M/s. Jay Pulse Mills,, Ahmedabad v. The Income tax Officer, Ward-3(4),, Ahmedabad

ITA 1317/AHD/2004 | 1995-1996
Pronouncement Date: 07-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 131720514 RSA 2004
Assessee PAN AABFJ3044Q
Bench Ahmedabad
Appeal Number ITA 1317/AHD/2004
Duration Of Justice 6 year(s) 14 day(s)
Appellant M/s. Jay Pulse Mills,, Ahmedabad
Respondent The Income tax Officer, Ward-3(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 07-05-2010
Date Of Final Hearing 27-04-2010
Next Hearing Date 27-04-2010
Assessment Year 1995-1996
Appeal Filed On 23-04-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1317-1319/AHD/2004 ASSESSMENT YEARS:1195-96 TO 1997-98 DATE OF HEARING:27.4.10 DRAFTED:28.4.10 M/S. JAI PULSE MILLS PLOT NO.204/205/1 GIDC ESTATE NARODAA AHMEDABAD PAN NO.AABFJ3044Q V/S . THE INCOME TAX OFFICER WARD-3(4) AHMEDABAD (APPELLANT) .. (RESPONDENT) ITA NO.1370/AHD/2004 ASSESSMENT YEAR: 1998-99 M/S. JAI PULSE MILLS PLOT NO.204/205/1 GIDC ESTATE NARODAA AHMEDABAD PAN NO.AABFJ3044Q V/S . THE INCOME TAX OFFICER WARD-3(4) AHMEDABAD (APPELLANT) .. (RESPONDENT) ITA NO.1419-1420/AHD/2004 ASSESSMENT YEAR:1999-00 &2000-01 THE INCOME TAX OFFICER WARD-3(4) AHMEDABAD V/S . M/S. JAI PULSE MILLS PLOT NO.204/205/1 GIDC ESTATE NARODAA AHMEDABAD PAN NO.AABFJ3044Q (APPELLANT) .. (RESPONDENT) ITA NO.818/AHD/2006 ASSESSMENT YEAR: 2002-03 THE INCOME TAX OFFICER WARD-3(4) AHMEDABAD V/S . M/S. JAI PULSE MILLS PLOT NO.204/205/1 GIDC ESTATE NARODAA AHMEDABAD PAN NO.AABFJ3044Q ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 2 (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI A.C. SHAH AR RESPONDENT BY:- SHRI C.K. MISHRA SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE SEVEN APPEALS 4 APPEALS BY THE ASSESSEE AN D 3 APPEALS BY REVENUE ARE ARISING OUT OF THE ORDER OF COMMISSIONE R OF INCOME-TAX (APPEALS)-II AHMEDABAD IN APPEAL NOS.CIT(A)VII/WD.3(4)/104-107/0 3-04 DATED 05-03-2004; APPEAL NOS. CIT(A) VII/WD.3(4)/108 103/03-04 I.E. DATED 13-02-2004 AND 11-02- 2004 AND APPEAL NO. CIT(A)VII/WD.3(4)12/05-06 DATED 03-01-2006. THE ASSESSMENTS WERE FRAMED BY THE ITO WARD-3(4) AHMED ABAD U/S.143(3) R.W.S. 147 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDERS DATED 28-03-2003. 2. THE FIRST COMMON ISSUE IN FOUR APPEALS OF THE AS SESSEE IN ITA NO.1317-1319 & 1370/AHD/2004 REGARDING ASSUMPTION OF JURISDICTION U/S.147 OF TH E ACT BY THE ASSESSING OFFICER AND THE VALIDITY OF THE ASSESSMEN T. LD. COUNSEL FOR THE ASSESSEE SHRI A.C. SHAH FAIRLY STATED THAT HE HAS INSTRUCTIO NS FROM THE ASSESSEE NOT TO PRESS FIRST COMMON ISSUE AND ACCORDINGLY HE HAS NOT ARGUE D ANYTHING ON THIS ISSUE. AS THE ASSESSEE HAS CLEARLY ADMITTED THAT HE IS NOT INTERE STED IN PROSECUTING THIS ISSUE ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 3. AS REGARDS THE ISSUE OF MERITS IN THESE 4 APPEA LS OF THE ASSESSEE AND THREE APPEALS OF THE REVENUE IS AS REGARDS TO ONLY ADDIT ION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF WASTAGE ON THE BASIS OF 5% DI SALLOWED BY THE ASSESSING OFFICER. IN FIRST 4 APPEALS OF THE ASSESSEE THE