Maldeep Catalysts Pvt.Ltd.,, Surat vs Assessee on 18 September, 2008
5. W e have heard both the parties and gone through the facts of
the case. Indisputably, the AO adopted an incorrect method for calculating
the production, having calculated the average conversion ratio of 0.95 on the
basis of value instead on the basis of quantity. Consequently, the ld. CIT(A)
concluded that the basis for production could not be the value of raw material,
but quantity only, especially when turpentine oil was mixed in varying quantity
with each product and the AO did not take into account the factor of mixing of
MTO with the finished product. Even other wise, without pointing out any defect in
the books and without establishing that there was actually excess consumption
or inflation of purchase or suppression of production nor having an expert opinon,
chemical formulae can not be the sole basis for addition. The decision of the
ITAT in Quality Chemicals (supra) relied upon by the ld. CIT(A) supports this
view. Undisputedly, the assessee is maintaining the books of accounts and no
defects have been pointed out by the AO in the purchases or sales and even in
the expenses. There is no finding or opinion either that the records were incorrect
and incomplete or that the method applied was such that the income could not be
7
ITA nos.3708 & 3911/A/08
deduced from the accounts maintained by the assessee. Simply on the basis of
an axiomatic chemical formulae, without any defects in the books of accounts,
when the method of accounting has consistently been adopted by the
assessee, addition could not be sustained. It is difficult to catalogue various types
of defects in the account books of an assessee which may render rejection of
accounts on the ground that accounts are not complete from which the correct
profit cannot be deduced. The ld. CIT(A) found that no defects were pointed out
by the AO in the books nor any such defects have been brought to our notice.
The ld. DR did not refer us to any material controverting the aforesaid findings of
facts recorded by the ld. CIT(A).