMPARABLE CASE OF M/S. BHAGWATI REFINERY PVT. LTD., THE PRODUCTION OF SOYA REFINED OIL AND COTTON REFINED OIL SHOWN IS ON HIGHER SIDE COMPARED TO THE PRODUCTION SHOWN BY THE APPELLANT. IN THIS REGARD THE APPELLANT HAS POINTED OUT FOLLOWING REASONS FOR HIGHER PRODUCT' SHOWN BY M/S. BHA GWATI REFINERY PVT. LTD. I) THE RAW MATERIAL USED BY M/S. BHAGWATI REFINERY PVT. LTD. IS DE- GUMMED SOYA RAW OIL WHEREAS THE APPELLANT HAS USED SOYA RAW OIL WITH GUM AND HENCE THE SHORTAGE IN THE CASE OF THE APPEL LANT IS BOUND TO BE ON HIGHER SIDE. II) IN THE COMPARABLE CASE OF M/S. BHAGWATI REFINER Y PVT. LTD. NO BY PRODUCTS HAVE BEEN SHOWN AND CONSIDERED WHEREAS IN THE CASE OF THE APPELLANT THE BY PRODUCTS I.E. ACI D OIL, SLUDGE AND SOAP STOCK HAVE BEEN PRODUCED TO THE EXTENT OF 2.39% WHEREAS IN THE SAID COMPARABLE CASE NO BY PRODUCTS WERE CONSIDERED AND SHOWN. III) THE QUALITY OF REFINED COTTON OIL AND SOYA OIL PRODUCED BY THE APPELLANT IS MUCH BETTER THAN THE QUALITY OF M/S. B HAGWATI REFINERY PVT. LTD. AND HENCE THE SAME HAS BEEN SOLD IN THE MARKET AT HIGHER PRICE AND HENCE SHORTAGE IS BOUND TO BE ON HIGHER SIDE. 13 ITA NOS.781 AND 786/PN/2013 IV) MACHINERY USED BY THE APPELLANT FOR MANUFACTURI NG COTTON SEED REFINED OIL IS MACHINERY OF DESMET MAKE OF GERMANY RESULTING IN HIGHER QUALITY OF FINISHED PRODUCT AND HIGHER SHORTAGE OF 1 %. V) THE COMPARABLE CASE IS THAT OF SANJAY COTTON SEE DS INDUSTRIES, DHULE, WHO USED THE SAME MACHINERY AND WAS HAVING S HORTAGE OF 3% IN 5 ASSESSMENT YEARS WHICH HAVE BEEN ACCEPTED IN ASSESS MENTS U/S.143(3). IN THE SAID CASE THE SAME MACHINERY AS USED BY THE APP ELLANT HAS BEEN USED. 7.2 IN VIEW OF THE ABOVE CONTENTIONS RAISED BY THE APPELLANT, THE CASE OF M/S. BHAGWATI REFINERY PVT. LTD. DOES NOT SEEM TO BE A COMPARABLE CASE IN STRICT SENSE ESPECIALLY IN VIEW OF DIFFERENT TYPE OF RA W MATERIAL USED BY IT, THE DIFFERENT MACHINERY USED BY IT AND AS NO BY PROD UCT HAS BEEN SHOWN/CONSIDERED BY IT/AO. IN RESPECT OF ADDITION TOWA RDS SHORTAGE IN COTTON REFINED OIL THE APPELLANT HAS POINTED OUT A C OMPARABLE CASE OF SANJAY COTTON SEED INDUSTRIES. IN THIS COMPARABLE CASE THE SHORTAGE IS 3% WHICH IS SIMILAR TO THE CASE OF THE APPELLANT AND THE A.O. HAS ALSO ACCEPTED THE SAID SHORTAGE IN THE SCRUTINY ASSESSMENT OF VARIOUS YEA RS. IN THE SAID COMPARABLE CASE THE COMPANY HAS USED SAME MACHINERY AND RAW MATERIAL. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF RS. 3 0,17,364/- ON ACCOUNT OF ALLEGED EXCESSIVE SHORTAGE OF COTTON REFINED OIL. THE SAID ADDITION OF RS.30,17,364/- IS DELETED. THE A.O. IS DIRECTED ACCORD INGLY GROUND NOS. 3 IS ALLOWED. 