A SSESSEE HAS ALSO CHALLENGED THE ENHANCEMENT MADE BY THE CIT(A) ON AD HOC BASIS AND BY TAKING THE DEFICIT IN THE YIELD AT 9.1% TO 9.5% IN THESE ASSESSMENT YEARS. TH E FACTS ARE BEING EXACTLY IDENTICAL IN ALL THE YEARS HENCE WE WILL TAKE THE FACTS FROM THE ASSESSMENT YEAR IN WHICH SURVEY WAS CONDUCTED I.E. ASSESSMENT YEAR 200 2-03 AND DECIDED THE ISSUE RAISED ON MERITS BY THE ASSESSEE AS WELL AS REVENUE WHICH IS COMMON IN ALL THE 7 ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 3 APPEALS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CRUSHING OF MUG AND CREATING BI-PRODUCT CALLED MUG DAL. A SURVEY U/S.133A OF THE ACT WAS CARRIED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 04-02-2002 AND DURING THE SURVEY CERTAIN DISCREPANCIES WERE NOTED BY THE SURVEY PARTY IN RES PECT OF STOCK OF MUNG STOCK OF MUNG DAL AND CASH. THE SURVEY PARTY IN ORDER TO ASCERTAIN THE CORRECT YIELD OF MUNG DAL AND ITS BI-PRODUCT A SAMPLE MILLING WAS DONE BY TAKING 200 KG. OF MUNG AND MUNG DAL AND ITS BI-PRODUCT RESULTED OUT OF T HE SAID PROCESSING WAS NOTED. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER NOTED THA T THE ANALYSIS OF SAMPLE PROCESSING OF MUNG DAL CARRIED OUT BY THE SURVEY PARTY CLEARLY DEMONSTRATE THAT THE PERCENTAGE OF THE BI-PRODUCTS I.E. CHUNI WASTE DUST ETC. CONSTITUTES ABOUT 8.46% OF THE TOTAL CONSUMPTION WHEREAS THE ASSESSEE HAS DECLARED THE WASTAGE AT 10% AS PER THE STOCK REGISTER MAINTAINED FOR PRODUCTION OF MUNG DAL AND PERCENTAGE OF BI- PRODUCT. ACCORDING TO THE ASSESSING OFFICER THE PE RCENTAGE OF KUMA WASTE COMES TO 10% AND THE ASSESSEE IS SHOWING HIGHER PERCENTAGE O F WASTAGE AND BI-PRODUCT. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IN THIS WAY SUPPRESSED THE PRODUCTION OF PRINCIPAL PRODUCT OF MUNG DAL TO TH E EXTENT OF 1.5% AND THE AO CARRIED OUT AN EXERCISE OF SAMPLE MILLING AS UNDER: - WORKING AS PER SURVEY: INPUT KEPT (MUNG) NO OF BAGS X NET WEIGHT IN ONE BAG IN KG. 20 X 100 = 2000 KG. PRODUCTION OF MUNG DAL: WASTAGE FOUND : DUST 39 340 KG KUMA (MUNG CHUNI) 1 34 000 KG 1 74 340 KG. LESS: WEIGHT OF 5 BAGS (BANDAN) IN WHICH DUST AND KUMA FILED IN 1 KG PER BAG 5 000 KG. NET WEIGHT 1 69 340 KG INPUT (MUNG DAL) 2000.00 KG. REPLY TO Q. NO.33 CHENI WASTE DUST 169.34 KG 1 830.66 KG THEREFORE YIELD = 91.54% & SASTAGE = 8.46% WORKING AS PER ASSESSEE: MUNG FED INTO MACHINE (AFTER CLEANING THE MACHINE) 2000.00 KG. LESS: MUNG LEFT OUT IN THE MACHINE 138.66 KG NET MUNG PROCE SSED 1861.34 KG MUNG DAL PRODUCED (AS PER Q.NO.33 OF THE STATEMENT) 1692.00 KG 90. 90% KUMA CHUNI WASTE DUST STONE ETC: KUMA 135.00 7.00% DUST WASTE STONE ETC. 39.34 2.10% 174.34 ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 4 LESS: WEIGHT OF 5 BARDANS 5.00 169.34 KG. 1861.34 100% MUNG DAL LEFT IN MACHINE = 138.66 KG FOTRI (KUMAR OR CHUNI) = 135.00 KG DUST WASTAGE STONE ETC. = 34.34 KG = 308.00 MUNG DAL = 1692.00 KG = 2000.00 KG THEREFORE YIELD = 90.90% & BI-PRODUCT/WASTAGE = 9. 