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TMI Blog1998 (9) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 21,57,800 and Rs. 3,20,000 for asst. yrs. 1984-85 and 1985-86, respectively was made by the AO. 4. The assessee-company derived income from manufacturing of cotton yarn, cotton textiles and hosiery textiles and sale thereof. In the asst. yr. 1984-85 the assessee consumed raw cotton weighing 24,74,777 kg. and obtained production of yarn therefrom at 19,86,096 kg. as compared to the production of yarn at 22,61,804 kg. from the raw cotton consumed at 28,05,718 kg. in the preceding assessment year. The assessee, therefore, claimed process loss of raw cotton to the extent of 4,88,681 kg. in the current year as against last year s process loss of 5,43,514 kg. which gives the percentage of 19.74 per cent and 19.37 per cent respectively. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further stated that the assessee is a company which started sometime in 1957 or so and no addition on this account was made ever. Reliance was placed on R.B. Banshilal Abirchand Spinning Wvg. Mills vs. CIT (1970) 75 ITR 260 (SC), Jhandu Mal Tara Chand Rice Mills vs. CIT (1969) 73 ITR 192 (P H), Dhakeshwari Cotton Mills Ltd. vs. CIT (1955) 27 ITR 126 (SC) and M.D. Umer vs. CIT 1975 CTR (Pat) 13 : (1975) 101 ITR 525 (Pat). After considering the submissions of the learned Departmental Representative and the material, the CIT(A) deleted the additions in both the years. 6. We have heard the rival submissions and considered them carefully. We have also perused the material placed here before us. The learned authorised representative has repeate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te shown. Further, the assessee has shown hard waste at 10.11 per cent and blow dust at 7.58 per cent. Hard waste as well as blow dust has been sold and the sale of hard waste as well as blow dust is supported by sale vouchers. If the sale of hard waste and blow dust is considered, there could be no excess yarn manufacturing as that would lead to the total production in excess of 100 per cent which is impracticable. There is also no material evidence on record to suggest that the assessee in fact sold cotton yarn whereas the bills were issued either of hard waste or blow dust. Moreover, I also find that the yield of yarn as well as waste has been varying from year to year depending upon the quality of raw cotton used and the production res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible in the eyes of law. No defect of any kind was pointed out by the AO. 6.1. In case of R.B. Banshilal Abirchand Spinning Weaving Mills vs. CIT at 282 the Bombay High Court has observed that: "The officer s right under the proviso to s. 13 arises only after a finding is recorded as to the unacceptability of the method and irregularity of the accounts kept. In the absence of such a finding recorded by the authorities, the book results cannot be ignored or brushed aside. The mere fact that the percentage of dead loss of cotton is high in a particular year cannot lead to an inference that thereby there has been a suppression of the production in a spinning mill. On the above observations, the Hon ble High Court has allowed the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of claim of assessee for carry forward of loss to the successive years. The assessee filed return of its income late. The AO determined the loss at Rs. 72,94,968 but the same was not allowed to be carried forward since the return filed on 16th Dec., 1986, was late as per s. 80 of the IT Act. 7.3. Before the CIT(A) it was submitted by the counsel that assessee-company is one of the sick units and the Government took over the same in January, 1985 when there was no proper staff and no one to look after the work of the mill. Therefore, there were extraneous circumstances for the delayed return for which Form No. VI was also filed. In view of these circumstances, the return having been once considered and assessments having been made und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the assessee is allowable. 7.7. In case of CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC), the Hon ble Supreme Court has held that "under the provisions of s. 22(3) (analogous to s. 139(4) of IT Act, 1961, is a proviso to s. 22(1) (analogous to s. 139(1) and the return filed under s. 22(3) is also a return filed under s. 22(1) and therefore the unabsorbed business losses should be allowed to be carried forward". The decision of the apex Court is still a good law. Therefore, the ratio of the decision is very much applicable to the facts of the present case. 7.8. The amendment in s. 80 by the Direct Tax Laws (Amendment) Act, 1987, whereby the above words have been replaced by the words "under s. 139(3)" hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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