21. HOWEVER, AS REGARDS THE ADDITION OF RS.68,84,400/- ON ACCOUNT OF SUPPRESSED PRODUCTION OF SOYA REFINED OIL THE LD.CIT(A) RE STRICTED THE SAME TO RS.58,44,338/- BY OBSERVING AS UNDER : 7.3 IN RESPECT OF ADDITION ON ACCOUNT OF SHORTAGE I N SOYA REFINED OIL, IT HAS BEEN NOTICED THAT IN THE CASE OF M/S. BHAGWATI REF INERY PVT. LTD. A DIFFERENT TYPE OF RAW MATERIAL IS BEING USED BY IT. T HE MACHINERY USED BY IT IS ALSO DIFFERENT AND THERE IS NO BY PRODUCT. HOWEVER, THE APPELLANT HAS NOT BROUGHT ON RECORD ANY COMPARABLE CASE IN SUPPORT OF H IS CLAIM THAT THE SHORTAGE SHOWN BY IT IN RESPECT OF SOYABIN REFINED OIL IS REASONABLE. THE YIELD IN RESPECT OF SOYA OIL HAS BEEN SHOWN BY THE APPE LLANT AT 93.62% AND THE BY PRODUCTS ARE SHOWN AT 2.39%, THEREFORE RESULTAN T NET SHORTAGE WORKS OUT TO 3.99% . I HAVE FOUND IN ONE OF THE RESEA RCH PAPERS NAMELY ASSESSING THE FEASIBILITY OF PROCESSING AND MARKETING NICHE SOY OIL WRITTEN BY SERGIO H. LENCE AND SANJEEV AGRA WAL (SERGIO H. LENCE IS AN ASSOCIATE PROFESSOR OF ECONOMICS AND SANJEEV AGRAWA L IS AN ASSOCIATE PROFESSOR OF MARKETING, BOTH AT IOWA STATE UNIVERSITY. ) THAT ONE LB OF CRUDE OIL YIELDS 0.97 LB OF REFINED OIL (I.E. 97% YIELD). CONSIDERING THE TOTALITY OF THE FACTS, DISCREPANCIES IN MAINTENANCE OF RECORD POI NTED OUT BY THE A.O. AND TO MEET THE ENDS OF THE JUSTICE THE ADDITION ON A CCOUNT OF SHORTAGE IN SOYA OIL IS THEREFORE, RESTRICTED TO 0.90% AS AGAINST 1 % MADE BY THE A.O. THE ADDITION ON ACCOUNT OF SHORTAGE IN PRODUCTION OF REFINED OIL IS THEREFORE RESTRICTED TO RS.58,44,338/- AS AGAINST RS.61, 84,400/- MADE BY THE A.O. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NO.4 IS PARTLY ALLOWED. 14 ITA NOS.781 AND 786/PN/2013 22. AS REGARDS THE ADDITION OF RS.2,505/- ON ACCOUNT OF DIS ALLOWANCE U/S.14A R.W. RULE 8D THE LD.CIT(A) DELETED THE SAME BY OBS ERVING AS UNDER : 8.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICE D THAT THE APPELLANT HAS NOT CLAIMED ANY EXPENDITURE IN THE FORM OF INTER EST ETC. WHICH IS CAN BE REGARDED AS RELATED TO INVESTMENT IN LIC MUTUAL FU ND. THE APPELLANT HAS POINTED AM THAT ITS SHARE CAPITAL AND RESERVE AND SU RPLUS IS MUCH MORE THAN THE INVESTMENT OF RS. 5,01,000/- IN MUTUAL FUND. THE APPELLANT HAS ALSO POINTED OUT THAT EVEN THE PROFIT/TAXABLE INC OME OF THE CURRENT YEAR IS RS. 32.87 LACS WHICH MUCH MORE THAN THE SAID IN VESTMENT OF RS. 5,01,000/- IN MUTUAL FUND. IT HAS BEEN LAID DOWN IN THE CASES OF CIT VS. HERO CYCLES LTD. (2010) 323 ITR 518 (P&H) AND WINSOME TEXTILE INDUSTRIES 319 ITR 204 (P & H), DCIT VS. MAHARASHTRA SE AMLESS LTD. (ITAT DELHI) THAT NO DISALLOWANCE CAN BE MADE U/S.14A OF IN TEREST ON BORROWED FUNDS WHERE' IN CASE OF MIXED FUNDS, IT IS NOT POSSIBLE T O ASCERTAIN WHETHER THE INVESTMENT IN TAX FREE BONDS IS OUT OF THE ASSESSEE'S O WN FUNDS, THE SOURCE OF INVESTMENT IN THE TAX FREE BONDS IS IDENTIFI ED AND THE ASSESSING OFFICER FAILED TO ESTABLISH ANY NEXUS BETWEEN THE BOR ROWED FUNDS AND THE INVESTMENTS IN THE TAX FREE BONDS. THEREFORE, THE APPO RTIONMENT ON A PRO- RATA BASIS WAS IMPROPER IN THE ABSENCE OF ANYTHING BROU GHT BY THE AO TO REBUT THE ASSESSEE'S STAND THAT THE INVESTMENT IN THE TAX FREE BONDS HAD BEEN MADE OUT OF THE INTEREST FREE OWN FUNDS. IT HAS A LSO BEEN LAID DOWN IN THE CASE OF BUNGE AGRIBUSINESS (INDIA] (P) LTD. VS. DCIT (2011) 64 DTR 201 (MUM.TRIB) THAT IF THERE WERE FUNDS AVAILABLE, B OTH INTEREST FREE AND INTEREST BEARING, THEN A PRESUMPTION WOULD ARISE THAT INTEREST FREE FUNDS HAVE BEEN GENERATED FOR INVESTMENTS AND NO DISALLOWANC E OF INTEREST COULD BE MADE UNDER SECTION 14A'. THIS CONTENTION IS ALSO SUPPORTED IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340. 