2004 (8) TMI 79 - HC - Income Tax

Estimation of yield of rice bran oil - In view of discrepancies in the stock a surrender of Rs. 3 lakhs was made on account of profit earned on the unaccounted sales. In view of the admission of the assessee that sales outside the books of account had been made books of account were rejected. Yield of rice bran oil was taken at the rate of 12.25 per cent. as per the previous year as against the assessee s claim being 11.59 per cent. The Assessing Officer also made addition of Rs. 1, 21, 699 in respect of purchases made by the assessee in the impugned order no reference is made to the records other than the seized documents - Records said to have been produced by the assessee ought to be examined by the Assessing Officer for the purpose of determining the yield of oil on the basis of the records of lab. examination for the entire stock of rice bran. For this limited purpose we remand the matter to the Assessing Officer

Summary

Issues: Estimation of yield of rice bran oil for assessment year 1995-96.

Analysis:
The appeal before the High Court pertained to the estimation of the yield of rice bran oil for the assessment year 1995-96. The case originated from a search conducted at the business premises of the assessee, where discrepancies in stock were found. The Assessing Officer had taken the yield of rice bran oil at 12.25%, while the Commissioner of Income-tax (Appeals) restricted it to 11.75%. The Tribunal, however, determined that the yield rate should be 12.17% based on the previous year's assessment. The Tribunal highlighted that the lab examination report considered by the Commissioner of Income-tax (Appeals) was based on a sample study of 11.88 MT of rice bran, not the entire stock processed by the assessee. The Tribunal emphasized the lack of day-to-day processing and yield records maintained by the assessee, leading to the decision to apply the yield rate of 12.17%. The Tribunal found that the lab examination report provided by the assessee was not a reliable parameter for determining the actual yield of rice bran oil.

The learned counsel for the assessee argued that the yield claimed was verifiable based on lab examination reports of the entire stock, not just a sample. It was contended that the Tribunal had misunderstood the scope of the reports and failed to consider records produced for the period not covered by seized documents. On the other hand, the Revenue's counsel presented a letter submitted by the assessee claiming conformity of the yield with seized records and offering additional records for examination. The High Court observed that the impugned orders did not reference records beyond the seized documents produced for examination. Consequently, the Court directed the Assessing Officer to examine the records claimed to have been produced by the assessee, specifically the lab examination reports for the entire stock of rice bran, to determine the yield of oil accurately. The matter was remanded to the Assessing Officer for a fresh order in accordance with the law, ultimately disposing of the appeal.