The ITO, Ward-3, Mehsana V. M/s. Siddhi Agro Chemicals,

ITA 890/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7791 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-06-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 22-03-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.890 & 925/AHD/2005 ASSESSMENT YEAR:200-02 DATE OF HEARING:3.6.09 DRAFTED: 22.6.09 ITO, WARD-3, MEHSANA M/S. SIDDHI AGRO CHEMICALS, PLOT NO.C- 1/38, G.I.D.C., KALOL PAN NO. APPLIED FOR V/S. V/S. M/S. SIDDHI AGRO CHEMICALS, PLOT NO.C- 1/38, GIDC, KALOL THE INCOME TAX OFFICER, WARD-(3), MEHSANA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI JAYANTA JHAVERI, SR. DR REVENUE BY:- SHRI DHIREN SHAH, CA O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE CROSS APPEALS ONE BY THE REVENUE AND OTHER BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-XXI, AHMEDABAD IN APPEAL NO. CIT(A)-XXI/MEH/46/04-05 DATED 24-12-2 004. THE ASSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER, WARD-3, MEHSANA U /S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VI DE HIS ORDER DATED 10-03-2004 FOR THE ASSESSMENT YEAR 2001-02. 2. THE ONLY COMMON ISSUE IN BOTH THESE APPEALS ASSE SSEE AS WELL AS REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDI TION OF RS.20,10,265/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED PURCHASE OF SULPHURIC ACID. THE GROSS PROFIT ADOPTED BY THE ASSESSING OFFICER ON THIS UNR ECORDED PURCHASE OF SULPHURIC ACID ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 2 AT RS.1,82,371/-. THE REVENUE IS AGAINST THE DELETI ON OF THIS ADDITION OF RS.20,10,265/- THE ASSESSEE IS AGAINST THE APPLICAT ION OF GP AT RS.1,82,371/-. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). 4. THE BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ZINC AND COPPER SU LPHATE. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS SHOWN GROSS PROFIT (GP) OF RS .36,05,530/- ON SALES OF RS.1,82,37,150/- WHICH WORKED OUT AT 19.77% AS AGAI NST EARLIER YEARS GP OF RS.38,43,102/- ON TOTAL TURNOVER OF RS.1,67,67,403/ - @ 22.92% OF GP. THERE WAS A DECLINE IN GP, THE ASSESSEE WAS REQUESTED TO JUSTIF Y THE GP RATE. THE ASSESSEE SUBMITTED THE DETAILS THAT THE COST OF RAW MATERIAL S HAS ALSO INCREASED DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEA R AND THERE IS INCREASE IN SALE IN COMPARE TO EARLIER YEAR BY 8.76%. A STATEMENT OF P ARTNER, SHRI BALDEVBHAI JOITARAM PATEL WAS RECORDED ON 20-02-2003 U/S.131 OF THE ACT , TO FURNISH THE DETAILS OF MANUFACTURING PROCESS OF ZINC SULPHATE AND HE NARRA TED THE MANUFACTURING PROCESS VIDE ANSWER TO QUESTION NO.5 AS UNDER:- THERE IS VERY VARIATION IN QUANTUM OF RAW MATERI AL BEING USED IN MANUFACTURING PROCESS. FIRST OF ALL, IN A REACTION VASSEL HAVING WORKING