8.2 IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RATIO LAID DOWN BY THE ABOVE MENTIONED DECISIONS, I AM OF THE CONSIDERED VIEW THAT THE AO IS NOT JUSTIFIED IN ALLOWING RS.2,505/- BY APPLYING PROVISION S OF SECTION 14A OF THE ACT. THE ADDITION OF RS.2,505/- IS THEREFORE DEL ETED. GROUND NO.5 STANDS ALLOWED. 23. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CIT(A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : GROUNDS BY REVENUE : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN NOT UPHOLDING THE ACTION OF THE AO. IN RESPECT OF REJECTING BOOKS OF ACCOUNT U/S 145 OF THE ACT WHEN AO. HAD POINTED OUT DEFECTS OF THE BOOKS OF ACCOUNT IN HIS ASSESSMENT ORDER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C IT(A) ERRED IN DELETING THE ADDITIONS OF RS. 60,90,410/- MADE BY THE AO. ON ACCOUNT OF FALL IN GROSS PROFIT RATIO. 15 ITA NOS.781 AND 786/PN/2013 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C IT(A) ERRED IN DELETING THE ADDITIONS OF RS. 11,07,347/- MADE BY THE AO. ON ACCOUNT OF FALL IN NET PROFIT RATIO. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C IT(A) ERRED IN DELETING THE ADDITIONS OF RS. 30,17,364/- MADE BY THE AO. ON ACCOUNT OF SUPPRESSED PRODUCTION COTTON SEEDS REFINED OIL. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C IT(A) ERRED IN DELETING THE ADDITIONS OF RS.2,505/- MADE BY THE AO. U/S 14A R.W. RULE 8D. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E ORDER OF THE CIT(A) BE CANCELLED AND THAT OF THE AO. BE RESTORED. GROUNDS BY ASSESSEE : 1. ON THE FACTS AND IN LAW THE LD.CIT(A) HAS ERRED I N CONFIRMING ADDITION OF RS.58,44,338/- AS AGAINST RS.61,84,400/- MA DE BY THE A.O. ON ACCOUNT OF ALLEGED EXCESSIVE SHORTAGE. 2. ON THE FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS : I) THAT THE APPELLANT HAS MAINTAINED DAY TO DAY STOCK RECORD AND HENCE NO ADDITION ON ACCOUNT OF SHORTAGE CAN BE MADE. II) THAT IN VIEW OF SETTLED POSITION OF LAW ADDITION CANNOT BE MADE ON THE BASIS OF RESEARCH PAPERS IGNORING THE ACTUA L FACTS OF THE CASE. III) THAT ADDITION OF SHORTAGE CANNOT BE MADE IGNORI NG COMPARABLE CASE AND WITHOUT POINTING OUT ANY OTHER C ASE WHICH CAN BE COMPARED WITH THE APPELLANTS CASE. 24. GROUND OF APPEAL NO.1 BY THE REVENUE RELATES TO REJ ECTION OF BOOKS OF ACCOUNT U/S.145 OF THE I.T. ACT BY THE AO WHICH WAS HELD TO BE NOT CORRECT BY THE CIT(A). 25. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE CIT(A) IN HOLDING THAT REJECTION OF BOOKS OF AC COUNT BY THE AO IS NOT CORRECT. ADMITTEDLY, THE ASSESSEE HAS MAINTAIN ED CASH BOOK, LEDGER, PURCHASE AND SALES REGISTERS, QUANTITATIVE DETAILS E TC. AND ITS ACCOUNTS ARE AUDITED. NO SPECIFIC DEFECTS HAVE BEEN POINT ED OUT BY THE AO. IN OUR OPINION BOOK RESULTS CANNOT BE REJECTED MER ELY ON THE GROUND THAT THERE IS FALL IN THE GP RATIO AND NP RATIO DUR ING