DAULATRAM ENGINEERING SERVICES PVT LTD,MANDIDEEP vs. JCIT RANGE-2, BHOPAL

ITA 1052/IND/2025Status: DisposedITAT Indore30 September 2026AY 2009-1038 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Impugned Assessment Order was passed in a mechanical manner without an in-depth analysis of the assessee's submissions. The Tribunal found that the CIT(A) failed to appreciate the core contention of the assessee that there was no generation or sale of scrap. The Tribunal noted that the assessee's explanation regarding the cost of production, showing 87.70% for material consumed and 12.30% for manufacturing expenses and personnel, was not negated by the revenue with any tangible material. The Tribunal observed that the revenue had not provided any empirical findings or tangible data, such as factory-based production, shop-level production, or central excise/sales tax records, to sustain the allegation of scrap generation and sales. The Tribunal also noted that the assessee had provided details of previous years' audited financial statements which did not show any scrap sales. Therefore, the Tribunal set aside the Impugned Order.

What were the facts?

The assessee, Daulatram Engineering Service Pvt. Ltd., is in appeal against the order of the CIT(A) for Assessment Year 2009-10. The original assessment under section 143(3) determined the total income at Rs. 1,74,97,800/-. Subsequently, the case was reopened under section 147, and an addition of Rs. 90,66,307/- was made on account of alleged suppressed scrap sales. The Assessing Officer's reasoning was based on the ratio of 'Material Consumed' to 'finished goods produced' being 87.70% as per the audit report, implying a 12.30% balance represented scrap. The assessee contended that this 12.30% represented manufacturing expenses and expenditure on personnel, not scrap, and that no scrap was generated or sold. The CIT(A) upheld the addition.

What were the issues?

1. Whether the addition of Rs. 90,66,307/- on account of suppressed scrap sales is sustainable in law, turning on the interpretation of the ratio of material consumed to finished goods produced as disclosed in Form 3CD and the assessee's explanation of cost of production under section 147 read with section 143(3). Assessee's contentions: The assessee argued that the 12.30% balance indicated in Form 3CD represented manufacturing expenses and personnel costs, not scrap. They asserted that their manufacturing process did not generate any scrap, and no scrap sales had occurred. They relied on their detailed explanation of the cost of production and submitted that the issue had been examined in prior assessment proceedings. Revenue's contentions: The revenue contended that the 12.30% balance, derived from the ratio of material consumed to finished goods produced, represented scrap, and the failure to disclose its sale constituted suppressed income escaping assessment. They relied on the auditor's observation in point 32 of the audit report and Form 3CD.

Which sections of the Income-tax Act were involved?

Section 253,Section 250,Section 147,Section 143(3),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

For Appellant: CA & Sh
For Respondent: Shri Binay Kumar Rai, Sr.DR
Hearing: 09.09.2026Pronounced: 30.09.2026

Per Paresh M Joshi, J.M:

This is an appeal filed by the Assessee under section 253 of the income tax Act 1961,[ hereinafter referred to as the Act

for the sake of brevity] before this tribunal, as & by way of a second appeal .The Assessee is aggrieved by the order

bearing No:-ITBA/NFAC/S/250/2025-26/1081054969(1)

dated 23.09.2025 passed by the Ld. CIT(A) u/s 250 of the Act, which is hereinafter referred to as the “Impugned

DAULATRAM ENGINEERING SERVICE PVT LTD. ITA No. 1052/Ind/2025 - A.Y. 2009-10

order”. The Relevant Assessment year is 2009-10 and the corresponding previous year period is from 01.04.2008 to 31.03.2009

The order continues below.

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