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TMI Blog1971 (3) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1922, in respect of the assessee, the assessee filed a return showing a net loss of about Rs. 4,93,191. The Income-tax Officer, however, applied the proviso to section 13 of the Act and estimated the total income of the assessee at Rs. 82,437. By his assessment order dated December 13, 1945, he added back a sum of Rs. 2,58,541 on account of unexplained shortage in the production of yarn and cloth. On appeal by the assessee, the Appellate Assistant Commissioner reduced the addition to Rs. 36,711. Both the assessee and the Income-tax Officer then appealed to the Income-tax Appellate Tribunal, but the Tribunal confirmed the decision of the Appellate Assistant Commissioner. Learned counsel for the assessee contends that there is no justification for applying the proviso to section 13, especially having regard to the detailed records maintained by the assessee. We shall now proceed to examine this contention. The account books maintained by the assessee disclose that 51,23,346 lbs. of cotton were issued to the mill. Out of this, 50,60,550 lbs. of cotton were put into the machinery for the manufacture of yarn, the balance of 72,796 lbs. being claimed as shortage on account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13 was attracted because although the assessee could be said to have a complete record of the ginned cotton that was purchased and the cotton that was processed into yarn there was no record of the intangible waste and the dust that was stated to have fallen out in the blow room. It was conceded on behalf of the revenue that although intangible additions could not be made and the dust as a matter of rule was never weighed but, it was said, that did not exonerate the assessee from maintaining the proper records in that regard. It was urged on behalf of the assessee that the percentage of refraction was dependent on the quality of the cotton used and, it was pointed out, that the assessee had used during the accounting year much inferior variety of cotton known as Jarilla and Malvi cotton, and a table was filed showing the percentage of refraction in the case of different qualities of cotton at various stages in the blow room, carding and other departments, from which it appeared that the average percentage of refraction should have been 21.9% during the accounting period. The Tribunal did not accept the data as affording adequate guidance. It reasoned that the actual refraction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that in 1951-52 and other years the sizing material had included a larger proportion of maize starch and gum by reason of which the weight of yarn showed a comparative increase, the retentive quality of the sizing material being greater. The Tribunal, however, did not accept the explanation, and sustained the increase in weight at 4% taken by the Appellate Assistant Commissioner. In regard to the production of yarn, the Tribunal has applied the proviso to section 13 for the reason that the assessee did not maintain a record of the intangible waste and dust which had fallen out in the blow room. This is in spite of the admission on behalf of the revenue that such intangible additions could not be made and that the dust was as a matter of rule never weighed. The Tribunal concedes that the proviso to section 13 becomes applicable in a technical sense only. It is difficult to appreciate what it means by that. When admittedly the dust is not weighed and it is not possible to determine the amount of the intangible waste, it is difficult to see how the absence of such a record can be employed to justify the application of the proviso to section 13. The question was considered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly distinguishable. In Arumugaswami Nadar's case, the court expressed the view that in the case of match manufacturing, in view of the difficulties obtaining in manual manufacture, the maintenance of a daily mixture account could not possibly help in the co-relation of the issues of chlorate with the manufacture of matches, and consequently not much weight could be attached to an absence of a daily mixture account. This is a consideration which can hardly be said to arise in the case before us. In Harakchand Radhakisan v. Commissioner of Income-tax, the only consideration upon which the Tribunal had proceeded was that the rate of yield for the relevant year should have been higher when compared to the yield of the preceding year. There can be little doubt that no manufacturing business can expect the same rate of production year after year. Any serious deviation between the figures of the preceding year and the relevant year could, however, legitimately put the revenue authorities on enquiry and if there is no adequate explanation to support the deviation the inference that the books are not reliable can be drawn. In K. M. Adam v. Commissioner of Income-tax, the assessee dealt in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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