9911796707
TMI Blog2003 (12) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... nt against 7.46 percent for the assessment year 1986-87. He asked the assessee to show-cause why addition should not be made for fall in the G.P. 3. The Assessing Officer further found that the previous year of the assessee consisted of 21 months which was divided into two periods-the first period of 12 months up to June 30, 1988, and the second period of 9 months up to March 31, 1989. He further examined consumption of various raw materials and production in the two periods and compared them with the results of the assessment years 1987-88 and 1988-89. The chart is given in para. 5 of the assessment order. On the basis of the above analysis, the Assessing Officer concluded that the operations of the assessee showed downward productivity. He found that there was increase in consumption of coal, power and other raw material used in the manufacture. He, therefore, asked the assessee to explain the above increase in consumable items. It is observed in the assessment order that no satisfactory explanation was rendered. The Assessing Officer, therefore, refused to accept increased consumption of electricity and coal without corresponding increase in the manufactured items. He concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years. It ranged between 2 percent to 7 per cent.. The figures are noted by the learned Commissioner of Income-tax (Appeals) in para. 1(iii)(a) of the order. There can be variation in the ratio of production to the consumption of raw material from batch to batch. The assessee furnished figures of consumption ratio in different assessment years. 7. It was further explained that the books of account were produced before the Assessing Officer from time to time. At Chandigarh camp and at Solan, tables of comparative production on the basis of norms and standards disclosed by the assessee in the earlier assessment years were produced before the Assessing Officer. The Assessing Officer having regard to the assessment order for the assessment year 1988-89 held that the assessee suppressed the production of 438 mt. of vanaspati ghee having value of Rs. 96,09,720 sold outside the books of account. It was thus submitted that the addition has been made by the Assessing Officer on account of low G.P. rate and lower production, and on account of higher consumption of electricity. The assessee explained increase in expenditure and this explanation is noted in para. 2(iii) at page 3 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine them. As per the assessment order he has done lot of labour to look into the manufacturing results of the appellant but due to non-cooperation of the appellant he had to rely on the assessment order of the assessment year 1988-89, which has already been adjudicated by the undersigned as stated above. (a) As already held in the immediately preceding year that the manufacturing process of the appellant-company is strictly supervised by the excise authorities who regularly inspect the records maintained under the Central Excise Rules. In the case of Seetharama Mining Co. v. CIT [1968] 68 ITR 1 (AP) (Sh. N.), it was held that where statutory registers have been maintained, estimation of higher production would not be proper. Therefore, I feel there was no reason to doubt the manufacturing account of the appellant. (b) Secondly the Assessing Officer has doubted the manufacturing account on the ground that the consumption of material was higher as compared to the preceding year. The production of finished goods with respect to consumption of material mainly depends upon the quality of the material used. The more better quality of material is used the more quantity of finishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The learned Departmental Representative placed strong reliance on the order of the Assessing Officer. It was emphasised that there was a fall in the G.P. and increase in raw material and electricity consumed. The Assessing Officer had made a detailed analysis of the working of the assessee for the period under consideration and in other assessment years and rejected the book results under the extraordinary circumstances. The assessee was not able to explain increase in production expenses and decrease in production. Therefore, the rejection of the books of account was quite in order. The Assessing Officer had further applied reasonable rate of G.P. as per history of the case. In these circumstances, the addition made was quite in order. 12. Learned counsel for the assessee supported the impugned order. He argued that similar additions were made in the assessment years 1985-86 to 1988-89 but were deleted in appeal. The revenue authorities accepted those orders and no appeal was brought before the Appellate Tribunal. He further pointed out that the books of account are audited and production was carried under the supervision of the Excise department. All regular registers relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production of ghee is also noted. This is aimed at proving that there was downward trend in the production. He then observed that vide order sheet entry dated January 23, 1992, the assessee was required to furnish explanation for disproportionate increase in the manufacturing cost. He held that the explanation of the assessee was not satisfactory. The composition of change of raw material consumed could not affect the production. He concluded that the consumption of higher electricity and oil only showed that there was production and consequent sale not recorded in the books of account. 