1962 (1) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Income Tax Officer's addition of Rs. 27,445 and Rs. 4,740 due to alleged shortages in oil yield and oil cake yield.
2. Availability of material to support the refraction rate of 2%, oil yield at 32%, and oil cake at 66%.

Issue-Wise Detailed Analysis:

1. Justification of the Income Tax Officer's Addition:
The Income Tax Officer (ITO) added Rs. 27,445 and Rs. 4,740 to the assessee's income due to alleged shortages in oil yield and oil cake yield, respectively. The ITO believed that the yield from mustard seeds was below normal and, after allowing a 2% refraction, concluded that the oil yield should be 32% and oil cake yield 66%. This led to a calculated shortage of 499 maunds of oil and 948 maunds of oil cakes. The Assistant Commissioner and the Income Tax Appellate Tribunal affirmed this decision, citing usual rates in the region.

The court found that the ITO's assessment was based on conjecture without any scientific data or material evidence to support the specific percentages of oil and oil cake yield. The court emphasized that the ITO did not reject the account books of the assessee, which disclosed the quantity of seeds crushed correctly. The court concluded that there was no material justifying the exact percentages used by the ITO, making the addition of Rs. 27,445 and Rs. 4,740 unjustified.

2. Availability of Material for Refraction and Yield Rates:
The court examined whether there was any material to support the refraction rate of 2%, oil yield at 32%, and oil cake yield at 66%. It referenced several Supreme Court decisions, emphasizing that findings based on no evidence or irrelevant material could be reviewed. The court noted that the ITO, Assistant Commissioner, and Tribunal did not have any scientific data or material evidence to justify the specific refraction and yield rates. The court also highlighted that the Appellate Assistant Commissioner relied on rates applied by his predecessor without material evidence of the quality of seeds used in the previous year.

The court reiterated that the assessment should be based on material evidence and not on conjectures or assumptions. It found that the ITO's assessment lacked the necessary material to justify the refraction and yield rates, making the assessment based purely on conjecture.

Conclusion:
The court answered both questions in the negative, indicating that the ITO was not justified in making the additions due to the lack of material evidence supporting the refraction and yield rates. The court emphasized the need for assessments to be based on material evidence rather than conjecture. The assessee was awarded costs of Rs. 100.