THE YEAR AS 16 ITA NOS.781 AND 786/PN/2013 COMPARED TO THE PRECEDING ASSESSMENT YEAR OR LOWER RA TE OF GP AND NP OF THE ASSESSEE AS AGAINST HIGHER RATE SHOWN BY A COMP ARATIVE CASE. WHEN THE ASSESSEE HAS PRODUCED THE VARIOUS DETAILS, TH E AO IS REQUIRED TO POINT OUT SPECIFIC DEFECTS IN THE ACCOUNTS SO AS TO JUSTIFY REJECTION OF BOOK RESULTS. IN THE INSTANT CASE, THERE IS NO SUCH ALLEGATION BY THE AO. THE VARIOUS REASONS GIVEN BY THE AO FOR REJECT ING THE BOOK RESULTS HAVE BEEN REASONABLY REBUTTED BY TH E ASSESSEE BEFORE THE CIT(A) WHICH HAVE BEEN REPRODUCED BY THE LD.CIT(A) AT PARA 5 OF HIS ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE CIT(A). E VEN THE DECISION RELIED ON BY THE AO HAS ALSO BEEN SUCCESSFULLY DIS TINGUISHED BY THE ASSESSEE BEFORE THE CIT(A). SINCE THE CIT(A) WHILE H OLDING THAT THE AO IS NOT JUSTIFIED IN REJECTING THE AUDITED BOOKS OF A CCOUNT U/S.145 OF THE ACT HAS GIVEN A CATEGORICAL FINDING THAT TH E FACTS RELIED ON BY THE AO IN THE CASE OF KANCHWALA GEMS (SUPRA) ARE T OTALLY DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSESSEE AND THERE IS NO MENTION OF ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT IN T HE BODY OF THE ASSESSMENT ORDER AND IN ABSENCE OF ANY CONTRARY M ATERIAL BROUGHT TO OUR NOTICE BY THE LD. DEPARTMENTAL REPRESENTATIVE WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. THE FIRST GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 26. IN GROUND OF APPEAL NO.2 THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.40,90,410/- ON ACC OUNT OF FALL IN GP AND IN GROUND OF APPEAL NO.3 THE REVENUE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.11,07,347 /- ON ACCOUNT OF FALL IN THE NP RATIO. 17 ITA NOS.781 AND 786/PN/2013 27. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OPPOS ED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT PRODUCED THE REQUISITE DETAILS AS CALLED FOR BY THE AO FOR WHICH HE HAS REJECTED THE BOOK RESULTS AND MADE ADDITION ON ACCOUNT OF GROSS PROFIT AND NET PROFIT. REFERRING TO THE ASSESSMENT ORDER HE SUBMITTED THAT THE AO HAS GIV EN VALID REASONS FOR REJECTING THE BOOK RESULTS AND GOING FOR GP AND NP ADDITIO N WHICH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE ARE JUSTIFIED. THEREFORE, THE CIT(A) WAS NOT AT ALL JUSTIFIED IN DELETING SUCH ADDITION. 28. THE LD. COUNSEL FOR THE ASSESSEE WHILE SUPPORTING THE ORDER OF THE CIT(A) ON THE ABOVE ISSUES REFERRED TO PAGE 8 TO 24 OF THE PAPER BOOK AND DREW THE ATTENTION OF THE BENCH TO THE QUANT ITATIVE DETAILS OF OPENING STOCK, PURCHASES AND SALES, CONSUMPTION AND CLOSI NG STOCK OF VARIOUS ITEMS. REFERRING TO THE PROVISIONS OF SECTION 145 O F THE I.T. ACT HE SUBMITTED THAT THE AO HAS TO POINT OUT SPECIFIC DEFEC TS WHILE REJECTING THE BOOK RESULTS. HOWEVER, IN THE INSTANT CASE THE AO HAS NOT DONE SO. 29. REFERRING TO PAGES 61 TO 71 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE R EPLY GIVEN TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETT ER DATED 05-12-2011 WHEREIN THE ASSESSEE HAS GIVEN ELABORATE S UBMISSIONS TO