16. After drawing the above inference, the Assessing Officer has addressed the question as to what was the addition to be made. He first compared the G.P. rates. He then looked to the ratio between oil production and the byproducts. He then took note of the addition which he made in the assessment year 1988-89 and found that the ratio of the finished products to byproducts, if the above addition is taken into account, would be 14.56 times in weight of the by-products. If the above multiplier is applied to byproducts of the year under consideration, the main finished product should be 35337 mt. aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond period. Unless such material was furnished, the chart available in the assessment order could not have been prepared. It is not clear from the record whether batchwise consumption or production is available with the assessee or not. In our considered opinion, when details for production and consumption of raw material were filed and not doubted by the Assessing Officer and when inference was clearly drawn that there was higher consumption and higher by-product with downward trend in production, there was no need to call again and again for production register of batch and for daily production and consumption records. 20. In the next para. the Assessing Officer has referred to non-production of project report. The said project report was not filed before the Assessing Officer but filed before the Commissioner of Income-tax (Appeals). The production report based on hypothetical figures has rightly been held to be of no use by the learned Commissioner of Income-tax (Appeals) as the assessee's factory had been running for several years. There are actual figures of consumption and production which have been used by the Assessing Officer. Therefore, in the circumstances, we entirel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Consumption of electricity 286 units/tonnes (assessment year 1987-88) 35253 29833 5420 298 units/tonnes (assessment year 1988-89 returned) 33980 29833 4147 The assessee has disclosed consumption of 309 units of electricity per metric tonne. From the above three Tables it is evidently clear that the assessee has suppressed its production and consequently the sale of finished products. Keeping in view the assessment order for the assessment year 1988-89 and other record as well as explanation given by the assessee in this regard the assessee is held to have suppressed production and consequently sale of 438 metric tonnes of vanaspati ghee which is the least figure of difference in the above 3 Tables. The average selling price during the year was Rs. 21,940 per metric tonne. Applying this rate to 438 metric tonnes of suppressed production an addition of Rs. 96,09,720 is made to the assessee's income on account of suppressed production as well as suppressed sales. Penalty proceedings for concealment of income are initiated accordingly." 23. The Assessing Officer was quite generous in taking the least figure of addition of 438 mt. although it was very much within his po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re are the following pertinent observations in the assessment order : "The undersigned fixed camp at Chandigarh on February 28, 1992, as the administrative office of the assessee-company is located near Chandigarh. This has been done to facilitate the production of the books of account and complete vouchers. On February 28, 1992 books were only partly produced. Cash book was not produced nor were most of the vouchers and purchase books. This was duly recorded in the order sheet on February 28, 1992 and the proceedings were closed." It is evident that all books of account were produced by the assessee except cash book. How cash book or vouchers were relevant for the issue raised by the Assessing Officer is not evident from the record. Again it is recorded that on March 3, 1992, i.e., two days after the above date, the assessee produced again voluminous records and the Assessing Officer observed as under : "On March 3, 1992 Sh. V. K. Puri, company secretary, attended office at Solan along with voluminous set of books of account. However, his offer that these be examined was rejected as the proceedings had already been closed on February 28, 1992." The assessment order is dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h book was relevant to the controversy raised by him relating to production. Which of the vouchers not produced was relevant is also not clear from the assessment order. However, in order to avoid complications, the assessee took voluminous record to Solan for