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TMI Blog1976 (8) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1971-72 showed total sales of Rs.13,29,483 on which gross profit of Rs.1,49,352 was shown which works out to about 9 per cent which the Income Tax Officer considered low. The assessee crushed 17,515.30 quintals of paddy and rice production was 10,955.81 quintals which works out at 61 per cent The Income Tax Officer held that the production result was very low and that normally yield of 64 per cent has been shown by the assessees of this circle. The Income Tax Officer asked the assessee to explain the reasons of low yield and the assessee furnished a written reply in which the assessee stated that major parts of the paddy was purchased in the wet season, i.e., November to February. The Income Tax Officer took the view that this may be true to some extent but in early harvesting season the price of paddy is much lower than the price in that latter part of the year. The Income Tax Officer took the view that the yield disclosed at 61 per cent was very low and cannot be accepted. He also found that entire purchases were made from local villagers and the purchases were on different dates, but the assessee did not maintain any qualitative stock account. The Income Tax Officer, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock account. He, therefore, made an addition of Rs.,70,000 to raise the gross profit to more than 10 per cent. 5. The assessee appealed before the Appellate Assistant Commissioner. The AAC disposed of the appeals for each of the three assessment years separately. In the assessment year 1971-72 it was submitted before the AAC that the purchases were made mostly in the month of Dec., the harvesting season, when the moisture content is more and as such yield rate is low. It was submitted before the AAC that out of the total purchases of 17,515 quintals, 16,070 quintals were purchases during the harvesting season when the contents of moisture were more. The assessee quoted yield rates in various years. It was also submitted before the AAC that the purchases and sales are completely verifiable and proper stock account was maintained and so no addition was called for. The assessee also relied on the order of the Tribunal for the assessment year 1969-70 where the Tribunal vide order in ITA No. 1647 (Pat) of 1973-74 held that the yield rate of 62.5 per cent was reasonable. The AAC held that the yield rate of 61 per cent was quite low. The AAC has also pointed out that the fact of purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded before the AAC that if the loss on account of levy rice supplied to Government and sale proceed of bran of Rs.48,270 is included in the gross profit the resultant gross profit comes to 10.43 per cent and should have been accepted. The AAC found that during the assessment year 1973-74 the assessee crushed 27,204 quintals of paddy with yield of 17,195 quintals of rice at 63.2 per cent which the AAC considered as fair. With regard to low gross profit the AAC found that there was special reasons for fall in gross profit due to supply of levy rice at low rate resulting in loss of Rs.39,102 which the Income-tax Officer failed to consider while making the addition of Rs.70,000 which was considered by the Income-tax Officer in the next assessment year where he had accepted the gross profit rate of 7.46 per cent. The Appellate Assistant Commissioner, therefore, held that there was no ground for making such an addition. Keeping the aforesaid fact into view, he sustained an addition of Rs.20,000 in this account and deleted the balance of Rs.50,000. 8. Being aggrieved by the various orders of the Appellate Asstt. Commissioner, the department has filed ITA Nos. 1502, 1503 and 1504 (Pat) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bihar Government is 62.5 per cent and higher percentage should not be adopted. The AAC reduced the standard out-turn to 63 per cent and allowed a relief of Rs.14,000 to the assessee. The Tribunal took the view that though in normal circumstances, considering the fact that there was Bhadai paddy and government levy paddy also the yield should have been taken at 63 per cent but considering the additional fact that the quality of grains was bad this year, the yield should have been expected at 62.5 per cent. Thus, in the assessment year 1969-70 the Tribunal adopted a rate of 62.5 per cent considering the circumstance that a part of the paddy purchased pertained to the wet season and the paddy was Bhadai paddy and Government levy paddy. 11. In view of this order of the Tribunal, the assessee has pointed out that in the assessment year 1971-72 the harvest purchase and Bhadai purchase amounted to 93.75 per cent the late harvest season purchase was 4.30 per cent and dry season purchase was 1.95 per cent and it was due to this that the yield was 61.01 per cent. He has also pointed out that in the assessment year 1972-73 the harvest purchase of paddy was 88.90 per cent. The assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. In this account the assessee showed production of 34 1/2 per cent which the Income-tax Officer held to be low as the normal yield is taken at 36 to 38 per cent. The assessee showed total sales of mustard seeds at Rs. 31,134 on which gross profit of Rs. 727 was shown works out at 0.05 per cent which the Income-tax Officer also considered as low. He, therefore, made an addition of Rs. 4,000 in the mustard oil account in the assessment year1972-73 14. On appeal before the AAC it was submitted that in the mustard oil account the purchases and sales were verifiable and the yield rate of 34.49 per cent was quite reasonable and no addition should have been made. The AAC held that the gross profit of 0.05 per cent was quite low and also the yield rate. However, he held that addition of Rs.4,000 was excessive. He, therefore, restricted the addition to Rs.2,000 and deleted the balance amount of Rs.2,000. 15. In the departmental appeal in the assessment year 1972-73 it has been submitted that the entire addition should have been sustained. In Cross Objection No. 86 (Pat) of 1975-76 the assessee has pleaded in ground Nos. 2 3 that the addition of Rs.2,000 was not justified. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the fooding expenses the assessee has claimed a sum of Rs.5,627 which also included expenses of customers which is not allowable. He, therefore, disallowed a sum of Rs. 1,000. Under the head mill machinery expenses the assessee claimed a sum of Rs. 15,437. The Income Tax Officer found that the expenses were unvouched and unverifiable. He, therefore, disallowed a sum of Rs. 2,000 in this account as regards the shop expenses the Income Tax Officer disallowed a sum of Rs.15,00 as expenses were unvouched and unverifiable such as chanda of Rs.245 and pan, tea etc. of Rs. 250. 20. On appeal before the AAC he deleted the entire addition of Rs.2,000 relating to mill machinery expenses as the Income tax Officer did not point out any item which was unvouched and unverifiable. Thus, the ground of the assessee relating to amount of Rs. 2,000 out of mill machinery expenses is not maintainable as the decision is in favour of the assessee. As regards the following expenses the AAC sustained a disallowance of Rs. 1,000. However, we feel that the disallowance is excessive. We, therefore, reduce the disallowance to Rs. 500. The assessee thus gets a relief of Rs. 500 in this account. As re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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