TaxTMI 
TaxTMI 
2009 (3) TMI 221
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....ls for de novo disposal in accordance with law. That is how the appeals by the assessee are coming before us for the second time. There was a search in the premises of the assessee on January 8, 2004. Accordingly all these assessments have been completed under section 153A. The first appeals have been disposed of by the Commissioner of Income-tax (Appeals)-I, Kochi through his orders dated September 11, 2006 and October 10, 2006. In all the six appeals filed by the assessee, only a single issue is raised. The said single issue is that the Commissioner of Income-tax (Appeals) has erred in sustaining the additions made by the assessing authority against the alleged sale of used gunny bags. In first appeals, the additions sustained by the Commissioner of Income-tax (Appeals) for the impugned six assessment years stood as below: --------------------------- Assessment year Amount --------------------------- 1998-99 79,704 2000-01 70,369 2001-02 3,00,859  ....
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.... the quantity of empty gunny bags generated and the mode of gunny bags disposed of. In the absence of such data or evidence, it is not possible to accept the contention of the assessee that the entire gunny bags were found unusable. That is an extreme case of exaggeration. When the assessee has not maintained the necessary details regarding the generation and disposal of empty gunny bags, what is to be presumed is the normal things of life on the rule of preponderance of probability. We cannot presume extraordinary things. Presumption should answer the test of normal human reasoning. As far as this case is concerned, the assessee carrying on a large scale flour mill generates substantial quantity of empty gunny bags and does not maintain any record whatsoever to support the disposal of those gunny bags. The assessee gives an explanation that the gunny bags were not usable. In the facts and circumstances of the case, we find that it is only an argument for the sake of argument. We are not able to accept it. Therefore, the Assessing Officer has rightly estimated the sales turnover of empty gunny bags in the hands of the assessee. While making the estimate, the assessing auth....
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....ht to light the incomplete nature of the stock registers and quantitative particulars maintained by the assessee. The Assessing Officer has pointed out that even though "refraction loss" is an essential feature of the manufacturing process employed by the assessee, no quantitative details of the loss generated in the form of wheat dust and broken wheat were maintained by the assessee on a day-to-day basis. The Assessing Officer has also stated that the assessee has not maintained any reliable record regarding the quantum of water added for conditioning the wheat to make it fit for flouring. According to the assessing authority, these crucial details are missing in the stock particulars maintained by the assessee. That is why the Assessing Officer has limited the claim of wastage made by the assessee in its manufacturing process. But the Commissioner of Income-tax (Appeals) held that the assessee has been following the same method for all the assessment years in the past and the assessee has been maintaining reasonable records in respect of the movement of stock and in such circumstances, there was no reason to make an estimated addition on the ground of process wastage. The Comm....
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....al Commissioner has relied on the following decisions: (a) CIT v. N. Jayaprakash [2006] 285 ITR 369 (Ker); (b) Mohd. Haran and Co. v. CIT [2005] 274 ITR 490 (All); and (c) Bimal Kumar Anant Kumar v. CIT [2007] 288 ITR 278 (All). The main thrust of the argument of the learned Additional Commissioner is that the assessee-company has not maintained the requisite details regarding the quantitative particulars of raw materials, production, wastage, etc. He submitted that in the absence of such necessary materials, it is not possible for the Assessing Officer to accept the results furnished by the assessee as true and correct. He further explained that in such circumstances, it is the legitimate duty of the Assessing Officer to come to a reasonable finding on the basis of fair estimates. He also explained that in such circumstances, estimate is the only safe course of action available to the Assessing Officer to complete the assessments. The learned Additional Commissioner further stated that the additions have been made by the Assessing Officer towards the value of excess loss claimed by the assessee on the basis of valid materials collected, in the course of search and i....
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....pure guess work and assumption which is not sustainable in law. The learned chartered accountant further explained that after the introduction of section 153A, in search cases the total income of the assessee is to be computed on the basis of undisclosed income unearthed and the same is to be added to the regular income assessed under section 143(3) or under section 143(1) for each of six preceding assessment years. Where nothing incriminating is found during the course of search relating to any assessment years, the assessments for such years cannot be disturbed as laid out by the Income-tax Appellate Tribunal, Kolkotta Bench in the case of LMJ International Ltd. v. Deputy CIT [2008] 22 SOT 315. He further contended that the Assessing Officer has not appreciated that the assessee's process is a continuous one and it is not only impractical but impossible to measure the output at each stage of production to ascertain the loss. The only practical and possible way in which the loss in processing could be ascertained was to compare the quantity of wheat introduced for processing and the quantity of finished goods obtained at the end of the process. It is not fair on the part of the....
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....9] 309 ITR 259 (HP). We heard both sides in detail and considered the materials including the earlier orders of the Tribunal, one in favour of the Revenue and the other in favour of the assessee. The order of the Tribunal in the case of Kodandaram Roller Flour Mills (P) Ltd., Calicut relied upon by the assessee is dated March 24, 2008. The said order has been passed by the Cochin Bench of the Income-tax Appellate Tribunal consisting of hon'ble Members Shri N. Barathvaja Sankar and Shri Riyaz S. Padevkar. In the above order the Tribunal has accepted the contentions of the assessee and dismissed the appeals filed by the Revenue. When the Income-tax Appellate Tribunal, Co chin Bench, passed the above order, another order passed by the same Bench in the case of Asst. CIT v. Parrisons Roller Flour Mills Pvt. Ltd., dated January 8, 2008, consisting of Dr. O. K. Narayanan, and Shri K. Balan, was available on record. The issue considered by the Tribunal in both the cases cited above was the same regarding the addition made by the Assessing Officer on the ground of excess process wastage. The earlier decision of the Tribunal dated January 8, 2008 was in fact placed before the Bench wh....
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....ing of the earlier order and the wisdom of the later order; thus both the orders need to be followed in the correct perspective. When we consider the issue raised before us in all its seriousness, we find that the wastage/loss in the manufacturing process is to be seriously considered. This is because the assessee has not maintained meticulous details of quantitative position on a day-to-day basis. Of course, the assessee has compiled the quantitative details for the purpose of its final accounts. The details have been collected and furnished on the basis of stock registers maintained by the assessee-company. But the stock register does not reflect the accurate quantitative position in the manufacturing process carried on in its line of business. The assessee itself has made approximations. The search carried out by the Department has brought out that the records maintained by the assessee on day-to-day basis were not flawless. The statements recorded from the technical personnel of the assessee working in its plant have clearly supported the factual propositions made by the Assessing Officer. The Assessing Officer has considered the refraction loss, which may be around to 3 ....