examination of the Assessing Officer on March 3, 1992. The assessment order was passed on March 25, 1992. Thus between 3rd March and the date of the order, there were clearly 22 days period available and the Assessing Officer could have very easily examined and seen whatever he wanted to see with reference to the books of account. We may take liberty to add that how entries in the books of account were relevant for examining the explanation of the assessee relating to fall in production of the main item and increase in production of byproducts, is not stated by the Assessing Officer. With reference to entries in the books of account, he prepared charts relating to production and projected production if there was no fall in production or increase in byproducts or consumption of higher raw material and electricity. The addition has been made on account of low production and by taking into account figures of estimated production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bilise. The production capacity was raised and in fact there has been a higher production but whether higher production led to higher efficiency is a relative question. What is efficiency A higher production or higher profit or higher by-product? In our considered opinion, we need not give importance to the above question. It would be important to examine whether addition made by the Assessing Officer for under production of 438 mt. is justified. It is evident from the chart that conclusion of suppressed production of 438 mt, is based on the assessed production taken by the Assessing Officer in the period relevant to the assessment year 1988-89, as in that year also, the Assessing Officer had concluded that there was suppression of 234 mt. and this way addition of Rs. 45,39,600 was made in the income of the assessee. The addition was deleted by the Commissioner of Income-tax (Appeals) in appeal and the said order was accepted by the Revenue. The said order was passed after the assessment order in question and, therefore, the Assessing Officer had not the advantage of going through the said order of the learned Commissioner of Income-tax (Appeals). He thought that the basis adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting from raw materials to finished products are done under supervision of the excise authorities and records as maintained under the Central Excise Rules are periodically checked by such authorities. Hence there is no scope of suppressed production. (ii) Consumption of materials may vary from year to year due to inefficient working, break downs of machinery, technical faults and such other factors. (iii) Out of total coal consumption, D-grade coal which is of much inferior quality accounted for 47.3 percent of total consumption. This explains higher coal consumption. (iv) As regards excessive electricity, it was pointed out that during this year more rice bran oil, solvent extract-mustard oil and Mohuva oil were used. Due to change in product-mix, the processing time was longer which resulted in higher consumption of electricity." It was submitted that the Assessing Officer did not take into account objections/explanation rendered by the assessee in the proper perspective and the addition was made in an arbitrary manner without application of mind. The learned Commissioner of Income-tax (Appeals) found force in the submissions advanced on behalf of the assessee and deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.74 mt. of the assessee. The difference was insignificant. 31. The learned Commissioner of Income-tax (Appeals) also addressed the question of higher consumption of coal and electricity. He held that when D-grade or inferior quality of coal was consumed, quantity will go up. The Commissioner of Income-tax (Appeals) took into account figures furnished by the Bureau of Industrial Cost and Price (BICP) and held that the assessee's consumption was more than 419 mt. against 430 mt. reflected in the figures of the Bureau. Likewise, he found that 12 units of electricity in excess were consumed for production of 1 mt. of vanaspati. He found that the consumption of power could not be compared from year to year as in one year there may be more break down, tripping and line loss than the other. This fact was not taken into account. In the final analysis, he held that the assessee had consumed rice bran oil, mustard oil, Mohuva oil and due to change in oil mix, more power was consumed as processing of these oils is much longer than other oils (conventional). He accordingly held that consumption of coal and electricity cannot be held to be excessive. The learned Commissioner of Income-tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances while deleting the impugned addition. All the points raised by the Assessing Officer have been met in the impugned order. We do not find any legal error in the approach of the learned Commissioner of Income-tax (Appeals) and confirm his order. Deletion of addition is hereby upheld. 