TMI Blog1975 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... s of cotton, comber waste, etc. have been inflated. The excess over the market rate has been pocketed by Mr. G. Krishnan. The inflation of purchase price was to the extent of Rs. 67,456. (ii) The wastage shown by the assessee in the production of 6 counts and 10 counts of yarn was much more than the normal wastage. The purchases showed that the quality of cotton purchased was very goods and it did not justify this must of wastage. (iii) The cotton receipts and issues books were scrutinised and verified with the mixing books and a number of discrepancies were found between these two sets of books. The entries in the mixing books did not tally either from the point of quality or from the point of the person from whom the goods were purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It may be remembered that the accounting year is the calendar year 1960. At the time the shares were held by Shri G. Krishnan and family. Later on, there was a change in the management and Shri G. Krishnan and his family ceased to be interested in the affairs of the company. The old employees were also no longer in service. So, by the time the letter from the ITO was received, the company was under the new management. So, they had stated that, according to them, the company had paid these amounts are purchase price and, therefore, there was no case of inflation in the purchase rate. At the time of hearing, the learned counsel for the assessee, without conceding the finding of the ITO that the difference between the market rate and the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimate made by the Department is reasonable. 6. After having heard both the parties, we are of opinion that some addition will have to be sustained. The assessee itself concedes that the purchase price could constitute a ground for the rejection of the books. Similar the third ground is to the effect that the issue and receipts books and mixing book are not being properly maintained. Beyond taking these as evidences for rejection of the books, we are unable to read anything deeper in them. If the books of account are conceded to be defective, then the proviso to s. 145 applies and it would be necessary to make a proper estimate of the income. In arriving at this proper estimate, it is open for us to scrutinise the purchases, the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given the comparative figures of the market rates so that it will be possible to say at a glance whether the price paid was the market rate for the best quality. In any case, the production is well within the margin of tolerance as found by the Research Unit. 8. We are also not impressed by the reason based on the discrepancies in certain manufacturing accounts. It may be that the total quality shown as issued for mixing was in excess of actual purchases. But the ITO himself observes that in some lots there were also shortages. It would show that either of these sets of books are not properly maintained. The excess of issue over purchase is worked out with reference to the cotton receipts and issues book and not with reference to the cot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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