1964 (7) TMI 44

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..... nd a market only abroad. The assessee claimed that, after he had tanned his skins, he found certain of the skins were not up to the standard. He therefore rejected them. The Income-tax Officer thought that the rejections were excessive. These rejections have been variously described in the orders of the officers below as shortages or wastages. But it is not denied by the department at this stage that they represent rejections of unsaleable skins which were found to be not up to the standard. It is also not in dispute that, in spite of these rejections, the assessee's gross profit return was not low and, indeed, compared favourably with the returns of similar dealers. In dealing with the claim of the assessee on this head, the Income-tax .....

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..... ment year 1952-53 is concerned, the sum of ₹ 28,000 added covers two items: ₹ 18,000 relevant to the rejections and ₹ 10,000 as due to inflated figures furnished by the assessee in the cost of tanning. Mr. Abdul Karim, learned counsel for the assessee, does not object to this addition of ₹ 10,000 but confines himself only to the additions made on the head of rejections. Once again we may emphasise that Mr. Balasubramaniam, learned counsel for the department, does not dispute the contention of the assessee that his gross profit margin is, in fact, somewhat higher than that shown by other dealers similarly placed. Nor does he dispute the proposition that the comparable case relied upon by the department in support o .....

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..... er, thereby deriving income which he has suppressed. But where the skins are there, not having been disposed of by the assessee, it is unreasonable to say that upon the notional sale value of those skins, profit could or should have been derived which should be brought in as taxable income. The orders of the authorities below do not say that the assessee has dealt with these rejections at all, and, in the face of that irrefutable circumstance, there can in law be no addition on this head. We are accordingly satisfied that there was no justification whatsoever for making the additions of ₹ 30,000, ₹ 47,717 and ₹ 18,000 in respect of the three assessment years. The question is so answered in favour of the assessee. The asses .....

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