THE VARIOUS QUERIES RAISED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. REFERRING TO PAGES 72 TO 75 OF THE PAPER B OOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE DETAILED SUBMISSION GIVEN BEFORE THE AO VIDE LETTER DATED 1 4-12-2011. REFERRING TO PAGE 88 OF THE PAPER BOOK HE DREW THE ATT ENTION OF THE BENCH TO THE CHART GIVING QUANTITATIVE DETAILS OF VARIOUS IT EMS MONTH- WISE. REFERRING TO PAGES 89 TO 91 OF THE PAPER BOOK HE DREW THE 18 ITA NOS.781 AND 786/PN/2013 ATTENTION OF THE BENCH TO THE CHART GIVING QUANTITATIVE D ETAILS OF PACKING MATERIALS. REFERRING TO PAGE 108 OF THE PAPER BOO K THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE QUANTITATIVE DETAILS OF PRINCIPAL ITEMS OF RAW MATERIALS AND FIN ISHED PRODUCTS OF A COMPARATIVE CASE NAMELY SANJAY COTTON SEED INDUSTRIES OF DHULE. 30. SO FAR AS THE COMPARISON OF BHAGWATI REFINERY PVT. LTD . WITH THAT OF THE ASSESSEE IS CONCERNED THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE AO HAS NOT CONSIDERED THE BY-PROD UCTS OF THE ASSESSEE. HAD HE CONSIDERED THE SAME, HE WOULD NOT HAV E COME TO THE CONCLUSION THAT THERE IS SHORTAGE IN THE YIELD PERCENTAGE AS COMPARED TO THAT OF BHAGWATI REFINERY PVT. LTD. HE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED THE FULLEST DETAILS POSSIBLE AND NOT A SINGLE DEFECT HAS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT THE MARGIN OF PROFIT CANNOT REMAIN THE SAME AND IT MAY DIFFER FROM YEAR TO YEAR. IT MAY EITHER INCREASE OR MAY DECRE ASE. IT CANNOT REMAIN CONSTANT DUE TO VARIOUS FACTORS SUCH AS QUALITY O F SEED, PRICES OF PRODUCTION, THE OVERALL MARKET CONDITION ETC. HE FURTHER SUBMITTED THAT THERE CANNOT BE ADDITION FOR BOTH GP AND NP IN A CASE. 31. SO FAR AS DELETION OF RS.2,500/- MADE BY THE AO U/S.14 A IS CONCERNED HE SUBMITTED THAT WHEN THE ASSESSEE HAS NO T CLAIMED ANY INTEREST IN THE PROFIT AND LOSS ACCOUNT AND WHEN THE SHA RE CAPITAL AND FREE RESERVES OF THE ASSESSEE ARE MORE THAN THE INVEST MENT OF RS.5,01,000/-, THEREFORE, THE CIT(A) WAS FULLY JUSTIFIED IN DELET ING THE SAME. 19 ITA NOS.781 AND 786/PN/2013 32. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SI DES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE AFTER REJECTING THE BOOK RESULTS MADE ADDITION OF RS.60,90,410/- ON ACCOUNT OF FALL IN GROSS PROFIT, RS.11,07,347/- ON ACCOUNT OF FALL IN NET PROFIT A ND RS.30,16,364/- ON ACCOUNT OF SUPPRESSED PRODUCTION OF CO TTON SEED REFINED OIL. THE AO SIMILARLY MADE ADDITION OF RS.68,84,400/- ON ACCOUNT OF SUPPRESSED PRODUCTION OF SOYA REFINED OIL AND M ADE DISALLOWANCE OF RS.2,505/- U/S.14A R.W. RULE 8D. WE FIND THE LD.CIT(A) DELETED THE ADDITION OF RS.60,90,410/- AND RS.11,07,34 7/- ON ACCOUNT OF FALL IN THE GROSS PROFIT AND THE NET PROFIT R ESPECTIVELY THE REASONS FOR WHICH HAS ALREADY BEEN REPRODUCED AT PARA 19 OF THE IMPUGNED ORDER. WE DO NOT FIND ANY INFIRMITY IN THE ABOVE. ADMITTEDLY, THE ASSESSEE IN THE INSTANT CASE HAS MAINTAIN ED REGULAR BOOKS OF ACCOUNT WHICH WERE DULY AUDITED BY THE AUDITO RS U/S.44AB AS WELL AS UNDER