2018 (8) TMI 1139 - HC - Income Tax

Estimation of income - allegation of suppressed production and sale of bagasse - ascertaining sugarcane loss - Addition on the basis of examining and comparing the production of bagasse in another sugar factory - Held that - Upon examining the material on record, we do find that the addition has been made simply on account of recoveries made by another sugar factory. The assessee on the other hand states that it did produce the material before the Assessing officer to show what recoveries had been made and that everything was duly recorded in the books of account. The matter requires reconsideration. - Matter remanded back to tribunal.

Summary

Issues:
1. Estimation of suppressed production and sale of bagasse
2. Addition made on account of sugarcane loss

Estimation of suppressed production and sale of bagasse:
The case involved an appeal under section 260A of the Income Tax Act, 1961 against an order passed by the tribunal for the assessment year 2007-08. The Assessing Officer sought to make an addition towards the bagasse by comparing the production of bagasse in another sugar factory. The C.I.T. observed that the recovery of bagasse is influenced by various factors, including the quality of sugarcane and the stage of maturity. The C.I.T. emphasized that the recovery of one factory cannot be compared with another. Additionally, there was no evidence to suggest that the assessee sold bagasse outside the books of accounts. The tribunal, without delving into the C.I.T.'s reasoning, sided with the Assessing Officer. However, upon review, it was found that the addition was solely based on another factory's recoveries. The assessee contended that all relevant information was presented to the Assessing Officer and was duly recorded. The High Court directed the matter to be reconsidered by the tribunal based on the existing material on record, emphasizing the need for a lawful decision.

Addition made on account of sugarcane loss:
The second issue pertained to the addition made on account of sugarcane loss. The C.I.T. noted that the Assessing Officer failed to justify this addition with appropriate records and merely relied on another sugar factory's data. The revenue had accepted such losses in previous years, raising questions about the inconsistency in treatment. The High Court highlighted the lack of supporting evidence for the addition and the need for a thorough reconsideration of the matter. Consequently, the appeals were disposed of, with the case remanded back to the tribunal for a lawful decision, without imposing any costs.