CAPACITY OF TEN TO TWELVE THOUSAND LETRES, SULPHURI C ACID WEIGHING 3 METRIC TONS AND OUT OF RAW MATERIALS LIKE ZINC ASH, ZINC S CRAP, FOUNDRY WASTE, ETC. ANY ONE RAW MATERIAL IN QUANTITY OF 40 TO 150 BAGS (ONE BAG CARRIES 40 KGS) ARE TO BE POURED INIT AS A RESULT OF WHICH WHOLE VASSELS W ILL BE FILLED UP. OUT OF THAT, FIVE TO SEVEN THOUSAND LETRES FILTERED SOLUTION WIL L BE PREPARED. OUT OF THIS FILTERED SOLUTIONS, 35% FINISHED GOODS WILL BE PROD UCED. WITH A VIEW TO PRODUCE ONE TON FINISHED GOODS, WOOD WORTH RS. 2,00 0/- IS USED. ACCORDINGLY, THE ASSESSING OFFICER ISSUED SHOW CAUS E NOTICE NO.MSN/WARD.3/ASST.PROCE./2003-04 DATED 28-08-2006 TO EXPLAIN THE DISCREPANCY IN THE MANUFACTURING OF ZINC SULPHATE 33% AND ZINC SULPHATE 211% WITH THE CONSUMPTION OF SULPHURIC ACID AND ALLEGED SHORTAGE OF PURCHASE OF SULPHURIC ACID. THE AO REJECTED THE SUBMISSIONS OF THE ASSESSEE BY STATING THAT SHRI SHRI BALDEVBHAI JOITARAM PATEL HAS CATEGORICALLY STATED THAT CONSUMPTION OF 3 MT SULPHURIC ACID ALONGWITH OTHER RAW MATERIALS LIKE Z INC, SCRAP, ASH ETC. RESULTS INTO ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 3 PRODUCTION OF 5000 TO 7000 KGS. SEMI PROCESSED ITEM WHICH ARE CALLED BY ASSESSEE AS FILTERED SOLUTION. ACCORDING TO HIM, OUT OF THIS FILTERED SOLUTION OF 5000 TO 7000 KGS., FINISHED PRODUCTS I. E ZINC SULPATE 33% COMES @ 28% AND ZINC SULPHATE 21% COMES @ 35%. IF ON THIS BASIS, THE AVERAGE IS TAKEN, THEN CONSUMPTION OF 1000 KGS. SULPHURIC ACID ALONG WITH OTHER RAW MATERIALS WILL RESULT INTO PRODUCTION OF 640 KGS. ZINC SULPHATE ( I.E. 32% OF 6000 LTRS FILTERED SOLU TION FOR 3 MT SULPHURIC ACID). THUS, THE AO BROUGHT OUT THE RATIO BETWEEN INPUT OF SULPH URIC AND OUT PUT OF ZINC SULPHATE IN TERMS OF PERCENTAGE COMES TO 100% AND 64% AND HE DISCUSSED IN THE CASE OF ASSESSEE, FOR PRODUCTION OF 1094295 KGS.BEING AGGRE GATE OF ZINC SULPHATE 33% AND ZINC SULPHATE 21% FOR THE YEAR UNDER CONSIDERATION ONLY 889655 KGS. SULPHURIC ACID ARE SHOWN TO HAVE BEEN USED. ACCORDING TO HIM, IF O NE GOES BY THE STATEMENT OF THE ASSESSEE, AS RECORDED U/S. 131 OF THE ACT, ON OATH, THEN 1022545 KGS. SULPHURIC ACID ARE REQUIRED TO BE USED FOR PRODUCTION OF 1094295 K GS. ZINC SULPHATE OF 33% AND ZINC SULPHATE OF 21% BUT ACTUALLY, ONLY 889655 KGS SULPHURIC ACID ARE SHOWN TO HAVE BEEN USED BY THE ASSESSEE FOR PRODUCTION OF 1094295 KGS ZINC SULPHATE 33% AND ZINC SULPHATE 21%. THUS, QUANTITY OF SULPHURIC ACID USED BY THE ASSESSEE IS LESS BY 817181 KGS ( I.E. 1022545 KGS. SULPHURIC ACID 889 655 KGS SULPHURIC ACID) AND OBVIOUS SUCH QUANTITY OF 817181 KGS OF SULPHURIC AC ID THOUGH HAS BEEN USED BY THE ASSESSEE, BUT THE SAME ARE NOT ACCOUNT FOR IN THE B OOKS OF ACCOUNTS. THE VALUE OF DIFFERENCE OF SULPHURIC ACID AT 817181 KGS @ 2.46 P ER KG. COMES TO FRS. 20,10,265/- (AVERAGE VALUE IS TAKEN AFTER DIVIDING THE TOTAL QU ANTITY OF SULPHURIC ACID BY VALUE). THE AO ALSO STATED THE REASONING THAT THE PRODUCTIO N REGISTER OF THE ASSESSEE IS NOT SHOWING CONSUMPTION OF RAW MATERIALS ON DAY TO DAY BASIS AND ONLY PRODUCTION OF ZINC SULPHATE OF 33% AND 21% ARE SHOWN IN SUCH STOC K REGISTER AND THEREFORE PRODUCTION REGISTER OF THE ASSESSEE IS OBVIOUSLY NO T REFLECTING ITS TRUE STATE OF AFFAIRS. IN VIEW OF THESE FACTS, IT MAY BE MENTIONED THAT TH IS IS NOT ONLY RIGHT BUT ALSO DUTY THAT IS PLACED ON THE OFFICER TO MAKE SUCH COMPUTATION I N SUCH MANNER AS IT DETERMINE FOR DECLARING THE CORRECT PROFIT AND GAINS. ACCORDINGL Y, HE MADE ADDITION OF THE VALUE OF SULPHURIC ACID OF 818181 KGS. BY REJECTING THE BOOK RESULTS U/S.145(3) OF THE ACT BY GIVING FOLLOWING FINDING:- 3.7 IN VIEW OF ABOVE FACTS, IT IS CLEAR THAT THE A SSESSEE HAS MAINTAINED THE PRODUCTION REGISTER ARBITRARILY AND THE SAME IS NOT SHOWING TRUE STATE OF AFFAIRS AND HENCE SAME IS LIABLE TO BE REJECTED. AGAIN, ON THE BASIS OF ASSESSEES OWN STATEMENT (I.E. AS PER STATEMENT OF PARTNER OF THE FIRM) THE RATIO WITH REGARD TO CONSUMPTION OF SULPHURIC ACID AND VIS--V IS PRODUCTION OF ZINC ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 4 SULPHATE OF 33% AND 21% HAS BEEN WORKED OUT AND AS PER THE SAME IT IS FOUND THAT SULPHURIC ACID AS SHOWN TO HAVE BEEN USE D BY THE ASSESSEE ARE LESS BY 817181 KGS. AND THEREFORE IT IS HELD THAT S ULPHURIC ACID TO THE EXTENT OF 817181 KGS ARE NOT RECORDED IN THE BOOKS OF ACCOUN TS OF THE ASSESSEE AND SOURCE OF INVESTMENT IN PURCHASES OF 817181 KGS. AR E NOT DISCLOSED BY THE ASSESSEE. IN VIEW OF THIS, THE BOOK RESULT AS SHOW N BY THE ASSESSEE IS NOT ACCEPTABLE AS THE CONSUMPTION REGISTER/PRODUCTION R EGISTER IS NOT REFLECTING TRUE STATE OF AFFAIRS. BOOK RESULT OF THE ASSESSEE IS THEREFORE REJECTED U/S.145(3) OF THE I.T.ACT. VALUE OF SUCH SULPHURIC ACID OF 817181 KGS. COMES TO RS.20,10,265/- AND THE SAME IS ADDED TO THE TOTA L INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE IN ITIATED SEPARATELY FOR CONCEALMENT OF PARTICULARS OF INCOME. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE ADDITION OF ALLEGED UNRECORDED PURCHASES OF SUL PHURIC ACID BUT APPLIED GP RATE BY GIVING FOLLOWING FINDING:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED RELEVANT FACTS OF THE CASE. AS MENTIONED SUPRA THE ASSESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAS NOT MAINTAINED THE PRODUCTIO N REGISTER PROPERLY BECAUSE CONSUMPTION OF RAW MATERIALS IS NOT SHOWN ON DAY TO DAY BASIS AND ONLY THE PRODUCTION OF ZINC SULPHATE OF 33% AND 21% ARE SHOW N IN THE STOCK REGISTER. ON THIS BASIS THE ASSESSING OFFICER HELD THAT THE C ONSUMPTION /PRODUCTION REGISTER IS NOT REFLECTING TRUE STATE OF AFFAIRS AN D THEREFORE THE ASSESSING OFFICER REJECTED THE BOOK RESULTS U/S. 145(3) OF TH E I.T. ACT. FURTHER ON THE BASIS OF STATEMENT OF PARTNER OF THE APPELLANT FIRM HAS HELD THAT THE APPELLANT HAS USED MUCH MORE SULPHURIC ACID THAN SHOWN IN THE REGISTER. THIS QUANTITY OF PRESUMED EXCESS SULPHURIC ACID NOT RECORDED IN T HE BOOKS OF ACCOUNTS WAS CALCULATED AT 817181 KGS VALUING TO RS. 20,10,2 65/- WHICH IS ADDED BY THE ASSESSING OFFICER. I FIND THAT THIS PRESUMPTION OF THE ASSESSING OFFICER THAT THE APPELLANT HAD SHOWN QUANTITY OF SULPHURIC ACID USED LESS BY 817181 KGS IS NOT SUPPORTED BY ANY EVIDENCE. THE CALCULATION O F RAW MATERIAL CONSUMED AND THE FINAL PRODUCT DOES NOT HAVE SUPPORT OF ANY TECHNICAL OR SCIENTIFIC AUTHORITY. IN FACT IF THIS PROPOSITION OF EXCESS SU LPHURIC ACID IS TAKEN INTO ACCOUNT IT WOULD FURTHER LOWER THE PERCENTAGE OF G. P SHOWN BY THE APPELLANT WHICH CANNOT BE A CASE IN REALITY. IN VIEW OF THIS, I HOLD THAT AS IT IS NOT ESTABLISHED BY THE ASSESSING OFFICER THAT THERE HAS BEEN EXCESS CONSUMPTION OF SULPHURIC ACID VALUING TO RS. 20,10,265/- WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, THE ADDITION OF RS. 2 0,10,265/- IS NOT JUSTIFIED. IT IS RELEVANT TO MENTION HERE THAT THE FALL IN G.P HAS ALSO BEEN EXPLAINED BY THE APPELLANT ON TWO GROUNDS (1) THAT SALES PRICE O F THE PRODUCTS HAVE BEEN REDUCED AND (2) THERE HAS BEEN INCREASE IN THE PURC HASE PRICE OF THE RAW MATERIALS CONSUMED IN THE PROCESS. HOWEVER, IN ABSE NCE OF MAINTENANCE OF DETAILS OF CONSUMPTION OF RAW MATERIALS ON DAILY BA SIS BY THE APPELLANT THE ABOVE EXPLANATION IS NOT FULLY ACCEPTABLE. CONSIDER ING THE G.P % SHOWN BY ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 5 THE APPELLANT IN EARLIER YEARS AND NEXT YEAR, ADDIT ION CALCULATED @ 1% OF THE TURNOVER WHICH WORKS OUT TO RS. 1,82,371/- IS CONFI RMED. 6. AGGRIEVED, BOTH, THE REVENUE AS WELL AS THE ASSE SSEE CAME IN APPEAL BEFORE US. BEFORE US, THE LD. DR MADE ARGUMENTS THAT THER E IS SHARP DECLINE IN GP RATE AS COMPARED TO THE LAST YEAR, I.E. DOWN FROM 22.92% TO 19.77% FROM THE LAST YEAR. HE STATED THAT EVEN THE ASSESSEE COULD NOT PROVE THE P ERCENTAGE-WISE CONSUMPTION OF SULPHURIC ACID IN THE MANUFACTURE OF ZINC SULPHATE 33% AND ZINC SULPHATE 21%. HE ALSO STATED THAT THE ASSESSING OFFICER HAS RECORDED A CATEGORICALLY FINDING THAT THE PRODUCTION REGISTER OF THE ASSESSEE IS NOT SHOWING CONSUMPTION OF RAW MATERIALS ON DAY TO DAY BASIS AND ONLY PRODUCTION OF ZINC SULPHA TE OF 33% AND 21% ARE SHOWN IN SUCH STOCK REGISTER AND THEREFORE PRODUCTION REGIST ER OF THE ASSESSEE IS OBVIOUSLY NOT REFLECTING ITS TRUE STATE OF AFFAIRS. IN VIEW OF T HESE FACTS, IT MAY BE MENTIONED THAT THIS IS NOT ONLY RIGHT BUT ALSO DUTY THAT IS PLACED ON T HE OFFICER TO MAKE SUCH COMPUTATION IN SUCH MANNER AS IT DETERMINE FOR DECLARING THE CO RRECT PROFIT AND GAINS. THE LD. DR FURTHER SATED THAT THE AO HAS DISCUSSED DATA-WISE D ETAILS IN PARA-3.4 OF THE ASSESSMENT ORDER AND ACCORDINGLY HE CAME TO THE VAL UE OF DIFFERENCE OF SULPHURIC ACID OF 817171 KGS. @ 2.46 PER KG. AND RIGHTLY ESTI MATED THE INCOME. 