35. In the next ground of appeal, the Revenue has challenged the deletion of disallowance of Rs. 19,339 made on account of foreign travelling of managing director. The Assessing Officer disallowed the above amount as not relating to business. On appeal, the Commissioner of Income-tax (Appeals) held that the managing director went abroad in connection with the assessee's business and this tour was authorised by the board of directors. He accordingly deleted the disallowance. 36. The Revenue has come up in appeal. However, during the course of hearing, the learned Departmental Representative could not point out any mistake in the impugned order of the learned Commissioner of Income-tax (Appeals). The deletion of disallowance of Rs. 19,339 is hereby confirmed. 37. In the result, the appeal is dismissed. P. K. Bansal (Accountant Member). 1. I have gone through the order proposed by my lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of production 853 1074 884 6. Actual consumption of oil 18885 13203 32088 18341 7. Actual production of vanaspati ghe 17419 12414 29833 17069 8. Installed capacity 18750 14062 32812 18750 9. Sale of vanaspati ghee in mt 17486 12211 29697 17728 10. Sale of vanaspat ghee in amount 37,96,04,671 27,19,70,359 65,15,57,503 34,75,93,394" The Assessing Officer after considering the explanation of the assessee came to the conclusion : i. that the coal consumption per mts. higher this year as compared to previous year. ii. that the electricity consumption is higher per mt. vis-a-vis, previous year. iii. that finished goods to consumption of raw material and with byproducts is understated. For the above reasons, the Assessing Officer estimated that there has been suppression of production and sale of vanaspati ghee by 438 mt. by the assessee during the assessment year under consideration and valued the same at Rs. 96,09,720 on the basis of average rate realized by the assessee and thus made the addition of this amount in the income of the assessee. 2.1 The assessee went in appeal before the Commissioner of Income-tax (Appeals), who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r were never produced in spite of repeated opportunities. Production record was never produced. This observation has been made by the learned Commissioner of Income-tax (Appeals) under para. (b) at page 2 of the impugned order. 4. In this case, in my opinion, the issue is when there is fall in G.P., the Assessing Officer can investigate the matter and the investigation cannot be thwarted by the assessee by adopting non-co-operative attitude and come up with all sorts of legal and technical pleas at higher appellate forum avoiding production of complete books of account before the lower authorities. 5. There is no dispute on this settled law that when regular system of accounting is followed, no addition can be made but the fact remains that whether the assessee has been following a regular system or not has to be established by the assessee, which can be done by producing books of account claimed to have been maintained. In case the assessee fails to produce the books, this plea has no legs to stand. Therefore, under these peculiar facts, it cannot be held that the assessee had been following regular system of accounting. 6. The action of the Commissioner of Income-tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Commissioner of Income-tax (Appeals) under para. 2(iv)(b) is reproduced, there is a finding that in earlier years, the assessee could import 80 percent of oil. In the later years there was curtailment on imports and the assessee had to use non-conventional oil like rice bran and mustard oil, I find from the record that this aspect was not before the Assessing Officer and nor the assessee made it in its submission before the Commissioner of Income-tax (Appeals) in which the assessee had discussed some sketch facts about project report. No reason is given about the non-submission of project report before the Assessing Officer and its acceptance by the Commissioner of Income-tax (Appeals) without giving any opportunity to the Assessing Officer. The submission does not reveal the input-output ratio, GP, electricity consumption ratio in the project report. It has been mentioned that the assessee could import 80 percent and not 55 percent but it has not been mentioned what was the actual import figure during the year under appeal and in the earlier years. Even the nature of the imported oil not given. The Commissioner of Income-tax (Appeals) has finally mentioned that rice bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses are bound to be more than earlier year because it takes time for stabilization of plant and the efficiency will increase in the next year. In my view, this reason cannot be the basis for the current assessment year nor the assessee has raised this plea before the Commissioner of Income-tax (Appeals). Therefore, reliance on preceding year is misplaced on the peculiar facts of the assessee. If the finding of the Commissioner of Income-tax (Appeals) applied to this year, there should have been significant improvement in the trading results of the assessee. This vital aspect was not examined. In the preceding year, it has been mentioned that B grade coal was more consumed but no such fact has been brought on record during this year. The power consumption could be more due to more tripping and composition of oil mix consumed. It is found that only generalization has been done and no effect has been made to bring on record the number of tripping in earlier year and this year. This is possible if complete electricity register is maintained in the plant. Similarly, consumption of raw material mix should have been compared for justifying more consumption of electricity rather than st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r were most of the vouchers and purchase books. This was duly recorded in the order sheet on February 28, 1992, and the proceedings were closed." 