2014 (10) TMI 38 - HC - Income Tax

Claim of shortages disallowed Invocation of section 145 - Whether the Tribunal was legally correct in confirming the addition on account of driage claimed, ignoring the fact that driage depends upon the quality of sugarcane, climatic conditions and other factors and as such was justified in sustaining the impugned addition on the basis of the case of another Chini mill Held that - The assessee has shown the higher driage, as compared to driage shown by another Sugar Mill i.e. M/s. Kisan Sahkari Chini Mill - the comparative chart shows that there is a close similarity in all aspects between the two Chini Mills - similar driage has been accepted by the authorities in the AY 1991-92 is not applicable as in that year no comparison was taken place - every assessment year is an independent assessment year - the assessee has shown a lesser driage - Regarding the production of extra sugar, the AO was directed to restrict the addition to the value of the suppressed stock of the sugarcane for the quantity - AO has made the addition on estimate basis which is a question of fact thus, there is no reason to interfere in the order of the Tribunal Decided against assessee.

Issues:
1. Addition of driage (shortage) in the assessment year 1995-96.
2. Justification of confirming the addition of driage without invoking section 145 of the Income Tax Act, 1961.
3. Comparison of driage between the assessee and another Sugar Mill.
4. Estimation of driage by the Assessing Officer (A.O.) and subsequent confirmation by appellate authorities.

Analysis:

Issue 1: Addition of driage (shortage) in the assessment year 1995-96.
The appeal was filed by the assessee against the order passed by the Income Tax Appellate Tribunal regarding the addition of driage amounting to Rs. 12,77,457 for the assessment year 1995-96. The assessee, a co-operative society engaged in sugar manufacturing, claimed a shortage of raw material (sugarcane) resulting in driage. The A.O. made the addition based on the shortage shown by the assessee, which was confirmed by the appellate authorities, leading to the filing of the present appeal.

Issue 2: Justification of confirming the addition of driage without invoking section 145 of the Income Tax Act, 1961.
The substantial questions of law raised in the appeal questioned the justification of confirming the driage addition without invoking section 145 of the Income Tax Act, 1961. The appellant argued that the addition was made without rejecting the books of account and solely based on surmises and conjecture. The appellant emphasized that the books of account were regularly audited, and internal control procedures were in place, negating the possibility of sales outside the books of account.

Issue 3: Comparison of driage between the assessee and another Sugar Mill.
A comparison was made between the driage shown by the assessee and another Sugar Mill, M/s. Kisan Sahkari Chini Mill. The lower authorities observed a close similarity in aspects between the two mills and noted a higher driage shown by the assessee compared to the other mill. The argument that similar driage was accepted in a previous assessment year was deemed inapplicable as each assessment year is independent. The A.O. was directed to restrict the addition to the value of the suppressed stock of sugarcane.

Issue 4: Estimation of driage by the Assessing Officer and confirmation by appellate authorities.
The A.O. made the addition of driage on an estimated basis, leading to a question of fact. The appellate authorities sustained the addition, citing the comparison with another Sugar Mill and the independent nature of each assessment year. The court found no reason to interfere with the lower authorities' orders and upheld the addition of driage. The substantial questions of law were answered in favor of the department, resulting in the dismissal of the appeal filed by the assessee.

This detailed analysis covers the key issues raised in the judgment, providing a comprehensive understanding of the legal aspects and arguments presented in the case.

← Previous Next →