7. ON THE OTHER HAND, THE LD. A.R. INVITED ATTENTIO N TO A.OS SHOW-CAUSE NOTICE DATED 28-3-2003, WHICH HAS BEEN COMPILED AT PAGE NO . 28 TO 31 OF THE PAPER BOOK AND PARTICULARLY PAGE NO. 29 WHEREIN THE A.O HAS MA DE AN OBSERVATION THAT IF SOMEONE GOES BY YOUR ABOVE REFERRED STATEMENT AS RE CORDED ON OATH, THEN 1022545 KGS SULPHURIC ACID ARE REQUIRED TO BE USED FOR PROD UCTION OF 654429 KGS. ZINC SULPHATE 33% AND ZINC SULPHATE 21%. HOWEVER, ONLY 8 89373 KGS SULPHURIC ACID ARE SHOWN TO HAVE BEEN USED BY YOU FOR PRODUCTION OF 65 4429 KGS ZINC SULPHURIC 33% AND ZINC SULPHATE 21%. THUS, QUANTITY OF SULPHURIC ACID SHOWN TO HAVE BEEN USED BY YOU IS LESS BY 133172 KGS ( I.E. 1022545 KGS 8893 73 KGS ). IN VIEW OF THIS, YOU ARE REQUESTED TO EXPLAIN AS TO WHY DIFFERENCE OF 133172 KGS SULPHURIC ACID SHOULD NOT BE TREATED AS STOCK PURCHASED OUT OF BOOKS OF ACCOUNTS AS 654429 KGS OF ZINC SULPHATE 33% AND ZINC SULPATE 21% CAN NOT BE PRODUCED ONLY B Y USING LESSER QUANTITY OF 889373 KGS OF SULPHURIC ACID. VALUE OF ABOVE DIFFER ENCES OF SULPHURIC ACID OF 133172 KGS @ RS. 2.46 PER KG COMES TO RS. 3,27,603/-. THE REAFTER, THE LD. A.R. INVITED ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 6 ATTENTION TO PARA 3.4 OF THE ASSESSMENT ORDER AND P ARTICULARLY THE OBSERVATION OF THE A.O AS UNDER :- THUS, THE RATIO BETWEEN INPUT OF SULPHURIC AND OUT PUT OF ZINC SULPHATE IN TERMS OF PERCENTAGE COMES TO 100% AND 64%. BUT IN T HE CASE OF THE ASSESSEE, FOR PRODUCTION OF 1094295 BEING AGGREGATE OF ZINC SULPHATE 33% AND ZINC SULPHATE 21% FOR THE YEAR UNDER CONSIDERAT ION ONLY 889655 KGS SULPHURIC ACID ARE SHOWN TO HAVE BEEN USED. IF SOME ONE GOES BY THE STATEMENT OF THE ASSESSEE AS RECORDED U/S. 131 OF T HE ACT ON OATH, THEN 1022545 KGS SULPHURIC ACID ARE REQUIRED TO BE USED FOR PRODUCTION OF 1094295 KGS. ZINC SULPHATE OF 33% AND ZINC SULPHATE OF 21%. HOWEVER, ONLY 889655 KGS SULPHURIC ACID ARE SHOWN TO HAVE BEEN USED BY T HE ASSESSEE FOR PRODUCTION OF 1094295 KGS ZINC SULPHATE 33% AND ZIN C SULPHATE 21%. THUS, QUANTITY OF SULPHURIC ACID USED BY THE ASSESSEE IS LESS BY 817181 KGS ( I.E. 1022545 KGS SULPHURIC ACID - 889655 KGS SULPHURIC ACID) AND OBVIOUS SUCH QUANTITY OF 817181 KGS. OF SULPHURIC ACID THOUGH HA S BEEN SUED BY THE ASSESSEE, BUT THE SAME ARE NOT ACCOUNT FOR IN THE B OOKS OF ACCOUNTS. VALUE OF ABOVE DIFFERENCES OF SULPHURIC ACID