9911796707
TMI Blog1974 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ry (P.) Ltd., the assessee, owns a sugar factory in the district of Muzaffarpur. For the assessment year 1958-59, the accounting period being from the 1st of October, 1956, to the 30th of September, 1957, the assessee filed a return showing an income of Rs. 5,78,891. In the return the assessee had shown production of sugar during the relevant year in question at 8.86 per cent. The Income-tax Officer by his order dated the 31st January, 1963, made an addition of Rs. 2,25,000 to the total income mainly on the ground that the production of sugar was not correctly disclosed. The Income-tax Officer was of the opinion that the norm of yield ought to have been higher and there was something wrong in the low production shown in the return. According to the Income-tax Officer, there were two possibilities for showing low recovery of sugar during the relevant period. One of the possibilities was the suppression of production of sugar and the other possibility was the inflation of the purchases of sugarcane. He ruled out the possibility of suppression of production of sugar because of the control by the excise authorities under the Central Excise Act and Rules. He, however, inferred that illu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumably, Sri Banerjee was under the wrong impression that because the accounts have been audited by a very reputed firm of chartered accountants, M/s. S. R. Batliboi & Co., it is not necessary to maintain the purjas." The Tribunal further observed as follows: "We have looked into the books of account and other registers, and we have come to the conclusion that the said firm of chartered accountants have not made an effective check of the accounts but have relied on the internal checking of the staff of the mills. In the course of the arguments this fact was pointed out to Sri Banerjee and some of the entries were also referred to him. In the circumstances, it is implicit that no reliance can be placed on the audited accounts of M/s. S. R. Batliboi & Co . ............... Even if we assume that the entire cultivation of surgarcane of the area allotted to the assessee by the Government has been purchased by the miller, in the absence of quantity and the rate of consumption which it bears to the sales we are unable to give a finding that the entire purchases of sugarcane have been utilised in the manufacture of sugar." The Tribunal also took into consideration the fact that two ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax, Venkatarama Ayyar J. summed up the legal position in these words: " It appears to us that apart from the circumstances to which we have referred justifying an interference with the findings set out in the statement of the case, what has to be considered in all those cases is whether, on the materials on record, the true and the only reasonable conclusion is the one which is contrary to that found by the Tribunal. " In Omar Salay Mohamed Sait v. Commissioner of Income-tax, it was observed as follows: "We are aware that the Income-tax Appellate Tribunal is a fact-finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it, this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Income-tax Officer shows that evidently he had no suspicion about the diversion of sugarcane by the assessee for the manufacture of jaggery. The Tribunal, however, without any material before it has reached a finding that some of the purchases of sugarcane could have been transferred for the manufacture of jaggery. It is significant to note that the Tribunal has not indicated as to how it was possible for the assessee to divert the sugarcane for the manufacture of jaggery in spite of checking by the officers of the Excise Department. It is manifest that the finding of the Tribunal that some of the purchases of sugarcane could have been transferred for the manufacture of jaggery is based purely on surmises and conjectures. That finding, therefore, must be held to be bad in law and it must be ignored. As I have already stated, the Income-tax Officer and the Tribunal have placed reliance upon the recovery of sugar by two sugar mills of North Bihar during the relevant period for the purpose of arriving at the finding that the recovery shown by the assessee-company was low. The names of these two sugar mills are not to be found either in the order of the Income-tax Officer or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29B(1) and (2) of the Bihar Sugar Factories Control Rules, 1938, have been loosely termed as parchas by the Income-tax Officer and the Tribunal. As provided under rule 29B(1), the occupier or manager of a factory for which the area is reserved is forbidden to purchase sugarcane grown in the reserved area without the previous issue of requisition slips and identification cards to the canegrowers except with the permission of the Cane Commissioner. Sub-rule (2) of rule 29B provides that the requisition slips and identification cards to the members of a cane-growers' co-operative society shall be issued by such society. Dr. Pal produced before us the specimen copies of the requisition slips which are required to be issued for the purchase of sugarcane in accordance with the provisions of rule 29B(1) and (2). In the requisition slips there is no column for mentioning the weight of the sugarcane purchased. It was, therefore, rightly contended on behalf of the assessee that the requisition slips, which have been loosely termed as parchas by the Income-tax Officer and the Tribunal, would not have shown the actual purchase of sugarcane by the petitioner. If in the parchas the actual weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant for the verification of the purchases of sugarcane but it is the weighment register which contains the full particulars about the purchases including the addresses of the sellers." Having disposed of the three contentions which have been raised on behalf of the assessee, I now proceed to consider the last question whether the Income-tax Officer and the Tribunal had any justification for rejecting the books of account, the registers and other documents filed by the assessee. The assessee had filed a number of documents and registers which included rough cash books, fair cash books, ledgers and journals. Under rule 38(1) of the Bihar Sugar Factories Control Rules, 1938, the manager or purchasing agent, as the case may be, is required to maintain clear and accurate records of all purchases made. As provided in the rule, such records shall show: "(a) the name, parentage and full address of the person from whom cane is purchased, (b) the name, parentage and full address of the person who actually delivers the cane, (c) the gross weight of the cane including the weight of the cart. (d) the weight of the cart (tare) (e) the net weight of the cane purchased, (f) the rate at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accountants, M/s. S. R. Batliboi and Company. It appears from the order of the Income-tax Officer that all the registers, account books, etc., which were produced by the assessee were rejected simply on the ground that the parchas were not produced. As I have already held, parchas were not relevant documents for the purpose of showing the real purchase of sugarcane by the assessee. The observation which has been made by the Tribunal in connection with the documents filed by the assessee has been quoted in extenso. From this observation it appears that the Tribunal also rejected the account books, registers, etc., because the parchas were not produced by the assessee. The Tribunal has treated the parchas as primary evidence and the other records as subsidiary evidence. It is difficult to comprehend the reasoning of the Tribunal when actually the parchas could not be primary evidence of the fact of actual purchase of sugarcane by the assessee-company. In Income-tax Appeal No. 1341 -Pat. of 1969-70, which I have referred to above, the Triburial has relied on those very documents and registers, which were produced by the assessee in the instant case, to show the actual purchase of suga ..... 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