TaxTMI 
TaxTMI 
1986 (5) TMI 83
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....IAC (Assessment) noticed that the raw material consumed in the processing, namely, bleaching agents and colouring agents were excessive. He called for the assessee's explanation which in the first instance was that the issue did not represent the daily consumption but reflected the quantity of shortfall issued so as to meet the daily requirement. The IAC was, however, not satisfied about this reply and wanted further information as to whether the next issue was made before the first issue was consumed. He asked the assessee to finish the monthly consumption, production chart, of grey cloth and chemicals/raw materials used and noticed that there was tremendous variations in the ratio of the grey cloth processed. The assessee's reply was that....
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....e consumption on account of oil amounting to Rs. 60,168 which came to 0.26 per cent of the cost of production as against Rs. 4,971 i.e. 0.03 per cent in the last year. The assessee's reply was that this year there was non-availability of Kerosene oil and, therefore, the assessee had to use more expensive item i.e. mineral oil. This again was rejected by the IAC on the ground that the assessee had shown a closing stock of 7,100 litres of kerosene and there had been no reduction in the consumption of the total quantity of kerosene. If mineral oil was a better raw material, the consumption should have come down. He also found that there was abnormally high consumption about which again the explanation of the assessee was not satisfactory. He, ....
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....r of making addition which was urgently done by applying the proviso to s. 145(1) or sub-s. (2) of s. 145 and rejecting the book results of then an estimate is made in respect of the gross profits that may have been earned by the assessee. In the present case there has been a lengthy exercise of estimating the raw material that should have been consumed by the assessee and computing the price of the excess consumption it has not been specifically mentioned that the provisions of s. 145(1) proviso or sub-s. (2) are applicable but it appears that the intention of the assessing authority was to reject the book results of the assessee. In Para 6 page 5 of the certified copy there is a clear observation if the books were kept regularly and corre....
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....et aside by the appellate authority and ultimately the addition stated to be deleted by the IAC himself. Next he has referred to certain explanations given by the assessee to the IAC in respect of this deficiency. Then he has referred to certain authorities which were quoted before him, namely, Oudh Sugar Mills vs. Union of India (1978) ELT published in April, 1978 page J-172. Thereafter he had referred to certain presumptions on the basis of which the IAC had made the additions which according to the submission made before him were not justified because the books of accounts had not been rejected and no specific defects in the books were pointed out by the lAC. Thereafter he has deleted the addition. As we have pointed out above, this last....
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....of the assessee have not been rejected. As regards the question of gross profit, the gross profit shown in this year i.e. 11.9 per cent though it compare favourably with some of the earlier years it was definitely lower than atleast two years when it was 13 per cent and 12.8 per cent respectively. If an addition of 1 per cent is made this would result itself in an addition of Rs. 2,22,000. At any rate, we do not know what where the reasons which ultimately resulted in the deletion of Rs. 53,000 made to the declared results in the year 1975-76 and Mr. Ajmera was not in a position to enlighten us in the matter further. The real issue which the IAC had raised was that the assessee had inflated its expenses on the cost of certain raw materials ....