OF 817181 KGS @ 2.46 PER KG COMES TO RS. 20,10,265/- (AVERAGE VALUE IS TAKEN AFTER DIVID ING THE TOTAL QUANTITY OF SULPHURIC ACID BY VALUE. THE LD. A.R. IN HIS ARGUMENTS POINTED OUT THAT THER E IS AN APPARENT MISTAKE AND WRONG WORKING OF THE A.O IN THE ASSESSMENT ORDER. T HE A.O HAS WORKED OUT THE PROPOSED CONSUMPTION OF SULPHURIC ACID OF 1022545 K GS - 889655 KGS ACTUAL CONSUMPTION OF SULPHURIC ACID = 817181 KGS. HERE T HE A.O HAS MADE AN APPARENT MISTAKE IN SUBTRACTION BECAUSE THE CORRECT SUBTRACT ION FIGURE WILL BE 132890 KGS. HE INVITED THE ATTENTION TO A.OS SHOW-CAUSE NOTICE DA TED 28-8-2003 ON PAGE 29 OF PAPER BOOK WHEREIN THE A.O HAS CORRECTLY WORKED OUT THE DIFFERENCE BETWEEN THE CONSUMPTION OF SULPHURIC ACID OUGHT TO HAVE BEEN CO NSUMED BY THE ASSESSEE AS PER THE A.O AT 1022545 KGS ACTUAL CONSUMPTION OF SULP HURIC ACID OF 889373 KGS AND THE DIFFERENCE OF 133172 KGS WAS WORKED OUT BY THE A.O IN THE SHOW-CAUSE AND THE VALUE OF ABOVE DIFFERENCE OF SULPHURIC ACID OF 1331 72 KGS @ RS. 2.46 PER KG COMES TO RS. 3,27,603/- WAS PROPOSED TO BE ADDED IN THE S HOW-CAUSE NOTICE DATED 28-8- 2003 WHICH HAS BEEN COMPILED AT PAGE NO. 28 TO 31 OF THE PAPER BOOK. THEREFORE, THE ADDITION FOR THE DIFFERENCE OF SULPHURIC ACID O F 817181 KGS @ 2.46 PER KG WORKED OUT AT RS. 20,10,265/- REQUIRES TO BE DELETED BEIN G AN APPARENT MISTAKE OF THE A.O IN SUBTRACTION OF THE FIGURES FROM THE PROPOSED C ONSUMPTION AS PER THE A.O AND ACTUAL CONSUMPTION OF SULPHURIC ACID WHICH WAS REFL ECTED IN THE BOOKS OF ACCOUNTS AND ADDITION WHICH COULD HAVE BEEN MADE BY THE A.O CAN BE RESTRICTED TO THE ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 7 AMOUNT OF RS. 3,27,603/- WHICH IS FOR THE DIFFERENC E OF SULPHURIC ACID AS PER A.OS VERSION AT 133172 KGS @ RS. 2.46 PER KG. THE LD. A. R FURTHER SUBMITTED THAT THE A.O ON THE BASIS OF PRESUMPTION AND MERELY ON SURMISES AND CONJECTURES HAS WORKED OUT THE CONSUMPTION OF SULPHURIC ACID OUT TO HAVE BEEN CONSUMED BY THE ASSESSEE. THE A.O IS NOT A TECHNICAL PERSON AND HE HAS NOT OBTAIN ED THE TECHNICAL REPORT TO ASCERTAIN THE CONSUMPTION FORMULA FOR THE MANUFACTU RING OF THE FINISHED PRODUCTS IN ORDER TO ESTIMATE THE PROPOSED CONSUMPTION OUGHT TO HAVE BEEN USED BY THE ASSESSEE FOR THE PRODUCTION. IN VIEW OF THE SUBMIS SIONS, THE A.R. INVITED THE ATTENTION TO THE FINDINGS GIVEN BY THE CIT (A) IN T HE APPELLATE ORDER ON PAGE 6 & 7 AND SUBMITTED THAT THE FINDINGS OF THE CIT (A) IS T HAT THE ADDITION MADE BY THE A.O OF RS. 20,10,265/- IS NOT JUSTIFIED AND THE ORDER OF CIT (A) REQUIRES TO BE UPHELD. THE LD. A.R. SUBMITTED THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS BEFORE THE A.O AS WELL AS IN APPELLATE HEARING BEFORE THE CIT (A), THE ASSESSEE HAS ALREADY SUBMITTED DETAILED