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)/ PER: SHRI D.T. GARASIA.

The only ground in this appeal is as under:-

"On the facts and circumstances of the case, the learnedCIT9A) erred in deleting the addition amounting to Rs.16,75,380/- made on account of excess consumption of yarn."

The short facts of the case that assessee company is engaged in the manufacturing and trading of narrow fabrics i.e. to say ribbon. During the year under consideration the assessee has shown the sales of Rs.2,87,37,117/- and gross profit of 25.06% as compared to last years sales of Rs.3.56 crores and G.P. of 25.57%. The A.O. found that assessee has not maintained day to day quantity records in respect of raw mateials used such as yarn, colour-chemical, packing materials. In absence of details of monthwise consumption vis-à-vis production and also value of closing stock reflected in trading account remained unverifiable. The assessee has produced the Excise Register which is maintained as per the Excise Law but the register was not mentioning about particular quality and quantity of yarn issued for production and after consumption, particular quality and quantity manufactured. The A.O. was of the view that the sale bill mention only of quality with reference to width of ribbon but quality in terms of thickness not mentioned which play an important role in deciding the value of ribbon sold. The assessee was given a show cause notice and assessee explained that there was increase in manufacturing expenses by 1.92% whereas there was a decrease of cost of goods sold by 1.41% and thus there was a net fall in G.P. by 0.51%. The A.O. further contended that the cost of goods has been increased by 10.24%. The A.O. observed that although quantity-wise there was not much difference in this year and production of last year but the turnover has been decreased substantially which has been stated because of fall in selling rate and the A.O. was of the view that actually excess consumption of yarn any reason for fall in G.P. Therefore, the AO tried to explain the increase of 8.2% consumption of raw material and increase of 1.92% in manufacturing expenses. The A.O. was of the view that fall in G.P. was only because of consumption of yarn being on higher side which was more by 8.33% compared to last year. Therefore, the A.O. was of the view that there was excess consumption of 11.967 kgs. As per the chart workd out by the A.O. and since the cost of yarn per kg was Rs.140/-, therefore, he made addition of Rs.16,75,380/-.