1% AND HE MADE ADDITION BY OBSERVING IN PARA-6 OF HIS APPELLATE ORDER AS UNDER:- 6. AS PER THE PRODUCTION REGISTER MAINTAINED BY TH E ASSESSEE THE MUNG CONSUMPTION FOR THE WHOLE YEA IS SHOWN AT 73207.68 QUINTALS. THE PRODUCTION OF MUNG DAL IS SHOWN AT 66141.37 QUINTALS KUMA & C HUNI AT 5411.10 QUINTALS AND WASTAGE ON ACCOUNT OF STONE/DUST AT 1655.21 QUI NTALS. THEREFORE THE YIELD RATIO IN RESPECT OF MAIN PRODU CTS AND BI-PRODUCT IS 90.35%: 3.39%. THE LOSS ON ACCOUNT OF STONE/DUST CO MES TO 2.26% AS PER THE ASSESSEE. THIS CAN BE CLEARLY EXPLAINED FROM THE FO LLOWING CHART:- RAW MATERIAL CONSUMED 73207.68 QUINTALS (I.E. WHOLE MUNG) PRODUCTION:- MUNG DAL PRODUCED 66141.37 QTS. (90.35%) BI-PRODUCTS (SALEABLE) 5411.10 QTS. (7.39% ) STONE/DUST (WASTAGE) 1655.21 QTS. (2.26%) 73207.68 QTS. (100%) 73207.68 QUINTAL S 7. IN VIEW OF PARA-5 ABOVE THE CORRECT WORKING OF YIELD RATIO IS AS UNDER:- CONSUMPTION OF MUNG AS PER STOCK RECORD 73207.68 QU INTALS LESS: WEIGHT OF BARDON (I.E. 1 KG. BAG PER 100 KG) 7 3.21 QTS. LESS: SHORTAGE IN WEIGHT 957 .65 QTS. 1030.86 QUINTALS (THE ASSESSEE HAS DEDUCTED RS.20 55 474 FROM THE PU RCHASE BILLS AND DECLARED IT IN THE P & L A/C. THE TOTAL PURCHASE FO R THE YEAR IS 73 334.68 QTS. FOR RS.15 74 03 520.50. THE AVERAGE PURCHASE PRICE IS THEREFORE RS.2146.37 PER QUINTAL. THE SHORTAGE IN WEIGHT THEREFORE BE RS .20 55 472/2146.37= 957.65 QUINTALS.) NET CONSUMPTION FOR PRODUCTION 72176.82 PRODUCTION OF MUNG DAL SHOWN 66141.37 YIELD (IN%) 91.64% (6141.37 X 100) 72176.82 THEREFORE YIELD = 91.64 & BI-PRODUCTS = 8.36% 8. FROM THE ABOVE COMPARISON OF SUBMISSION MADE BY THE ASSESSEE DATED 7.3.2005 PARA-6 AND THE CORRECT WORKING OF YIELD RA TIO GIVEN ABOVE IT CAN BE SEEN THAT THERE IS A DIFFERENCE OF 1.29% WHICH IS S HOWN BY THE ASSESSEE AS ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 5 EXCESS BI-PRODUCTS. FOR THE SAKE OF CLARITY THE FA CTS AND FIGURES ARE REPRODUCED BELOW:- I. AS PER ASSESSEE 90.35% MUNG DAL KUMA / FOTRI SHOWN BY THE ASSESSEE 7.39% AS PER PARA-6 STONE/DUST 2.26% TOTAL 100.00% II. AS PER WORKING GIVEN IN PARA PARA-7 ABOVE MUNG DAL 91.64% BI-PRODUCTS (INCLUDING DUST/STONE) THEREFORE (I-II) = 91.64 90.35 = 1.29% 9. ACCORDINGLY THE ASSESSEE HAS SHOWN EXCESS BI-PR ODUCTS WASTAGE OF 1.29%. IN QUANTITY / MONETARY TERMS THE SUPPRESSED PRODUCTION OF MUNG DAL IS WORKED OUT AS UNDER:- 1.29% ON TOTAL CONSUMPTION AS WORKED OUT IN THIS OR DER I.E. 72176.82 QUINTALS X 1.29% = 931.08 AVERAGE PRICE OF MUNG DAL (SALES / QUANTITY (160807010 / 65974.37) RS.2437.42 TOTAL VALUE OF 1.29% DIFFERENCE (RS.2437.42 X 931.08) RS.22 69 433/- LESS: PRODUCTION ON ACCOUNT OF PROPORTIONATE SALE PRICE OF KURMA/FOTRI AVERAGE PRICE OF KURMA/FOTRI (SALES/QUANTITY (31 39 962 / 5615.10 RS.559.20) TOTAL VALUE OF SUPPRESSED PRODUCTION OF MUNG DAL RE PLACED AS KURMA (I.E. 931.08 QTS. X RS.550.20) RS.5 20 660/- THEREFORE SUPPRESSED PRODUCTION OF MUNG DAL (RS.2269.433 5 20 660) RS.17 48 773/- 9.1 IT IS THEREFORE APPARENT FROM THE RECORDS AND INVESTIGATIONS THAT THE ASSESSEE HAS SUPPRESSED THAT THE ASSESSEE HAS SUPPR ESSED PRODUCTION OF MUNG DAL TO THE EXTENT OF RS.17 48 773/-. ACCORDING LY THIS AMOUNT IS ADDED TO THE TOTAL INCOME. THIS SUPPRESSION IS FURTHER SUPPO RTED BY THE FACT THAT THE ACTUAL WEIGHT OF THE RAW MATERIAL PU9RCHASED AND PU 9T TO PROCESSING HAS NOT BEEN RECORDED IN THE RELEVANT BOOKS THE SHORTAGES IN WEIGHT ARE NOT RECORDED IN THE REGISTERS OF THE TIME OF ENTERING THE PURCHA SES BUT ONLY A CLAIM MADE AT THE TIME OF MAKING THE PAYMENT TO THE CONCERNED PAR TIES. NO TRUCK-WISE/LOT- WISE RECORD IS MAINTAINED AND THE WEIGHT OF THE WAS TAGE PRODUCED IS NOT RECORDED FOR EVERY TRANSACTION BUT A LUMP SUM ENTRY IS AFTER A PERIOD OF TIME. 4. THE CIT(A) DELETED THE ADDITION BY OBSERVING IN PARA-4.3 OF HIS APPELLATE ORDER AS UNDER:- ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 6 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LD. A.R AND I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. IT IS TO BE NOTICED THAT AT THE TIME OF SURVEY THE BASIC OPERATION ITSELF WAS CARRI ED OUT BY THE SURVEY PARTLY WHICH REFLECTED AN YIELD OF 91.54% IN RESPECT OF D AL AND THE BI-PRODUCTS WERE AT THE RATE OF 8.46%. IT IS DIFFICULT TO UNDERSTAND THE METHOD ONLY ADOPTED BY THE AO BECAUSE WHILE WORKING THE ACTUAL YIELD HE HA S WORKED OUT CONSUMPTION OF MUNG AFTER DEDUCTING SHORTAGE IN W EIGHT AND THUS NET AMOUNT USED FOR CONSUMPTION WAS TAKEN. HOWEVER WHI LE WORKING OUT THE EXCESS SHORTAGE HE HAS TAKEN THE GROSS AMOUNT SHOW N AS CONSUMPTION. HE HAS NOT CARED TO DEDUCT THE SHORTAGE IN WEIGHT AND WEIGHT OF BARDAN WHILE WORKING OUT THE ACTUAL ADDITION. THUS THE ENTIRE BA SIS ADOPTED BY THE AO IS INCORRECT. IN THE ORDER THE AO HAS HIMSELF POINTE D OUT THAT WEIGHT LOSS AND WEIGHT OF BARDAN IS TO BE REDUCED FOR THE ACTUAL WO RKING OF YIELD. IF THAT BE THE POSITION THEN FOR WORKING OUT THE ACTUAL YIELD AS WELL AS THE YIELD AS PER AUDIT REPORT THESE WEIGHTS WERE TO BE REDUCED. I ALSO FI ND THAT IN THE CASE ASSESSEES OWN CASE MY PREDECESSOR VIDE ORDER DATED 5.3.2004 FOR A.YS 195-96 TO 1998-99 HAS HELD THAT PROPER WASTAGE ALLO WABLE TO THE APPELLANT FIRM WAS 9.5% MEANING THEREBY THAT THE YIELD WOULD BE 90.5%. IF THE YIELD IS CORRECTLY WORKED OUT AS DISCUSSED ABOVE THE YIELD FOR THE YEAR ACTUALLY WORKS OUT TO 91.36% AS UNDER:- CONSUMPTION OF MUG AS PER STOCK RECORD 73207.68 QTL. LESS: WEIGHT OF BARDAN 732.00 QTL. SHORTAGE IN WEIGHT 79.26 QTL ------------- 811.26 QTL NET CONSUMPTION OF MUG 72396.42 QTL ========= PRODUCTION OF MUG DAL 66141.37 91.36% KURMA 5411.10 7.4% DEFICIT 843.96 1.17% THEREFORE ON THIS BASIS THERE IS NO CASE FOR ANY A DDITION IN THE APPELLANTS CASE. I ALSO FIND THAT IN EARLIER YEARS THE LD. CI T(A) HAS HELD THAT YIELD OF DAL WOULD BE AROUND 90.5% AND OTHER ITEMS WOULD BE AROU ND 9.5% IN APPELLANTS OWN CASE. IN VIEW OF THE ABOVE FACTS ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. 5. AS REGARDS TO THE 4 APPEALS BY THE ASSESSEE THE CIT(A) ALSO ENHANCED THE ADDITION VIDE PARA-3.5 AND 3.6 OF HIS APPELLATE ORDER AS UNDER:- 3.5 THE CONTENTIONS RAISED AS MENTIONED IN PARA 3. 4 ABOVE HAVE BEEN CONSIDERED. THE FACT THAT THE APPELLANT FIRM HAD PU RCHASED NEW MACHINERY DURING THE ASSESSMENT YEAR 99-2000 MAY HAVE IMPROVE D THE MANUFACTURING PROCESS AS CLAIMED BY THE LD. COUNSEL. THE APPELLAN T FIRM HAD ALSO EMPLOYED A TECHNICAL PERSON TO SUPERVISE OVER THE MANUFACTUR ING PROCESS. I AGREE WITH THE LD. COUNSEL THAT THESE STEPS WOULD HAVE IMPROVE D THE PRODUCTION PROCESS AND AS A RESULT THE WASTAGE WOULD HAVE BEEN LOWER A S COMPARED TO THE PROCEEDING ASSESSMENT YEARS. THE ASSESSMENT YEARS U NDER CONSIDERATION IN ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 7 THIS APPEAL DID NOT INVOLVE THE NEW MACHINERY AND T HE TECHNICAL PERSON AND THEREFORE THE PROCESS WASTAGE WHICH HAS BEEN FIXED FOR A.Y. 99-2000 AND 2000-01 MAY NOT BE APPROPRIATED FOR THE ASSESSMENT YEARS UNDER APPEAL. SOME ADJUSTMENT IS THEREFORE CALLED FOR ON ACCOUNT OF THESE TWO FACTORS WHICH ARE NOT AVAILABLE FOR THE ASSESSMENT YEARS UN DER APPEAL AND WHICH MAY HAVE LEAD TO IMPROVEMENT IN THE MANUFACTURING P ROCESS IN THE SUBSEQUENT ASSESSMENT YEARS. HOWEVER I DO NOT AGRE E WITH THE LD. COUNSEL THAT THE QUALITY DIFFERENCE CREDITED IN THE VARIOUS ASSESSMENT YEARS WOULD HAVE ANY IMPACT ON THE STANDARD WASTAGE TO BE FIXED FOR THE APPELLANT FIRM. THE QUALITY DIFFERENCE AMOUNT CANNOT BE QUANTIFIED IN TERMS OF WEIGHT AND THEREFORE NO ESTIMATE CAN BE MADE ON THIS BASIS. I ALSO FIND THAT SUCH QUALITY DIFFERENCE ADDITIONS DO NOT LEAD TO A CONCLUSION TH AT THE QUALITY OF MUG PURCHASED BY THE APPELLANT FIRM WAS POORER IN THE A SSESSMENT YEARS UNDER CONSIDERATION AS COMPARED TO THE OTHER ASSESSMENT Y EARS. SIMILARLY I FIND THAT THE WASTAGE ON ACCOUNT OF STONE/DUST DOES NOT SHOW ANY UNIFORM PATTERN BUT VARIOUS FROM 2.68% TO 3.40% FOR THE FOUR ASSESS MENT YEARS. THEREFORE NO INFERENCE CAN BE DRAWN ON THE BASIS OF THE ABOVE FA CTS THAT THE WASTAGE IN THE MANUFACTURING PROCESS WOULD DEFINITELY BE HIGHER IN THE ASSESSMENT YEARS UNDER CONSIDERATION. 3.6 IN VIEW OF THE ABOVE DISCUSSION AND KEEPING IN VIEW THE FACTS OF THE APPELLANT COMPANY HAD PURCHASED NEW MACHINERY AND E MPLOYED TECHNICAL PERSON FROM A.Y. 99-2000 I HOLD THAT PROCESS WASTA GE ALLOWABLE TO THE APPELLANT FIRM IS 9.5% FOR ALL THE FOUR ASSESSMENT YEARS UNDER CONSIDERATION. IN VIEW OF THE ABOVE DECISION THE ADDITION / ENHAN CEMENT OF INCOME IS WORKED OUT AS UNDER: AY. 95-96 A.Y.96-97 A.Y.97-98 A.Y.98-99 CONSUMPTION OF MUG AS PER STOCK RECORD (QUINTALS) 90 060 78 460.08 70 967.29 77 828.23 LESS: WEIGHT OF BARDAN (JUTE BAG OF 1 KG. EACH FOR 100 KGS OF MUG((QUINTALS) 900.6 784.6 709.67 778.28 LESS: SHORTAGE IN WEIGHT (IN QUINTALS) 626.17 546.82 453.14 584.3 NET CONSUMPTION (QUINTALS) 88 533.23 77 128.66 69 804.48 76 465.65 PRODUCTION OF MUG (QUINTALS) 79 011.5 69 514.75 62 942 68 889.8 YIELD WASTAGE 89 25% 10.75% 90.13% 9.87% 90.16% 9.84% 90.09% 9.91% EXCESS WASTAGE CLAIMED BY THE APPELLANT WITH REFERENCE TO 9.5% 1.25% 0.37% 0.34$ 0.41% EXCESS WASTAGE IN QUINTALS 1 106.67 285.38 237.34 313.51 AVERAGE SALE PRICE RS/QUINTALS 1 555.15 1 731.99 1 923.46 1 854.69 ADDITION REQUIRED TO BE MADE (IN RS) 1 721.059 494.275 456.514 581 464 ADDITION MADE BY A.O (IN 224 960 182 628 216 711 203 965 ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 8 RS) BALANCE ADDITION/ENHANCEMENT REQUIRED TO BE MADE (IN RS) 1 496 099 311 647 239 803 377 499 6. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE SHRI A.C. SHAH STATED THAT THE ASSESSEES ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THIS TRIBUNAL IN THE CAS E ITO V. M/S. JAY INDUSTRIES ITA NO.528/AHD/2006 FOR ASSESSMENT YEAR 2002-03 VIDE ORDER DATED 25-09 -2009 WHEREIN THE ASSESSEE WAS ENGAGED IN THE SAME LINE O F BUSINESS AND FACTS ALSO IDENTICAL AND ISSUES ARISING OUT OF SAME SURVEY OPE RATION CARRIED OUT ON 04-02-2002 BY THE DEPARTMENT U/S.133A OF THE ACT. HE STATED T HAT THE FACTS BEING EXACTLY IDENTICAL THE ISSUE IS SQUARELY COVERED. 7. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE CASE RECORDS WE FIND THAT AT THE TIME OF SURVEY THE SAMPLE PROCESSI NG WAS CARRIED OUT AND ACCORDING TO THE SAMPLE PROCESSING THE BI-PRODUCTS CONSISTS OF CHUNI DUST WASTE ETC. WHICH COMES TO 8.46% AND THE BOOKS OF ACCOUNT REFLECTED T HE WASTE AND BI-PRODUCTS AT 10%. WE FIND FROM THE FACTS THAT OUT OF 100 KG. OF MUG THE PRODUCTION OF MUGDAL IS 90 KG. AND BI-PRODUCT IS 10 KG WHICH IS CALLED KU RMA OR CHUNI. KURMA IS BI-PRODUCT AND NOT A WASTE OR PROCESS LOSS. KURMA IS SOLD IN O PEN MARKET AND SALE PROCEED HAS ALREADY BEEN CREDITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. ACCORDING TO THE ASSESSEE THE ACTUAL WASTE IN THE FORM OF DUST & ST ONE COMES TO 2.10% AND NOT 8.46% AS POINTED OUT BY THE ASSESSING OFFICER ON TH E BASIS OF SAMPLE PROCESSING DONE BY THE SURVEY PARTY. WE FROM THE ARGUMENTS OF THE LD. COUNSEL THAT THE SALE PROCEEDS OF KURMA IS AT 5615 QTL. AND THE ASSESSEE HAS CREDITED THE SALE PROCEED AT RS.31 39 954/- IN ITS BOOKS OF ACCOUNT THEREFORE THE KURMA CANNOT BE TAKEN AS WASTE OR PROCESS LOSS. THE WASTE IS ONLY STONE AND DUST FOUND FROM MUNG. THE KUMA CAN BE CONSIDERED FOR THE PURPOSES OF TAKING Y IELD AND IN THAT CASE THE ENTIRE PROCESS HAS TO BE CONSIDERED AND INCLUDING KURMA T HE PROCESS LOSS WILL BE CONSIDERED AT 10%. THE ASSESSEE HAS PRODUCED THE C OMPLETE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER INCLUDING BILLS AND VO UCHERS AUDITED BY THE CHARTERED ACCOUNTANT. THE ASSESSEE HAS ALSO MAINTAINED THE S TOCK REGISTER AND AFTER GOING ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 9 THE ASSESSMENT ORDERS IN THESE SEVEN ASSESSMENT YEA RS WE FIND THAT THERE IS NO WHISPER ABOUT THE DEFECTS IN THE BOOKS OF ACCOUNTS. EVEN THE AO HAS NOT INVOKED THE PROVISIONS OF SEC.145A OF THE ACT AND HAS NOT R EJECTED THE BOOK RESULTS. ONCE THE BOOK RESULTS ARE NOT REJECTED THE AO HAS NO AL TERNATIVE EXCEPT TO ACCEPT THE BOOK RESULTS. IN THE PRESENT CASE THE ASSESSING O FFICER HAS NOT REJECTED THE BOOK RESULTS AND FOUND NO DEFECTS IN THE BOOKS OF ACCOUN TS OF THE ASSESSEE FOR ALL THE SEVEN ASSESSMENT YEARS. IN SUCH A SITUATION THE Q UESTION ARISES IS WHETHER THE AO IN EXERCISE OF HIS POWERS U/S.145(1) OF THE ACT IS WHETHER CAN MAKE ESTIMATES WITHOUT REJECTING THE BOOK RESULTS AND WITHOUT FIND ING FAULT IN THE BOOKS OF ACCOUNT. WE ARE OF THE VIEW THAT THE AO HAS TO GIVE A FINDIN G OF FACT I.E. WHETHER OR NOT INCOME CAN PROPERLY BE DEDUCED FROM THE ACCOUNTS