REASONING FOR THE FALL IN G.P AL ONGWITH SUPPORTING MATERIAL EVIDENCES AND IT WAS EXPLAINED BY THE ASSESSEE THAT THE REDUCTION IN G.P WAS ON ACCOUNT OF TWO GROUNDS I.E. (1) THAT SALES PRICE O F THE PRODUCTS HAVE BEEN REDUCED AND (2) THERE HAS BEEN INCREASE IN PURCHASE PRICE O F RAW MATERIAL CONSUMED IN THE PROCESS. THE LD. A.R. INVITED THE ATTENTION TO ASSE SSEES SUBMISSION IN SUPPORT OF THE REDUCTION IN G.P WHICH HAS BEEN COMPILED AT PAG E NO. 47 & 48 OF THE PAPER BOOK. THE LD. A.R. SUBMITTED THAT THE ADDITION CON FIRMED BY THE CIT (A) IN RESPECT OF G.P SHOWN BY THE ASSESSEE BY MAKING AN ADDITION CAL CULATED AT 1% OF THE TURNOVER WHICH WORKS OUT TO RS.1,82,371/- DESERVES TO BE DEL ETED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESS ING OFFICER WHILE WORKING OUT THE PROPOSED CONSUMPTION OF SULPHERIC ACID OF 10,22,545 KG. ACTUAL CONSUMPTION OF 8,89,655 KGS. THE BALANCE REMAINS AT 8,17,101 KGS A ND IN VIEW OF THIS THE AO MADE APPARENT MISTAKE IN COMPUTATION BECAUSE THE CORRECT FIGURE WILL BE 1,32,890 KGS AND NOT 8,17,181 KGS. AS COMPUTED BY THE AO. WE FURTHE R FIND THAT AS PER THE AO'S SHOW CAUSE NOTICE DATED 28-08-2003 THE AO HAS CORRECTLY DIFFERENCE BETWEEN THE CONSUMPTION OF SULPHURIC ACID OUGHT TO HAVE BEEN CO NSUMED BY THE ASSESSEE AS PER THE AO AT 1022545 KGS ACTUAL CONSUMPTION OF SULPH URIC ACID OF 889373 KGS AND THE DIFFERENCE OF 133172 KGS WAS WORKED OUT BY THE AO. WE FURTHER FIND THAT AS PER THE PROPOSED SHOW CAUSE NOTICE THE DIFFERENCE WORKE D OUT BY THE AO WAS ONLY ITA NO.890 & 925/AHD/2005 A.Y. 2001-02 ITO WD-3MEHSANA V. M/S. SIDDHI AGRO CHEMICALS PAGE 8 RS.3,27,603/- AND NOT RS.20,10,265/-. BUT, WE ARE OF THE VIEW THAT THE AO HAS MADE THIS ADDITION JUST ON THE BASIS OF PRESUMPTION AS T HE ACTUAL CONSUMPTION OF SULPHURIC ACID WAS REFLECTED IN THE BOOKS OF ACCOUNT AND THE AO IS NOT A TECHNICAL PERSON, WHO CAN ASCERTAIN HOW MUCH IS THE CONSUMPTION OF SULPHU RIC ACID IN TERMS OF KGS. FOR MANUFACTURING OF ZINC SULPHATE 33% AND ZINC SULPHAT E 21%. ACCORDINGLY, WE FIND THAT THE CIT(A) HAS RIGHTLY DELETE THE ADDITION MAD E BY THE AO AND HE HAS RIGHTLY THE ADDITION AT 1% OF THE TURNOVER TO BE THE INCOME OF THE ASSESSEE, AS THE ASSESSEE COULD NOT EXPLAIN THE REDUCTION IN GP AND THE GROUN DS TAKEN BY THE ASSESSEE AND AS DESCRIBED ABOVE ARE NOT SUPPORTED BY ANY MATERIAL. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE CONFIRM THE FINDINGS OF CIT(A) AN D THE GROUNDS RAISED IN BOTH THE APPEALS IS DISMISSED. 9. IN THE RESULT, ASSESSEES APPEAL AS WELL AS REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31/07/2009 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 31/07/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XXI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD