2005 (12) TMI 89 - HC - Income Tax

Summary

Issues:
1. Justification for rejecting accounts and adding excessive wastage amount in trading account.
2. Basis for concluding wastages in nylon yarn production.
3. Permission to present new case on "invisible wastage."

Analysis:

Issue 1:
The dispute in this case revolves around the rejection of the trading result by the Assessing Officer due to claimed excessive wastage in the production of nylon yarn, leading to an addition of Rs. 64,92,710 in the income of the assessee-company. The Tribunal, however, overturned this decision, citing various reasons. They highlighted that no defects were pointed out in the account books to justify rejection, and a mere deviation in waste percentage would not suffice. The Tribunal emphasized that serious infirmities must be present to reject accounts, which was not the case here. The Revenue's reliance on past judgments was deemed misplaced, and alleged discrepancies in stock figures were clarified by the assessee. The Tribunal's decision was based on factual appraisal and found the wastage percentage reasonable, leading to the deletion of the addition.

Issue 2:
Regarding the reliance on certificates from a West German company (referred to as BASF), the Tribunal considered a certificate stating the percentage of waste generated during nylon production under normal and irregular conditions. The certificate indicated a minimum of 8% waste during caprolactum to nylon-6 polymer conversion under normal conditions. The Tribunal found no bias in the certificate and upheld its validity. The Tribunal's decision to consider this certificate was within its domain, and no legal error was found in their reasoning. The certificate supported the assessee's accounting for wastage, further strengthening the Tribunal's findings.

Issue 3:
The Tribunal's decision to rely on a certificate dated March 21, 1975, was deemed legal, as it fell under their power to evaluate evidence. The absence of material to challenge this view supported the Tribunal's stance. Consequently, questions 1 and 2 were answered in favor of the assessee, rendering question 3 moot. The judgment concluded without costs, affirming the Tribunal's decision on the issues at hand.