1990 (12) TMI 138 - AT - Income Tax

Summary

Issues:
1. Calculation of expected yield of lime and addition made by Assessing Officer
2. Discrepancy in stock statement and books of accounts leading to addition by Assessing Officer
3. Disallowance of bad debts by Assessing Officer

Issue 1: Calculation of expected yield of lime and addition made by Assessing Officer

The Assessing Officer observed a low production of lime by the assessee firm and invoked proviso to s. 145(2) of the IT Act, 1961. He calculated a suppressed yield of lime and Samuda, resulting in an addition of Rs. 10,06,605. The CIT(A) analyzed the defects in the calculation and, based on an expert's certificate, determined the expected yield to be 51.9%, considering factors like process loss, recovery rate, and wastage. The CIT(A) found the production shown by the assessee at 50% to be reasonable and deleted the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the yield variation is common and the burden of proof lies on the Revenue in cases of sales suppression. The Tribunal confirmed the CIT(A)'s order, dismissing the Revenue's appeal.

Issue 2: Discrepancy in stock statement and books of accounts leading to addition by Assessing Officer

The Assessing Officer made an addition of Rs. 21,260 due to a difference in stock as per the pledged stock statement to the bank and the books of accounts. The CIT(A) upheld this addition. The assessee contended that the stocks of a partner were included with consent in the pledged stocks, supported by evidence like certificates and statements. The departmental representative argued against relying on the partner's evidence, stating inability to verify the actual stock availability. The Tribunal noted that the partner's evidence was admissible, and in the absence of contrary evidence, the addition was unjustified. The Tribunal deleted the addition, emphasizing the importance of substantiated evidence.

Issue 3: Disallowance of bad debts by Assessing Officer

The Assessing Officer disallowed a claim of bad debts amounting to Rs. 10,953, stating lack of proof of recovery steps taken. The assessee clarified that the bad debts were in relation to specific transactions with parties from Amritsar, supported by correspondence and efforts made for recovery. The Tribunal highlighted that legal proceedings are not mandatory for bad debt allowance and considered the circumstances of the cases. The Tribunal found the disallowance unsustainable and deleted the addition, allowing the assessee's appeal.

This judgment addressed issues related to the calculation of expected yield of lime, discrepancy in stock statements, and disallowance of bad debts. The Tribunal ruled in favor of the assessee, emphasizing the importance of substantiated evidence, reasonableness in production variations, and the absence of mandatory legal proceedings for bad debt allowance.