1985 (3) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Whether the stock register was properly maintained and production was properly reflected.
2. If not, whether the yield shown in groundnut oil and Tara Meera accounts was reasonable and, consequently, no addition was called for.

Issue-Wise Detailed Analysis:

1. Whether the stock register was properly maintained and production was properly reflected:

The Income Tax Officer (ITO) rejected the book results of the assessee on the grounds that the stock register was not properly maintained and the production was not correctly reflected. The ITO observed that in several other cases, the yield percentage of oil ranged between 29% to 30%. Consequently, he worked out the oil production of the assessee at 29.50%, resulting in a shortfall of 93 quintals of oil. The ITO made an addition of Rs. 60,125 in the groundnut oil account and Rs. 2,700 in the Tara Meera account.

The Appellate Assistant Commissioner (AAC) deleted these additions, stating that there was no defect in the books of account of the assessee and that the yield shown was well supported by several other cases. The AAC noted that no comparable case was cited by the ITO.

The Tribunal members were divided on this issue. One member agreed with the AAC, noting that no specific defect had been pointed out in the stock register by the ITO. The other member disagreed, pointing out the wide fluctuation in the yield of groundnut oil on different dates and the lack of day-to-day details of chhilka and oil-cake produced. This member concluded that the production register was not a day-to-day record but an imaginary oil stock register.

The Third Member, Dr. V. Balasubramanian, agreed with the AAC, stating that the stock register maintained by the assessee did represent the actual state of affairs. He noted that no other evidence had been produced by the department to show any manipulation in the register. He concluded that the ITO's allegations were not supported and that the stock register was not imaginary.

2. If not, whether the yield shown in groundnut oil and Tara Meera accounts was reasonable and, consequently, no addition was called for:

The ITO had observed that the yield of groundnut oil varied widely on different dates, which he found unreasonable given that the groundnut crushed was of more or less equal quality. He also pointed out that the assessee did not maintain day-to-day records of chhilka and oil-cake produced. The ITO compared the yield with other cases, such as Govind Oil Mills and Kalyan Oil Mills, which showed yields of 29.5% and 29%, respectively. He concluded that the reasonable yield should be 29.5%.

The AAC, however, found that the stock register had been properly maintained and that the yield shown by the assessee was comparable to other cases cited by the assessee. The AAC deleted the additions made by the ITO.

The Tribunal members were again divided. One member supported the AAC's view, noting that no defect had been established in the books of the assessee by the ITO. The other member found the explanation for the fluctuation in yield unconvincing and agreed with the ITO that the stock register was not a day-to-day record of production. This member suggested setting aside the AAC's order for fresh determination, considering the comparable cases cited by the ITO and the assessee.

The Third Member, Dr. V. Balasubramanian, found that the yield shown by the assessee could not be considered low without further information. He noted that the comparable cases cited by the ITO were not justified as no details about the nature of the business, quality of groundnut, and other factors were provided. He concluded that the addition of Rs. 60,125 should be deleted and agreed with the Judicial Member that the AAC's order should be upheld.

Conclusion:

The appeal by the revenue was dismissed. The Tribunal confirmed the order of the AAC, wherein the addition of Rs. 60,125 made by the ITO in the groundnut oil account and the addition of Rs. 2,700 in the Tara Meera account were deleted.