THE COMPANIES ACT AND NO ADVERSE REM ARKS HAVE BEEN GIVEN BY THE AUDITORS. FULL QUANTITATIVE DETAILS OF T HE PRODUCTS WERE GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO HAS NOT POINTED OUT ANY MISTAKE IN THE BOOKS OF ACCOUNT IN T HE BODY OF THE ASSESSMENT ORDER AND THE BASIS ON WHICH HE HAS REJECT ED THE BOOK RESULTS IS ON FLIMSY REASONS. THE DECISION IN THE CASE OF KA NCHWALA GEMS (SUPRA) WHICH WAS RELIED UPON BY THE AO IS ALSO NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE IN THAT CASE ASS ESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT AND THERE WAS DRAST IC FALL IN THE PROFIT DECLARED BY THE ASSESSEE AS COMPARED TO THE COM PARABLE INSTANCES. IT HAS BEEN HELD IN VARIOUS DECISIONS THAT MER E FALL IN THE GROSS PROFIT OR NET PROFIT OF AN ASSESSEE IN A PARTICULAR Y EAR AS COMPARED TO THE PRECEDING YEAR CANNOT BE THE BASIS FOR REJECTING THE 20 ITA NOS.781 AND 786/PN/2013 BOOKS OF ACCOUNT WHEN THE ASSESSEE MAINTAINS REGULAR BO OKS OF ACCOUNT AND FURNISHES THE QUANTITATIVE DETAILS ALONG WITH S UPPORTING EVIDENCES. IN THE INSTANT CASE, THE ASSESSEE HAS MAINTA INED REGULAR BOOKS OF ACCOUNT AS MENTIONED EARLIER AND HAS ALSO FURNISH ED THE VARIOUS DETAILS,. FURTHER, THE FALL IN THE GP RATIO OR NET P ROFIT RATIO AS COMPARED TO THE PRECEDING ASSESSMENT YEAR IS NOT SO D RASTIC SO AS TO TAKE AN ADVERSE VIEW FOR REJECTING THE BOOK RESULTS. I T MAY BE PERTINENT TO MENTION HERE THAT THE GP RATE IN THE IMPU GNED ASSESSMENT YEAR IS 2.46% AS COMPARED TO THE GP RATE 3 .30% IN THE PRECEDING ASSESSMENT YEAR. HOWEVER, NET PROFIT DECLARED BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR IS 0.5% AS COMPARED TO 0.6% IN THE PRECEDING ASSESSMENT YEAR. IT MAY BE PE RTINENT TO MENTION HERE THAT THE SALE OF THE ASSESSEE DURING THE I MPUGNED ASSESSMENT YEAR HAS GONE UP TO 110.73 CRORES AS AGAIN ST 91.15 CRORES IN THE PRECEDING ASSESSMENT YEAR. THE FALL IN THE NET PR OFIT RATIO MAY DEPEND ON VARIOUS FACTORS SUCH AS QUALITY OF SEEDS USED IN THE MANUFACTURING PROCESS, THE OVERALL MARKET CONDITION ETC. T HEREFORE, WE AGREE WITH THE ARGUMENT OF THE LD. COUNSEL FOR THE AS SESSEE THAT MARGIN OF PROFIT CANNOT REMAIN THE SAME AND IT MAY DIFFER FRO M YEAR TO YEAR. WE ALSO FIND FORCE IN THE ARGUMENT OF THE LD. COUNSE L FOR THE ASSESSEE THAT THERE CANNOT BE ADDITION FOR BOTH GROSS PROFIT AND NET PROFIT WHICH THE AO HAS DONE IN THE INSTANT CASE. IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE DETAILED REASONING GIVEN BY TH E LD.CIT(A) WHILE DELETING THE ABOVE 2 ADDITIONS WHICH HAVE ALREADY BEE N REPRODUCED IN THE PRECEDING PARAGRAPH WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.60,90,410/ - ON ACCOUNT OF FALL IN THE GROSS PROFIT RATIO AND RS.11,07,347/- O N ACCOUNT OF FALL IN THE NET PROFIT RATIO. GROUNDS OF APPEAL NO.2, AND 3 BY THE REVENUE ARE ACCORDINGLY DISMISSED. 