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IT(TP)A Nos. 299 & 218/Bang/2014 "14. Double taxation of scraps sales amounting to Rs. 40,092,519 14.1. The learned AO/DRP has erred in considering the domestic sales for the IDF 1 and IDF 2 unit as per the excise return which is inclusive of scrap sales.

14.2. The learned AO/DRP has erred in once again considering scrap sales while re-computing the profits to IDF 1 and IDF 2 amounting to Rs. 1,27,94,809 and Rs. 2,72,97,710 respectively.

51. In Gr.No.13 & 14 the dispute is with regard to figure of sales adopted by the AO while computing profits arising out of domestic sales of these units by adopting the figures as reflected in the excise return filed for these units rather than the sales of these units as recorded in the books of accounts (Sales Register). The action of the AO was confirmed by the DRP.

52. The AO recomputed the profits of the IDF 1 and 2 units. While re-computing the profits, the AO has considered the domestic sales as per the excise return and not the sales register. Scrap sales, which is already part of excise returns, was once again brought to tax. No specific reasons have been assigned for adopting this approach, except a passing reference to the fact that export sales of the Assessee have been inflated and that discussion will hold good for domestic sales as well (para 3.10 of the draft order of assessment at page-37 of the said order).

53. On the above approach of the AO which was reflected in the draft assessment order, the Assessee filed objections before the DRP. The DRP upheld the order of the AO, except in the case of double taxation of scrap sales wherein, the DRP has asked the AO to verify and provide relief if scrap sales are already part of domestic sales as per the excise return. However, the AO in the final order of assessment did not follow the directions of the DRP for the reason that as per IT(TP)A Nos. 299 & 218/Bang/2014 provisions of Sec.144C of the Act, the DRP does not have power to request the AO to verify the details and hence upheld his addition para 27.4 at page 61 of the final order of assessment.

55. As far as the action of the AO in considering sales as per excise return and including the scrap sale value again as an addition while computing total income, the learned counsel submitted that the sales declared in the excise return includes scrap sale value and making addition of sale value of scrap again in the computation of total income amounts to double addition of the same income. Scrap sales has been separately shown in the Assessee's segmental P&L (Rs. 1,27,94,809/- for EHTP 2 and Rs. 2,72,97,710/- for EHTP 1) page 548 in File 3 of IT(TP)A Nos. 299 & 218/Bang/2014 the Paper book. The AO has considered the sales as per the excise return (which includes the scrap sales) + scrap sales reported in the segmental P&L. our attention was drawn to the AO's computation at Pages 33 and 34 of the Draft Assessment order. It was submitted that scrap sale has been subject to tax twice. The learned counsel for the Assessee brought to our attention Assessee's submission dated 16th October 2012 (pages 518-540, at page 524 of File No. 2) wherein sample scrap invoices were given at File 13 pages 3084-3173. It was pointed out that the excise returns (available at pages 572-635 of File No. 3) demonstrate that scrap is included as part of the same. It was pointed out that the DRP in its directions at page 61, directed the AO to verify whether scrap sales were double taxed and if so, to not add the same once again. The learned counsel for the Assessee therefore prayed that the AO should be directed to adopt the domestic sales as per segmental P&L which is sales net of net of trade discount and sale of scrap has been reported separately in its segmental. It was submitted that by considering the sales as per the excise return, the AO has not granted the Assessee the benefit of the trade discount and has doubly taxed scrap sales.