12. It is clear that books were not produced. There is no assertion by the assessee also either before the Assessing Officer or even before us that the books of account were produced on February 28, 1992. 13. In my opinion, the Assessing Officer is correct in law in not examining the books when produced on March 3, 1992, although the order passed on March 26, 1992, hearing concluded on February 28, 1992. It has to be kept in mind that the Assessing Officer was not doing only one assessment. March is the month of time barring assessment. Once hearing is concluded by giving due and adequate opportunity, it would be unfair to ask the Assessing Officer after the closure of the proceedings that he should examine books of account as and when the assessee walked in his office, as per its whims and fancies. It seems to be merely a plank on the part of the assessee. If assessee's intentions were bona fide, it could have produced the books of account before the learned Commissioner of Income-tax (Appeals) or the Tribunal but it was not done. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of books of account, the result in the books cannot be accepted. 17. Further, the determination of income is dependent on the books of account regularly maintained by the assessee. The proceedings under the Income-tax Act are different from the criminal proceedings. In criminal proceedings, the oral evidence is relevant to decide whether the accused has committed an offence or not but this is not the case in income-tax proceedings. The income cannot be determined on the basis of oral evidence and on the saying of the assessee that it has maintained regular books of account, without producing the same before the Assessing Officer for his examination/verification. 18. The core issue in this case is related to the propriety of the assessment. The Assessing Officer repeatedly called for books, the assessee did not produce the same and came for relief at the higher level. If this is allowed, the provisions of sections 143(3), 142(1) and 144 will become otiose. This has a support from the ratio laid down by the Delhi High Court in the case of CIT v. Motor General Finance Ltd. [2002] 254 ITR 449. In which it was held. (page 462) "As the assessee could not produce any document in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various aspects in the assessment order but the aforesaid addition has been made by him by applying the ratio of raw material consumed in the production of vanaspati ghee as estimated and assessed by the Assessing Officer in the assessment year 1988-89. 4. The learned Commissioner of Income-tax (Appeals) in view of the elaborate reasons given in his order, has deleted the aforesaid addition. The learned Commissioner of Income-tax (Appeals) has given detailed reasons in the impugned order passed by him and has also relied upon the order passed by the Commissioner of Income-tax (Appeals) in the case of the assessee for the immediately preceding year 1988-89 in which the addition of Rs. 45,39,600 made on similar basis by estimating suppressed production and suppressed sales, was deleted. The Revenue accepted the said order of the Commissioner of Income-tax (Appeals) for the assessment year 1988-89 and did not prefer any further appeal before the Tribunal for that year. 5. The Revenue preferred the present appeal against the order passed by the Commissioner of Income-tax (Appeals) for the assessment year 198990. 6. The hon'ble Shri Vimal Gandhi, the then learned Vice-President (now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee made a statement at Bar that he himself was present during the course of hearing on February 28, 1992 and requested for some reasonable time for producing the remaining records. Learned counsel then drew my attention to page 3 of the assessment order in which it has been stated that Sh. V. K. Puri, company secretary, attended the office of the Assessing Officer at Solan on March 3, 1992, along with voluminous set of books of account. The Assessing Officer refused to examine those books of account and other records on the ground that proceedings has already been closed on February 28, 1992. Learned counsel pointed out that the assessment order was passed by the Assessing Officer on March 25, 1992. The Assessing Officer simply wanted to find out some pretext of showing some default on the part of the assessee so as to justify