21 ITA NOS.781 AND 786/PN/2013 33. SO FAR AS DELETION OF RS.30,17,364/- ON ACCOUNT OF SUP PRESSED PRODUCTION OF COTTON SEEDS REFINED OIL IS CONCERNED WE ALS O DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) DELETING THE SAID ADDITION. WE FIND THE AO MADE THE ADDITION ON THE GROUND THAT THE ASSES SEE HAS SOLD 5,80,749 JARS AND TINS WHEREAS HE HAS CONSUMED ONLY 5,67,760 LABELS. THEREFORE, THE ASSESSEE HAS SOLD THE OIL OUTSIDE T HE BOOKS AND CLAIMED MORE SHORTAGE. HOWEVER, WE FIND THE ASSESSEE DUR ING THE COURSE OF APPEAL PROCEEDINGS BEFORE THE CIT(A) HAS FILED DE TAILS OF OPENING STOCK AND PURCHASE OF LABELS AT 2,06,065/- AND 5,3 6,025/- RESPECTIVELY. THEREFORE, AFTER EXCLUDING THE CLOSING STOCK THE CONSUMPTION CLAIMED BY THE ASSESSEE IS MORE THAN THE FIGU RE DETERMINED BY THE AO. FURTHER, WE FIND THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MATERIAL USED BY M/S. BHAGAWATI REFINERY OIL PVT. LTD. IS DIFFERENT FROM THAT OF THE MATERIAL US ED BY THE ASSESSEE REMAINS UNCONTROVERTED. WHILE THE ASSESSEE HA S USED SOYA RAW OIL WITH GUM M/S. BHAGAWATI REFINERY OIL PVT. LTD. HAS U SED DEGUMMED SOYA RAW OIL. FURTHER, M/S. BHAGAWATI REFINERY OIL PVT. LTD. HAS NOT SHOWN ANY BY-PRODUCT WHEREAS IN THE BOO KS OF THE ASSESSEE THE BYPRODUCT IS TO THE EXTENT OF 2.39%. THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT THE QUALITY OF REFINED COTTON OIL AND SOYA OIL PRODUCED BY THE ASSESSEE IS MUCH BETTER THAN THE QUALITY OF M/S. BHAGAWATI REFINERY OIL PVT. LTD. FOR WHICH THE ASSESSEE IS SELLING AT A HIGHER RATE IN THE MARKET ALSO COULD NOT BE CONTR OVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. FURTHER, IN A COMPARAB LE CASE AS PRODUCED BY THE ASSESSEE IN THE CASE OF SANJAY COTTON SEED INDUSTRIES, DHULE IT HAS USED SIMILAR MACHINERY. THE ASSESS EE HAS DEMONSTRATED THAT THE SHORTAGE IN THAT CASE WAS 3% IN 5 ASSESSMENT YEARS AND THE AO HAS ACCEPTED SUCH SHORTAGE IN THE O RDER PASSED 143(3). THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. C OUNSEL 22 ITA NOS.781 AND 786/PN/2013 FOR THE ASSESSEE THAT THE ADDITION MADE BY THE AO AMOU NTING TO RS.30,17,364/- ON ACCOUNT OF EXCESSIVE SHORTAGE OF PRODUC TION OF COTTON SEED REFINED OIL IS NOT JUSTIFIED. IN THIS VIEW OF T HE MATTER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY GROUND OF APPEAL N O.4 BY THE REVENUE IS DISMISSED. 34. SO FAR AS DELETION OF RS.2,505/- MADE BY THE AO U/S.14 A R.W. RULE 8D IS CONCERNED WE FIND THE ASSESSEE HAS NOT CLAIMED ANY INTEREST IN THE PROFIT AND LOSS ACCOUNT AND THE OWN CAPIT AL AND FREE RESERVES OF THE ASSESSEE IS FAR MORE EXCESS THAN THE IN VESTMENT OF RS.5,01,000 BY THE ASSESSEE IN LIC MUTUAL FUND. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLO WANCE OF RS.2,505/- MADE BY THE AO U/S.14A R.W. RULE 8D OF THE I.T. RULES. ACCORDINGLY, THE SAME IS UPHELD. GROUND OF APPEAL NO.5 BY THE REVENUE IS DISMISSED. 