9911796707
TMI Blog1988 (11) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ns involved and whether the shortage claimed and allowed, which was the main issue in this appeal, was justified. 2. The assessee is an individual carrying on business in retail in sarees, lehangas, dupattas and suits. Lehangas, dupattas and some ladies suits were also made to order and supplied. Sometimes the cloth is purchased by the customers from the cloth available in the shop and sometimes cloth is brought by the customers and the assessee undertakes to do the stitching work, embroidery work, etc. as per the instructions of the customers for some remuneration called labour charges. For the year under appeal a gross profit of 14.1 per cent was shown on a turnover of 40.24 lakhs as against the same rate of gross profit shown on a lower turnover of Rs. 32 lakhs in the previous year. 3. During the course of examination of accounts, the assessee was required to furnish quantitative details of the sarees, lehangas, dupattas, etc. purchased and sold. The assessee did not maintain a stock register as such. But these details were prepared from purchase bills and cash memos maintained regularly by the assessee. On an analysis of these quantitative details furnished, the following p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upattas he estimated the consumption at 2.5 mts. as against 2.75 mts. claimed by the assessee. Likewise in suits, he estimated the consumption at 6.5 mts. as against 7 mts. taken by the assessee. The major difference arose in Lehangas where his estimate was 13.5 mts. as against 17 mts. taken by the assessee. In the case of saree falls also, the IAC was not prepared to accept the estimate of one mts. given by the assessee but reduced it to 0.75 mt. We have already mentioned above that the IAC did not give credit for the full quantities of sarees, dupattas, suits and lehangas on the ground that certain quantity of cloth was brought by the customers and we have also mentioned those figure above. Deducting these figures from the figures given by the assessee and estimating the consumption at the reduced figures mentioned above, the IAC held that cloth consumption was only of the following order: Item No. Rate of consumption of cloth (metres) Total consumption of cloth Sarees (783-58) 725 5.75 4168 Dupattas (413-31) 382 2.5 955 Suits (265-13) 252 6.5 1638 Lehangas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing officer was defective and could not be taken as proper and correct. He made a slight variation and arrived at a shortage of 1209 mts. and held that this was reasonable having regard to the magnitude of the business turned out by the assessee. In this shortage of 1200 mts. he attributed about 200 mts. in preparing samples and some quantity towards tear, etc., pilferage and shortage in measurement. He also found that the shortage arrived at by him worked out to 2.18 per cent of the over-all metreage handled and as the IAC himself allowed a shortage of 2 per cent on over-all, he felt that the shortage of 2.18 per cent worked out by him could not be said to be excessive. Thus he held that the rejection of the trading results by the Department was unjustified and deleted the entire addition. In regard to the addition made on job work, the Commissioner (A) was not satisfied with the reasons given by the IAC. He held that in so far as the estimate made on account of advances was concerned, when the books were in the possession of the IAC, he should have shown instances of omissions of sales and having failed to do so could not be permitted to resort to estimates. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of sarees, we verified as many as 13 specimen taken at random and we found that the finished product was ranging between 6 mts. highest to 5.60 mts. lowest. It is an admitted fact that there is bound to be some wastage in the manufacture of sarees because before the sarees are embroidered, they are all tightly fixed in a frame, pinned at the ends and the ends that were pinned will tear and go as waste and in addition thereto there will be wastage on account of hemming and other operations when the finished product after allowing for all these shortages worked out to a minimum of 5.60 mts. and maximum of 6. mts., it could not be that the cloth issued for the manufacture of sarees was only 5.75 mts. as estimated by the IAC, on which estimate strongest reliance and greatest emphasis was laid by the learned Departmental Representative as correct and complete. We fail to under stand as to how when the cloth issued for the manufacture of sarees was only 5.77 mts. as estimated by the IAC, the finished product would be more than that. There is therefore a flaw in the estimate adopted by the IAC and that could not be taken to be the correct estimate at all. In so far as suits ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the manufacture of these items. 7. After the inspections were over, when we had posted the appeal for hearing, the learned Departmental Representative made several submissions, one of which was as to why we should not go by the results of the inspection. He submitted that inspection took place in the year 1988 whereas the assessment related to the asst. yr. 1982-83 and the inspection could only be relevant for shortages and not for the issue of cloth. According to him the issue of cloth may vary from year to year depending upon the fashions and they change during the course of time, while the shortages may remain same. That being so, we should not go by the length as indicated by the assessee as issued for the manufacture of final products. With respect we are unable to accept this argument for the simple reason that apart from this being only a supposition, there cannot be any substance in the argument that the length would vary depending upon the change in fashions because lengths would vary only when the width of the than of cloths as manufactured by the mills or as woven by the powerlooms vary. There is no material produced before us to show that there was any variation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting employed by the assessee was defective or not. When the Department accepts the figures furnished by the assessee as prepared from the subsidiary material, namely, purchase vouchers and sale bills and inventories of stocks, it cannot complain that the assessee did not maintain a stock register and therefore the books of account were defective. This, to our mind, appear to be taking a contrary stand. The Department proceeded from those figures as furnished by the assessee and then tried to work out the shortage. Thus it cannot strictly be said that the method of accounting employed by the assessee was defective. Of course the assessee did not maintain the lengths of the materials issued to the tailors for the preparation of the final products. This can be said to be a defect. But the lengths issued to the tailors are standard. The tailors, the customers and everybody knows full well as to how much cloth was required for the preparation of these finished products. Looked at from that angle, non-maintenance of the length of the material issued to the tailors cannot be said to be such a serious defect as to throw-out the books of account over board as unreliable. That apart thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is properly explained and the Commissioner (A) had taken all the necessary material into consideration and arrived at very correct conclusions and did not omit to consider any relevant material or considered any irrelevant material so as to say that his decision was vitiated. It is also to be noted that in a search that was conducted on the business premises of the assessee on7th April, 1983nothing was found. Other than the suppressed shortages, no other defect was found. In addition the gross profit disclosed by the assessee was normal. Thirdly there was abnormal increase in turnover and lastly the order of the Tribunal, which we have referred to above, covers the very same grounds and there also the Tribunal, after considering the entire material on record came to the conclusion that the additions made by the Department on the basis of estimates were totally incorrect and unsupportable. There also the Tribunal confirmed the view taken by the Commissioner (A) in deleting the additions made. We are of the opinion that order of the Tribunal is entitled to great respect and we have no hesitation in our minds in accepting it for the purpose of as being a precedent. We find two sets of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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