ACIT, MEERUT vs. M/S. SBEC SUGAR LTD., BAGHPAT

The Revenue against the order of CIT (A), Meerut dated 18.09.2014filed two appeals Appeal No. 6642 & 6643/ D/2014 for respective assessment year 2009-10 and 2010-11.

The main ground of appeal

Ld. DR submitted that comparable cases cited by Assessing Officer prove that there is a generation of press cake in themanufacturing process of the company. He further submitted that it is unbelievable that assessee would give such a huge quantity of material, where the sale could be made, to the farmers free of cost where it has incurred huge loss andvehemently supported the order of Assessing Officer.

On other hand, ld. AR of the assessee submitted that assessee is a listed company carrying on this business and it has never sold press cake, but always given it to farmers free of cost who uses it as manure. His main contention was that assesseehas maintained regular books of account which are duly audited under The Income Tax Act as well as under The Companies Act and further the manufacturing activity and the quantity is subject to verification by Excise authorities and in absence of any defect in books of accounts and any direct evidence of unaccounted sale of press mud, book results shown by assessee cannot be rejected. He further submitted that financialresults of the assessee showed betterperformance compared to other parties statedby AO. Therefore, his contention was that the addition has been rightly deleted by the ld. CIT (A).

We have carefully considered the rival contentions and perused the reasoning given by the CIT (A) for deleting the addition. The assessee is manufacturer of sugar and necessarily press cake is the waste, which generates out of manufacturing of sugar. The firm of Chartered Accountants audits the books of accounts of the company under the applicable laws and further, the quantitative details are subjected to verification by Excise and VAT authorities. It is undisputed that neither the auditor nor the other authorities have pointed any defects in the quantitative details maintained by the assessee. Further, the AO has not controverted the fact with any evidence that press cake is not given by assesseeto farmers as manure. As assessee is manufacturer of sugar,it is important that what is the yield of sugar in comparison with other comparables noted by the AO as higher the yield of sugar,higher the profit of the company. On analysis,we found that for A.Y. 2009-10 and 2010-11, yield of sugar in case of assessee is higher than the other two comparables, namely Baghpat Sugar Mills and Ramala Sahkari Chini Mills Ltd. For the assessment year 2009-10, yield of assessee of sugar is 8.78% compared to 8.43% and 8.67%of the other companies. For A.Y. 2010-11, the assessee has improved the yield of sugar of 8.83% compared to 8.77% and 8.34% of other comparables. It shows that assessee has earned higher recovery of prime product manufactured by it. Further, during assessment proceedings, assessee has submitted complete details of production, yield and produced books of accounts before the Assessing Officer. On verification of them, no defects were found by AO. The Assessing Officer could also find no direct evidence that assessee has earned any income from sale of press cake and it is not recorded in the books of accounts of the assessee. In absence of any evidence that the statement of theassessee stating that press mud is given to the farmers as manure is false, it cannot be rejected. It is also not the case of the Assessing Officer controverting the fact that the press cake could be used as manure. Perhaps it may be the starting point of any further enquiry to be made by AO when he finds that press mud is generated in manufacturing process of sugar which is not sold as others.Merely rejecting the explanation of the assessee without any positive evidence, the addition has been made for sale of press mud outside the books of accounts.Therefore, in view of absence of any evidence against the assessee that it has sold the press cake outside the books of account when it is showing comparatively better financial results than the other comparables stated by the AO no addition can be made. Therefore, we

Ground No. 2 of appeal is against the deletion of addition of Rs.21,44,974/- on account of sundry creditors. The Assessing Officer has made addition of sundry creditors holding that assessee was asked to explain the details of outstanding creditors for more than one year amounting to Rs.10,54,351/-. In the body of order where the addition is made, the Assessing Officer has discussed the sum of Rs.10,54,351/-, however, he has made the addition ofRs.21,44,974/-. The CIT (A) has deleted this addition and therefore, the Revenue is in appeal.

Before us, the ld. DR relied on the order of the AO.

Ld. AR submitted that Assessing Officer has cut paste this figure from balance sheet of some other entity and made addition in the hands of the assessee. For this, he submitted the copies of the balance sheet of the assessee where no figure of Rs.21,44,994/- could be noticed under the schedules of sundry creditors. He stated that the additions are not related to the accounts of the assessee and therefore rightly deleted by CIT (A).

We have carefully considered the rival submissions. It is apparent that the AO is discussing the figure of Rs.10,54,000/- on account of old sundry creditors, however, on verification of accounts of the company with the figures stated by AO, it was found that these figures are not pertaining to the accounts of assessee. On query to Ld. DR, he also could not explain wherefrom the figures are taken by AO and if any list isavailable either with AO or with assessee of suchcreditors. LD AR also clarified that schedule of current liabilities shows the different figures which are not at all matching with the figures given in assessment order for substantiating this argument he took us to all the figures stated in the schedule ‘F’ of the balance sheet. On verification, we could not find any such figure of sundry creditors for which addition is made.Therefore, we delete the addition of Rs 21, 44,994/- on account of sundry creditors. We confirm the order of CIT (A) on this issue and dismiss ground no. 2 of the appeal. ITA No 6643/Del/2014

The main ground of appeal