35. SO FAR AS THE GROUNDS RAISED BY THE ASSESSEE IS CO NCERNED THE SAME RELATES TO THE ORDER OF CIT(A) IN SUSTAINING THE AD DITION OF RS.58,44,338/- OUT OF RS.61,84,400/- MADE BY THE AO ON AC COUNT OF ALLEGED SUPPRESSED PRODUCTION OF SOYA REFINED OIL. WE FIND THE ADDITION MADE BY THE AO ON THE BASIS OF A COMPARATIVE CASE IN T HE CASE OF M/S. BHAGAWATI REFINERY PVT. LTD. WHEREIN THE YIELD PERCENTAGE W AS 98.05%. IN CASE OF COTTON SEED REFINED OIL AND 96.04% IN CA SE OF SOYABEAN OIL WHEREAS IN THE CASE OF THE ASSESSEE THE YIE LD PERCENTAGE WAS 97% IN THE COTTON SEED REFINED OIL AND 93.62% IN THE CASE OF SOYABEAN REFINED OIL. WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY RELYING ON A RESEARCH PAPER NAMELY ASSESSING THE FEASIBILITY OF PRICING AND MARKETING NICHE SOYA OIL THE DETAILS OF WHICH AR E ALREADY 23 ITA NOS.781 AND 786/PN/2013 REPRODUCED AT PARA 21 OF THIS ORDER. 36. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT WHEN THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT WITH PROPER, QUANTITATIVE DETAILS AND AO HAS NOT POINTED OUT ANY DEFE CTS FOR SUCH BOOKS OF ACCOUNT AND THE CIT(A) HAS HELD THAT THE AO IS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS, THE CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE PART ADDITION ON THIS ISSUE. WE FIND THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAS MADE ANY SALES OUTSIDE THE BOO KS OF ACCOUNT. NO SUCH EXERCISE HAS EITHER BEEN DONE NOR ANY EVIDENCE BROUGHT ON RECORD. IT IS ONLY ON THE BASIS OF PRESUMPTIONS AND SUR MISES. ALTHOUGH THE ASSESSEE HAS DEMONSTRATED BEFORE THE CIT (A) THAT THE MACHINERY AS WELL AS THE RAW MATERIAL USED BY THE ASSES SEE IS DIFFERENT FROM THAT OF THE MACHINERY AND RAW MATERIAL USED BY M/S. BHAGAWATI REFINERY PVT. LTD. WE FIND THE CIT(A) DID NOT AGREE WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE ON THE GROUND TH AT ASSESSEE HAS NOT BROUGHT ANY COMPARABLE CASE TO SUPPORT HIS CLAIM TH AT SHORTAGE SHOWN BY THE ASSESSEE IN RESPECT OF SOYABEAN OIL IS REAS ONABLE. THE ASSESSEE HAS PRODUCED A COMPARABLE CASE IN THE CASE OF SANJAY COT TON SEED INDUSTRIES WHERE THE SHORTAGE OF COTTON REFINED O IL HAS BEEN ACCEPTED AT 3% WHICH THE LD.CIT(A) HAS CONSIDERED WHILE DE LETING THE ADDITION ON ACCOUNT OF EXCESSIVE SHORTAGE OF PRODUCTION O F COTTON SEED REFINED OIL. THEREFORE, ONCE THE ASSESSEE HAS DEMONSTRAT ED THAT SHORTAGE OF PRODUCTION OF COTTON SEED OIL IS COMMENSURATE WITH THAT OF A COMPARATIVE CASE, THEREFORE, WE FIND NO REASON AS TO WHY THE SAME LOGIC SHOULD NOT BE ACCEPTED IN CASE OF PRODUCTION OF SOY A REFINED OIL ESPECIALLY WHEN THE ASSESSEE HAS MAINTAINED PROPER BOOK S OF ACCOUNT WHICH THE CIT(A) HAS ACCEPTED. THEREFORE, THE CIT(A) IN OUR OPINION IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.58,84,400/-. IN THIS VIEW 24 ITA NOS.781 AND 786/PN/2013 OF THE MATTER WE SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE AO TO DELETE THE ADDITION OF RS.58,84,400/-. THE GROUNDS RAISED B Y THE ASSESSEE ARE ACCORDINGLY ALLOWED. 37. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMIS SED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-03-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 30 TH MARCH, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - II, NASHIK 4. 5. 6. THE CIT-II, NASHIK $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE C // /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE