2013 (4) TMI 43 - HC - Income Tax

Deficit in the yield at 9.1% to 9.5% - As per AO production and wastage which was not accurate. - Held that - Tribunal was of the opinion that the actual wastage in the form of dust and stone would come to 2.10% and not 8.46%. Tribunal noted that byproduct consisting of chuni, dust and waste together comes to 8.46% whereas Kurma or Chuni is by-product and not waste. Tribunal was of the opinion that Assessing Officer could not have made additions on the basis of estimates without rejecting book results or without finding out any fault with the books of account. Tribunal found that the Assessing Officer and CIT(Appeals) both had committed error in treating by product Kurma as waste whereas same was sold in the market fetching considerable sale proceeds to assessee. This has resulted into erroneous working out of wastage. Tribunal also compared similar data and figures of another assessee carrying on similar activities. - Decided against the revenue.

Summary

Issues:
- Appeal against Tribunal's judgement raising questions on deletion of enhancement made by CIT(A) regarding yield deficit and the correctness of Tribunal's finding.

Analysis:
1. The respondent assessee was involved in the crushing of "mug" and producing "mugdal." During a survey operation, discrepancies were noticed, leading to the Assessing Officer estimating wastage at 5% instead of the 10% recorded by the assessee. This resulted in unaccounted production being sold by the assessee out of books. The CIT(A) enhanced the additions under the same heading, leading to further additions for the years under consideration. The Tribunal, in the impugned judgment, allowed the assessee's appeal and reversed the orders passed by the Assessing Officer and CIT(A).

2. The Tribunal allowed the assessee's appeal on three grounds. Firstly, it found that the actual wastage was 2.10% and not 8.46% as held by the Assessing Officer. The Tribunal noted that the byproduct, including chuni and dust, was not waste but a saleable product, resulting in considerable sale proceeds for the assessee. Secondly, the Tribunal held that the Assessing Officer made estimations without rejecting the book results of the assessee. Thirdly, the Tribunal compared the yield of another assessee in the same business and accepted a wastage of 9.5% in the assessee's case.

3. The counsel for the Revenue contended that the Tribunal erred in allowing the appeal solely on the ground of not rejecting the book results. However, the High Court found that the Tribunal's conclusions were factual and evidence-based. The Tribunal's decision was based on the erroneous treatment of byproduct Kurma as waste, resulting in incorrect wastage calculations. The High Court concluded that the issue was factual, and no legal question arose, leading to the dismissal of all Tax Appeals.