the predetermined arbitrary addition on the basis of the assessment made in the case of the assessee for the assessment year 1988-89. Learned counsel also submitted that the order passed by the learned Accountant Member is not based on proper appreciation of facts and material existing on record. The learned Accountant Member has, inter alia, observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t page 7 of the paper book. He submitted that the GP rate declared and accepted by the assessee from the assessment years 1986-87 to 1989-90 raised between 2.03 percent and 6.90 percent The declared gross profit was always accepted in the past. Additions were made in the assessment years 1986-87 to 1988-89 in the declared trading results. Those additions were deleted by the Commissioner of Income-tax (Appeals) and no second appeal was filed by the Department in the assessment years 1986-87 to 1988-89. Learned counsel also submitted that the correctness of the declared trading results have also been accepted by the Department in the assessments made under section 143(3) for the assessment years 1991-92 to 1997-98. 12. Learned counsel further submitted that the learned Accountant Member has erred in observing that there was a non-co-operative attitude on the part of the assessee in not complying with the various notices requiring the assessee to produce the books of account and other records and also the project report. He submitted that the assessee extended fullest possible co-operation and produced all the relevant books of account and records before the Assessing Officer. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the addition was deleted in the assessment year 1988-89 because the Commissioner of Income-tax (Appeals) had set aside the order of the Assessing Officer for examination of the books of account and other records. On set aside, the Assessing Officer, in fact, has examined the books of account in the earlier year. The addition was made after examining the books of account, which was deleted by the Commissioner of Income-tax (Appeals). Therefore, in the absence of production of books of account, the correctness of the book results cannot be accepted in the year under consideration. The learned Accountant Member has also placed reliance on the judgments of the hon'ble Supreme Court in the case reported in CST v. Esufali (H. M.) Abdulali (H. M.) [1973] 90 ITR 271 and CIT v. Motor General Finance Ltd. [2002] 254 ITR 449 (Delhi). The learned Accountant Member has proposed confirmation of addition of Rs. 96,09,720. 16. The return of income was filed on December 29, 1989. The facts discussed in the assessment order indicate that the first notice was sent under section 142(1) on November 13, 1991, i.e., after about two years of the furnishing of the return of income by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1988-89. 18. The then learned Vice-President in paras. 26 to 32 (pages 139 to 143 supra) of the proposed order has discussed the facts relating to addition of Rs. 45,43,600 made by the Assessing Officer on similar basis in the assessment year 1988-89. He has also elaborately discussed the facts stated in the original assessment order as well as in the fresh order passed by the Assessing Officer in the assessment year 1988-89, in which he had estimated the alleged suppressed production of 234 mt. of vanaspati ghee and made an addition of Rs. 45,43,600 by applying the average selling price on similar basis. The then learned Vice-President has thereafter elaborately discussed the findings given by the Commissioner of Income-tax (Appeals) in his order for the assessment year 1988-89. The learned Commissioner of Income-tax (Appeals) has given a specific finding in his order for the assessment year 1989-90 that the facts and circumstances so discussed in the assessment order for the assessment year 1988-89 and the assessment year 1989-90 as well as in the order passed by the learned Commissioner of Income-tax (Appeals) in the assessment year 1988-89 clearly show that the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219 (SC), the hon'ble Supreme Court had rendered a similar decision and dismissed the appeal submitted by the Government. The hon'ble apex court in the case of CIT v. Shivsagar Estate [2002] 257 ITR 59 comprising three hon'ble judges, as in the earlier judgments, dismissed the appeal submitted by the Commissioner on the ground that no appeal had been taken to the Supreme Court for the earlier years. The then learned Vice-President has, therefore, rightly observed in para. 34 of page 23 (page 143 supra) of his order that it is known why for this year on identical circumstances the matter has been brought in appeal before the Tribunal when similar additions made in the assessment year 1988-89 were deleted by the Commissioner of Income-tax (Appeals) and such deletion was accepted by the revenue authorities. 20. The learned Accountant Member in his order has pointed out that the only distinguishing feature is that certain books of account were not produced before the Assessing Officer. In the absence of books of account, the correctness of the declared results could not be verified. The question relating to alleged non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will, therefore, have to be deleted, as has been deleted by the Commissioner of Income-tax (Appeals) in the assessment year 1988-89, which decision has been accepted by the Revenue. The alleged non-production of some books was not the basis for making the impugned addition, nor it can in any manner justify the stand of the Department that the deletion of similar addition accepted by the Revenue in the assessment year 1988-89 cannot be made the basis for deletion of impugned addition in the year under consideration. 21. It would be worthwhile to reproduce the GP chart submitted by the assessee at page 7 of the paper book : Assessment year GP rate shown GP rate accepted Addition made by the Assessing Officer (Rs.) 1985-86 2.03% 2.03% Nil 1986-87 6.90% 6.90% 5,33,728.00 1987-88 4.97% 4.97% 7,00,000.00 1988-89 3.60% 3.60% 45,39,600.00 1989-90 3.72% 3.72% 96,09,720 22. Commissioner of Income-tax (Appeals) and no second appeal was filed by the Department for all these years. The deletion of additions made on similar basis in the earlier years, has thus been accepted by the Department. The aforesaid chart also indicates that the GP rate varied between 2.03 perce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's account books. In such a situation, the hon'ble Supreme Court held that it was open to the officer to infer that the assessee had a large scale dealings outside the accounts. In the present case, the Assessing Officer has brought no positive material or evidence on records to show the existence of any unaccounted production or unaccounted sales. The Assessing Officer has simply presumed hypothetical production/suppressed production by calculating presumed production on the basis of certain ratios. The increase in the power consumption or consumption of raw material by themselves cannot justify rejection of the books of account, nor can it justify the charge of suppressed production or suppressed sales made outside the books of account, particularly, in a case where the correctness of the declared results are supported by regular books of account which are duly audited and which are also supported by various statutory registers required to be maintained as per excise laws. 25. It may be useful to make a reference to the judgments of some of the hon'ble courts in order to properly understand as to under what circumstances the correctness of the book results can be disputed : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 13 but reduced the addition to Rs. 15,000. The appeal to the Tribunal was dismissed. On a reference : Held, (1) that the method of accounting adopted by the assessee having been accepted by the Department in the previous years and the income computed on that basis, there were not sufficient grounds for applying the proviso to section 13 to the facts of the case ; (2) that even assuming that the proviso was attracted, the incometax authorities, not having determined any basis or manner of computation of the true income, profits and gains of the assessee-firm, were not justified in arbitrarily adding Rs. 15,000 in round figure to the income of the assessee-firm." 26. The learned Accountant Member in para. 7 (page 148 supra) of his order has discussed the relevancy of statutory registers and records maintained by the assessee as per the Excise Rules and has also mentioned that the reliance placed by the Commissioner of Income-tax (Appeals) on the decision reported in [1968] 68 ITR 1 is not correct as no such case was reported on the given page of the said report. It was contended on behalf of the assessee before the departmental authorities as well as before the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h other reasons given in the said judgment, the hon'ble High Court held that the Tribunal was wrong in drawing adverse inference and in rejecting the assessee's accounts and sustaining the addition of Rs. 2,25,000 merely because the "parchas" were not produced by the assessee. The relevance and significance of maintenance of statutory registers as per the excise rules, periodical physical verification by the excise authorities audit of accounts by the chartered accountants are the factors which have been taken into consideration by the hon'ble Patna High Court while deleting the aforesaid addition. The manufacture of vanaspati ghee is subject to strict supervision and checking by the Central excise authorities. The accounts of the appellant company are also audited as per the provisions of the Companies Act and section 44AB of the Act and correctness of the declared production is supported by the excise records. 28. The Income-tax Appellate Tribunal "Special Bench" in the case of Shanker Rice Co. v. ITO [2001] 249 ITR (AT) 44 (Amritsar) ; [2000] 72 ITD 139 has, inter alia, observed at pages 158 & 159 as under (at page 62 of [2001] 249 ITR (AT) : "Coming now to another aspect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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