MAINTAINE D BY THE ASSESSEE EVEN IF THE ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTI ON OF THE ASSESSING OFFICER AND THE INCOME HAS BEEN COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. WHAT IS TO BE D ETERMINED BY THE ASSESSING OFFICER IN EXERCISE OF HIS POWER IS A QUESTION OF F ACT. I.E. WHETHER OR NOT INCOME CHARGEABLE UNDER THE ACT CAN PROPERLY BE DEDUCED FR OM THE BOOKS OF ACCOUNT AND HE MUST DECIDE THE QUESTION WITH REFERENCE TO THE R ELEVANT MATERIAL AND IN ACCORDANCE WITH THE CORRECT PRINCIPLES. WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS TO EXAMINE THE ACCOUNTS OF ASSESSEE AND HAS TO CONSIDER THE FOLLOWING QUESTIONS:- (I) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A M ETHOD OF ACCOUNTING? (II) EVEN IF REGULAR ADOPTION OF A METHOD OF ACCOUN TING IS THERE WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCED FROM THE METHOD EMP LOYED? (III) WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED ? (IV) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE I N THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN? IN THAT EVENT IF THE ASSESSING OFFICERS FINDING O N ALL FOUR COUNTS IS IN THE AFFIRMATIVE THE ASSESSEES PROFIT ARE TO BE COMPUTED ON THE BAS IS OF THESE ACCOUNTS. WE FIND THAT THE FIRST PROVISO TO SEC. 145(1) OR SECTION 1 45(2) CAN BE INVOKED ONLY IF AND WHERE THE ELEMENTS ATTRACTING EITHER OF THOSE PROVI SIONS ARE FOUND TO EXIST. A CLEAR ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 10 FINDING TO THAT EFFECT ALONG WITH THE MATERIALS ON WHICH SUCH FINDING IS BASED HAS TO BE MADE OUT AND GIVEN BY THE ASSESSING OFFICER. NO ASSESSMENT UNDER THE FIRST PROVISO TO SECTION 145(1) OR UNDER SECTION 145(2) C AN BE SUSTAINED IF THE ASSESSING OFFICER HAS NOT CONSIDERED AND RECORDED A FINDING A GAINST THE ASSESSEE AS TO WHETHER HE HAS BEEN REGULARLY EMPLOYING A METHOD OF ACCOUNTING OR WHETHER HIS INCOME PROFITS OR GAINS CAN PROPERLY BE DEDUCED FR OM HIS METHOD OF ACCOUNTING IF HE HAS BEEN REGULARLY EMPLOYING A METHOD OF ACCOUNTING OR WHETHER THE ACCOUNTS ARE CORRECT AND COMPLETE. IN THE ABSENCE OF THESE FINDI NGS THE ASSESSING OFFICER CANNOT MAKE ASSESSMENT BY INVOKING THE PROVISIONS OF SEC. 145(1) OR 145(2) OF THE ACT . 8. ANOTHER FACET OF ARGUMENTS MADE BY THE LD. COUNS EL FOR THE ASSESSEE IS THAT THIS ISSUE IS COVERED BY THE DECISION OF CO-ORDINAT E BENCH ON SIMILAR FACTS WHEREIN THE ASSESSEE WAS CARRYING ON SAME LINE OF BUSINESS AND THE FACTS COMING OUT OF THE SAME SURVEY WHEREIN THE TRIBUNAL IN THE CASE OF M/S. JAY INDUSTRIES (SUPRA) HAS DELETED THE ADDITION CONFIRMING THE RESULTS DECLARE D BY THE ASSESSEE ON WASTAGE AS WELL AS ON PERCENTAGE OF YIELD BY GIVING FOLLOWING FINDINGS IN PARA-8 :- 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AT LENGTH. SHRI M.C. PANDIT LEARNED DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND SHRI A. C. SHAH LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CIT(A) HAS PASSED A WELL REASONED O RDER AFTER APPRECIATING THE FACTS OF THE CASE AND EVIDENCE AVAILABLE ON REC ORD. HE THEREFORE SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE UPHEL D. IT IS SEEN THAT DURING THE COURSE OF SURVEY BASIC OPERATION ITSELF WAS CA RRIED OUT BY THE SURVEY PARTY WHICH REFLECTED IN YIELD OF 90.50% IN RESPECT OF DA L AND BYE-PRODUCT @9.5%. IN OUR VIEW THE CIT(A) HAS CORRECTLY REJECTED THE METHODOLOGY ADOPTED BY THE AO. WHILE WORKING THE ACTUAL YIELD THE AO HAS WO RKED OUT CONSUMPTION OF MUNG AFTER DEDUCTING SHORTAGE IN WEIGHT AND THUS NE T AMOUNT USED FOR CONSUMPTION WAS 55880.34 KGS. HOWEVER WHILE WORKIN G OUT EXCESS SHORTAGE THE AO HAS TAKEN THE GROSS AMOUNT SHOWN AS CONSUMPT ION AT 55505.77 QUINTALS. THE AO HAS NOT CONSIDERED THE WEIGHT OF B ARDAN WHILE WORKING OUT ACTUAL ADDITION. WE ARE IN AGREEMENT WITH THE OBSER VATIONS OF THE CIT(A) THAT THE ENTIRE BASIS ADOPTED BY THE AO WAS INCORRECT. T HE CIT(A) HAS ALSO OBSERVED THAT IN THE GROUP CASES OF M/S. JAI PULSE MILLS IN WHICH SIMULTANEOUSLY SURVEY WAS CARRIED OUT HIS PREDECES SOR HAS HELD THAT PROPER WASTAGE ALLOWABLE TO THE ASSESSEE FIRM WAS 9.5% MEA NING THEREBY THAT THE YIELD WOULD BE 90.5%. THE CIT(A) HAS CORRECTLY STAT ED IN THE INSTANT CASE THAT THE YIELD IN THE YEAR UNDER CONSIDERATION WORKED OU T TO 90.88%. IT IS ALSO SEEN THAT IN THE AY 1999-2000 AND 2000-01 THE CIT(A) HAS DELETED SUCH ADDITION VIDE HIS ORDER DATED 05-12-2003 IN ASSESSEES CASE. IT SEEMS THAT THE REVENUE HAS NOT CHALLENGED THE ORDERS OF THE CIT(A) IN APPEAL BEFORE THE TRIBUNAL RELATING TO AY 1999-2000 AND 2000-01. THUS CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE DO NOT SEE ANY VALID GROUND ITA NO.1317-19 & 1370/AHD/04 A.YS.95-96 TO 98-99 ITA NO.1419-20/AHD/04 A.YS.99-00 TO 00-01 ITA NO.818/AHD/06 A.Y. 02-03 PAGE 11 FOR INTERFERING WITH THE ORDER OF THE CIT(A). WE FI ND THAT THE CIT(A) HAS PASSED A WELL REASONED ORDER AFTER APPRECIATING THE FACTS OF THE CASE AS WELL AS MATERIALS AVAILABLE ON RECORD. WE DO NOT SEE ANY RE ASON FOR DISAGREEING WITH THE CIT(A). IN THAT VIEW OF THE MATTER WE UPHOLD T HE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9. IN VIEW OF THE FACTS OF THE PRESENT CASE THAT TH E ASSESSING OFFICER HAS NOT REJECTED THE BOOK RESULTS OF THE ASSESSEE IN ALL TH E SEVEN ASSESSMENT YEARS AND THERE WAS NO DEFECTS POINTED OUT BY THE ASSESSING O FFICER THE ESTIMATION MADE BY THE AO AND CONSEQUENTLY ENHANCEMENT MADE BY THE CIT (A) IN FOUR ASSESSMENT YEARS IS ARBITRARY AND WITHOUT ANY BASIS. EVEN OT HERWISE THE TRIBUNAL IN THE SIMILAR PLACED FACTS IN ANOTHER CASE EMANATING OUT THE SAM E SURVEY CONFIRMED THE BOOK RESULTS DECLARED ON ACCOUNT OF WASTAGE AND PERCENTA GE OF YIELD WE ARE OF THE VIEW THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THESE SEVEN ASSESSMENT YEARS INCLUDING THE FOUR ASSESSMENT YEARS WHERE THE CIT(A ) HAS ENHANCEMENT THE ASSESSMENT DESERVES TO BE DELETED. WE ORDER ACCORD INGLY. 10. IN THE RESULT ASSESSEES APPEALS ARE PARTLY ALLOWE D AND THAT OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 07/05/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 07/05/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-II AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD