1986 (4) TMI 101 - AT - Income Tax

Summary

Issues Involved:

1. Denial of opportunity to the Departmental Representative.
2. Limitation of the assessment order.
3. Relief under Section 80J.
4. Disallowance under the head "leave with wages and leave with salary".
5. Addition on account of alleged inflation of purchase price of oil.
6. Addition on account of low yield of rice bran oil.

Detailed Analysis:

1. Denial of Opportunity to the Departmental Representative:

The main issue in the Revenue's appeal was the alleged denial of adequate opportunity to the Departmental Representative by the CIT(A). The Department claimed that the ITO was not informed about the fixation of the appeals, thus depriving the Department of its right to representation. An affidavit by Mr. S.R. Chhabra, ITO, was filed, asserting that he was not present during the hearing of the appeals. However, this was countered by an affidavit from Mr. Dineth Gogna, the assessee's representative, stating that Mr. Chhabra had appeared and defended the ITO's order. The CIT(A) confirmed that Mr. Chhabra appeared along with Mr. V.K. Singal, ITO, during the hearings. The Tribunal found that the CIT(A) had granted ample opportunity to the Department, as evidenced by the extensive order-sheet entries showing numerous hearings and submissions by both parties. The Tribunal concluded that the Revenue's claim of denial of opportunity was unfounded.

2. Limitation of the Assessment Order:

The assessee argued that the assessment order was barred by limitation. However, this issue had already been adjudicated against the assessee in the earlier decision for the assessment year 1976-77. The Tribunal rejected this ground based on the precedent set in the previous decision.

3. Relief under Section 80J:

The Revenue contested the relief granted under Section 80J without deducting liabilities. The Tribunal noted that the issue was covered against the assessee by a Supreme Court decision, and the CIT(A) had rectified the order under Section 154, aligning it with the Supreme Court's ruling. Consequently, this ground was rendered infructuous and dismissed.

4. Disallowance under the Head "Leave with Wages and Leave with Salary":

The Revenue's appeal included a ground regarding the disallowance of Rs. 93,456 under the head "leave with wages and leave with salary." The Tribunal noted that this issue had been previously decided against the Revenue, and even the Section 256(1) application had been rejected. The Tribunal upheld the CIT(A)'s decision, confirming the deletion of the disallowance.

5. Addition on Account of Alleged Inflation of Purchase Price of Oil:

The ITO had made an addition of Rs. 3,75,926, suspecting inflation of the purchase price of oil from three parties: M/s Navrang & Co., M/s Tilak Ram Dharam Pal, and M/s Mohindera Oil & General Mills. The CIT(A) had deleted this addition, and the Tribunal found that the CIT(A) had rightly appreciated the balance of evidence, which favored the assessee. The Tribunal noted that the assessee had provided substantial documentary evidence, including bills, payment proofs, and statutory stock registers maintained under government supervision. The Tribunal concluded that the Revenue's reliance on the notoriety of an oil scandal and statements from intermediaries was insufficient to substantiate the addition. The Tribunal upheld the CIT(A)'s deletion of the addition.

6. Addition on Account of Low Yield of Rice Bran Oil:

The ITO had made an addition of Rs. 18,40,084 based on the alleged low yield of rice bran oil. The CIT(A) had deleted this addition, and the Tribunal found that the yield disclosed by the assessee was consistent with the previous year's yield, which had been accepted. The Tribunal noted that the assessee maintained complete and verified stock registers and had provided a comparative chart showing the yield rates. The Tribunal upheld the CIT(A)'s decision, confirming the deletion of the addition.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming that the CIT(A) had granted adequate opportunity to the Department and had correctly deleted the additions made by the ITO. The assessee's appeal was partly allowed, with the Tribunal rejecting the ground related to the limitation of the assessment order. The Tribunal upheld the CIT(A)'s decisions on all other issues, including the relief under Section 80J and the disallowance under the head "leave with wages and leave with salary."