2011 (7) TMI 1241 - HC - Income Tax

Summary

Issues involved: Assessment of process loss in different types of oils, challenge to the order of CIT(Appeals) and Income Tax Appellate Tribunal, substantial questions of law admitted.

Assessment of Process Loss:
The assessee company, engaged in refining various oils, claimed different process losses for different oils. The Assessing Officer restricted the process loss for sunflower oil based on earlier findings. The CIT(Appeals) directed the Assessing Officer to allow process loss for three types of oils based on previous decisions, but to follow the decision for sunflower oil from a different assessment year. The Income Tax Appellate Tribunal confirmed the CIT(Appeals) order, deleting the addition of process loss. The tribunal's decision was challenged before the High Court.

Substantial Questions of Law:
Two questions were admitted as substantial questions of law. The first question concerned the deletion of disallowance made on account of process loss, with the Revenue alleging excessive loss to suppress production. The second question related to the deletion of transit loss/handling loss on different oils during shifting/transporting for refining and storing purposes.

Court's Analysis and Decision:
The High Court heard arguments from the appellant's counsel but no representation from the respondent. Regarding the first question, the Court noted a previous case involving the same assessee where the tribunal had considered various factors to conclude that the process loss claimed was not inflated. As no new evidence was presented to warrant a different view, the Court ruled in favor of the assessee. For the second question, the tribunal found the disallowance of transit loss to be presumptive without substantial evidence, especially considering the negligible amount in relation to the total turnover. The Court upheld the tribunal's decision, emphasizing the factual nature of the issue and the absence of defects in the assessee's books of accounts.

Conclusion:
The High Court upheld the decisions of the tribunal and CIT(Appeals, ruling in favor of the assessee on both substantial questions of law. The tax appeal was dismissed, affirming the deletion of process loss and transit loss/handling loss additions.