Law:

Section:

Section 69 of the Income-tax Act, 1961 - Unexplained investments - Assessment year 2000-01 - Assessee was engaged in business of manufacture of rigid PVC pipes and profiles - Assessing Officer noticed during course of assessment proceedings that assessee had shown scrap generation at 24.9 per cent in concerned year, while in previous assessment year, i.e., 1999-2000, scrap generation was shown at 13.31 per cent - Assessee, inter alia, explained that in year in question it applied for ISO 9000 certificate and as audit team for purpose of granting ISO certificate insisted that re-usable stock be also taken into books, an exercise that was not carried out in earlier years, it brought into books all scrap that was re-usable - Assessing Officer rejected explanation of assessee and treating excess generation as unaccounted sales made addition - Whether, on facts, addition could be sustained - Held, no FACTS The assessee was engaged in the business of manufacture of rigid PVC pipes and profiles. Subsequently, survey operations under section 133A were carried out at the business premises of the assessee in which the assessee surrendered certain sum on account of unexplained investment in machinery, building and of excess cash. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee had shown scrap generation at 24.9 per cent, against yield of 75.10 per cent in the concerned year, while in the previous assessment year, i.e., 1999-2000, the scrap generation was shown at 13.31 per cent. On account of that apparent deviation, the Assessing Officer issued a show-cause notice, thereby intending to treat the claim of excess scrap generated in the year in question as utilization for unaccounted manufacture and sale of pipes, outside the book. The assessee explained that in the process of manufacture of pipes, etc., scrap was generated and most of the scrap was of the re-usable kind and, in fact, was utilized in making finished products, while some scrap which was not re-usable was sold in the market. He further explained that it had applied for ISO 9000 certificate in the relevant year and as audit team for the purpose of granting ISO…

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