9911796707
TMI Blog1985 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... taken to be excessive by the ITO. He was of the view that the wastage was normally 2 per cent. He, therefore, took the view that the production of oil was suppressed by 3 per cent by the assessee. The assessee crushed 150 quintals of Tara Meera account and the shortfall was, thus, worked out at 4.50 quintals, i.e., 450 litres. Applying the average sale price of Rs. 60 per litre, the ITO made the addition at Rs. 2,700 in the Tara Meera account. Both the additions were being challenged by the assessee in appeal before the AAC. He was of the view that there was no defect in the books of account of the assessee and that the yield shown by the assessee was well supported by several other cases. He also observes that no comparable case was cited by the ITO. He, therefore, deleted the addition. 2. We are in complete agreement with the AAC. The ITO makes a reference to the comparable cases but no case has been cited by him in his order nor was the assessee confronted with any case. The AAC clearly observed that the stock register has been properly maintained by the assessee. No specific defect has been pointed out in the stock register by the ITO. He simply observes : "The stock regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock register. The ITO further observed that in cases of other comparable assessees the yield of groundnut oil ranged between 29 per cent to 30 per cent. He, therefore, worked out the reasonable yield at 29.5 per cent as against 27.3 per cent shown by the assessee as observed by the AAC and made addition of Rs. 60,125 on account of shortage shown in yield. While deleting the addition the AAC has merely stated that the stock register has properly been maintained without commenting on the wide fluctuation in yield on different dates or other observation made by the ITO. He also observed that the assessee had furnished comparable cases of low yield while the ITO has not mentioned any evidence in support of his estimates of yield at 29.5 per cent. 4. Before us the learned departmental representative has supported the order of the ITO and submitted that the stock register of yield was imaginary and did not reflect the real yield. He also submitted that the ITO had in support of the estimates of yield made by him at 29.5 per cent had relied upon the following comparable cases as is evident from the note recorded by him at the foot of the assessment order : (i) Govind Oil Mills showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO. The ITO is free to take his own enquiries and reach his own conclusions based on the facts available before him. I have already pointed out earlier that other adverse factors resulting in low yield have not been spelt out by the learned counsel for the assessee nor such case appears to have been set up before the AAC. The only explanation of the assessee about variation in yield is the quality of groundnuts purchased and consumed for crushing. I shall now consider this aspect of the case. The first purchase of groundnut is shown on 11-3-1976 which was from Rs. 113 to Rs. 137 per unit. The yield out of these purchases crushed on 13-3-1976 and 14-3-1976 is 25 per cent and 25.73 per cent, respectively. Next purchase is on 26-3-1976 at the rate of Rs. 116 to Rs. 127.50 per unit. Again on 1-4-1976 the purchases are at the rate of Rs. 133 to Rs. 160. Next crushing is also on 1-4-1976. Opening stock on this date was 37-75-0 units (presumably quintals). Further purchases added on this date are 23-25-750 quintals. Thus, total stock available for crushing was 61-0-750 quintals. It is not clear how much quantity of groundnuts was crushed on this day, though the yield is shown at 26 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have observed earlier that the AAC has not considered the comparable cases relied upon by the ITO as mentioned by him at the foot of the assessment order. He has also not confronted the cases relied upon by the assessee to the ITO, as the same were not cited before him at the time of assessment. In such circumstances, there is no other alternative but to set aside the order of the AAC and to restore the same to his file. I, therefore, set aside the order of the AAC for fresh determination taking into consideration the following points : 1. he will consider the comparable cases cited by the ITO ; 2. he will consider whether there was any cases for admission of comparable cases cited by the assessee before him keeping the view the provisions contained in rule 46A of the Income-tax Rules, 1962 ; and 3. if there is case under rule 46A, be will confront the comparable cases to the ITO and give him an opportunity to rebut the same. 8. So far as addition in Tara Meera account are concerned, I agree with the conclusion arrived at by the Judicial Member, as the ITO himself has not pointed out any defects in the account books or the stock register with reference to this account. I, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not given out the details of the quality and quantity of the groundnut crushed so as to explain the discrepancies with regard to the yield pointed out to him. That the yield varies abnormally from day to day itself is an evidence of the fact that the register is a made-up affair. This is especially so if regard is had to high prices at which the groundnut has been purchased. In fact, referring to some of the daily yields and some of the purchases the learned counsel pointed out that the register is full of instances showing high yielding groundnut showing a low yield and vice versa. This itself shows that the stock register cannot be accepted as correct. The incorrectness of the accounts follows from the incorrectness of the closing stock. Since the stock register itself can be assailed as above, according to the learned counsel, any sales of suppressed quantities of oil-cake, etc., will not come into the accounts. This firm no point of view can the accounts of the assessee be regarded as correctly maintained. The books had to be rejected. Rejecting the book results, it is open to the ITO to apply the correct percentage of yield or profit to arrive at the total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stification, therefore, for rejecting the books. Even if for argument's sake the books were held to be not satisfactorily maintained, according to the learned counsel, the book results were good. The comparable cases referred to were not pointed out to him in the first place. At any rate there was nothing to show that the nature of the business done by these comparable parties was the same as that done by the assessee. As against some cases pointed out, though at the appellate stage by the ITO, there were several other cases where a low yield has been accepted by the department. 4. The matter lies in a small compass. The assessee-firm carries on the business of manufacturing the groundnut oil. Some types of registers are maintained. The ITO has examined and adversely commented on a particular stock register treating it as an 'imaginary oil stock register'. Relying on what he calls some comparable cases, he has adopted a higher percentage of yield and made the addition. Going through the register produced and having regard to the background of the register maintained, it would be incorrect to say that the register is not contemporaneously maintained or is a mere piece of imaginary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the accounts are foolproof. On the contrary, the ITO has not pointed out any defects, omissions, manipulation of accounts, not even an over-writing or incorrect correction. This is, therefore, only the usual type of a case where the assessee has maintained accounts, but the extent of perfection which the ITO wants for the accounts to be foolproof has not been fully realised. The ITO, therefore, would be correct in rejecting the accounts. The question whether the book results should be rejected as well is a different matter. 6. Even though the assessee's books could be rejected as not foolproof, there is no information to indicate that the yield shown by the assessee is low or manipulated. In the first place I find nothing in the order of any of the authorities below to indicate the scientific significance of the yield considered in question. If the yield is of oil in relation to de-husked groundnut, that would be one matter. If a proportion is computed in relation to the weight of groundnut raw itself, it would be a more complicated affair with more variables included. If added to this one considers the different qualities of groundnut, the nature of the groundnut itself, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and show what they held should be in the background of these. No omissions, manipulations, etc., have been pointed out. Purchases and sales are fully vouched. No defects have been found out even with regard to these. I see, therefore, no justification to reject the book results and make an addition on account of shortage of yield. The addition of Rs. 60,125 should be deleted, I agree with the learned Judicial Member that the order of the AAC should be upheld. 8. The matter will now go back to the original Bench which heard the appeal for proper disposal. Per Shri Y.R. Meena, Judicial Member -- This appeal was filed by the revenue against the order of the AAC dated 30-9-1980. The assessment year involved is 1977-78. The following issues were raised in the appeal by the revenue : "The learned AAC has erred in : (i) deleting the addition of Rs. 60,125 made by the ITO in groundnut oil account ; and (ii) deleting the addition of Rs. 2,700 made by the ITO in Tara Meera account." 2. After hearing the appeal by the Tribunal, there was a difference of opinion among the Members on deletion of addition of Rs. 60,125 made by the ITO. The learned Judicial Member has confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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