TaxTMI 
TaxTMI 
2003 (12) TMI 586
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.... the G.P. would come down to 4.14 percent against 7.46 percent for the assessment year 1986-87. He asked the assessee to show-cause why addition should not be made for fall in the G.P. 3. The Assessing Officer further found that the previous year of the assessee consisted of 21 months which was divided into two periods-the first period of 12 months up to June 30, 1988, and the second period of 9 months up to March 31, 1989. He further examined consumption of various raw materials and production in the two periods and compared them with the results of the assessment years 1987-88 and 1988-89. The chart is given in para. 5 of the assessment order. On the basis of the above analysis, the Assessing Officer concluded that the operations of the assessee showed downward productivity. He found that there was increase in consumption of coal, power and other raw material used in the manufacture. He, therefore, asked the assessee to explain the above increase in consumable items. It is observed in the assessment order that no satisfactory explanation was rendered. The Assessing Officer, therefore, refused to accept increased consumption of electricity and coal without corresponding increas....
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....he G.P. had not been constant in different assessment years. It ranged between 2 percent to 7 per cent.. The figures are noted by the learned Commissioner of Income-tax (Appeals) in para. 1(iii)(a) of the order. There can be variation in the ratio of production to the consumption of raw material from batch to batch. The assessee furnished figures of consumption ratio in different assessment years. 7. It was further explained that the books of account were produced before the Assessing Officer from time to time. At Chandigarh camp and at Solan, tables of comparative production on the basis of norms and standards disclosed by the assessee in the earlier assessment years were produced before the Assessing Officer. The Assessing Officer having regard to the assessment order for the assessment year 1988-89 held that the assessee suppressed the production of 438 mt. of vanaspati ghee having value of Rs. 96,09,720 sold outside the books of account. It was thus submitted that the addition has been made by the Assessing Officer on account of low G.P. rate and lower production, and on account of higher consumption of electricity. The assessee explained increase in expenditure and this exp....
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....efore him when he had already finalised the case and could not examine them. As per the assessment order he has done lot of labour to look into the manufacturing results of the appellant but due to non-cooperation of the appellant he had to rely on the assessment order of the assessment year 1988-89, which has already been adjudicated by the undersigned as stated above. (a) As already held in the immediately preceding year that the manufacturing process of the appellant-company is strictly supervised by the excise authorities who regularly inspect the records maintained under the Central Excise Rules. In the case of Seetharama Mining Co. v. CIT [1968] 68 ITR 1 (AP) (Sh. N.), it was held that where statutory registers have been maintained, estimation of higher production would not be proper. Therefore, I feel there was no reason to doubt the manufacturing account of the appellant. (b) Secondly the Assessing Officer has doubted the manufacturing account on the ground that the consumption of material was higher as compared to the preceding year. The production of finished goods with respect to consumption of material mainly depends upon the quality of the material us....
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....eted and the appellant gets relief of Rs. 96,09,720." 11. The Revenue is in appeal before the Tribunal. We have heard both the parties. The learned Departmental Representative placed strong reliance on the order of the Assessing Officer. It was emphasised that there was a fall in the G.P. and increase in raw material and electricity consumed. The Assessing Officer had made a detailed analysis of the working of the assessee for the period under consideration and in other assessment years and rejected the book results under the extraordinary circumstances. The assessee was not able to explain increase in production expenses and decrease in production. Therefore, the rejection of the books of account was quite in order. The Assessing Officer had further applied reasonable rate of G.P. as per history of the case. In these circumstances, the addition made was quite in order. 12. Learned counsel for the assessee supported the impugned order. He argued that similar additions were made in the assessment years 1985-86 to 1988-89 but were deleted in appeal. The revenue authorities accepted those orders and no appeal was brought before the Appellate Tribunal. He further pointed out that....
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....of ghee and by-products in the first period and in the second period and then compared them with the assessment years 1988-89 and 1987-88. The total consumption of raw material and production of ghee is also noted. This is aimed at proving that there was downward trend in the production. He then observed that vide order sheet entry dated January 23, 1992, the assessee was required to furnish explanation for disproportionate increase in the manufacturing cost. He held that the explanation of the assessee was not satisfactory. The composition of change of raw material consumed could not affect the production. He concluded that the consumption of higher electricity and oil only showed that there was production and consequent sale not recorded in the books of account. 16. After drawing the above inference, the Assessing Officer has addressed the question as to what was the addition to be made. He first compared the G.P. rates. He then looked to the ratio between oil production and the byproducts. He then took note of the addition which he made in the assessment year 1988-89 and found that the ratio of the finished products to byproducts, if the above addition is taken into account, ....
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....ort for the year under consideration. Further the assessee did furnish all the details of consumption of raw material and production inclusive of by-products for the first period as also for the second period. Unless such material was furnished, the chart available in the assessment order could not have been prepared. It is not clear from the record whether batchwise consumption or production is available with the assessee or not. In our considered opinion, when details for production and consumption of raw material were filed and not doubted by the Assessing Officer and when inference was clearly drawn that there was higher consumption and higher by-product with downward trend in production, there was no need to call again and again for production register of batch and for daily production and consumption records. 20. In the next para. the Assessing Officer has referred to non-production of project report. The said project report was not filed before the Assessing Officer but filed before the Commissioner of Income-tax (Appeals). The production report based on hypothetical figures has rightly been held to be of no use by the learned Commissioner of Income-tax (Appeals) as the a....
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....5264 29833 9431 14.36 times (assessment year 1988-89 assessed) 43861 29833 5018 The assessee has disclosed production of finished goods only 13.51 times of the weight of by-products totalling 2,427 metric tonnes. The projected production on the basis of consumption of electricity is given below : Consumption of electricity 286 units/tonnes (assessment year 1987-88) 35253 29833 5420 298 units/tonnes (assessment year 1988-89 returned) 33980 29833 4147 The assessee has disclosed consumption of 309 units of electricity per metric tonne. From the above three Tables it is evidently clear that the assessee has suppressed its production and consequently the sale of finished products. Keeping in view the assessment order for the assessment year 1988-89 and other record as well as explanation given by the assessee in this regard the assessee is held to have suppressed production and consequently sale of 438 metric tonnes of vanaspati ghee which is the least figure of difference in the above 3 Tables. The average selling price during the year was Rs. 21,940 per metric tonne. Applying this rate to 4....
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....ount. We have already noted that the assessee produced all the relevant details and promised to produce the books of account after all the requisite details were furnished. It is not recorded by the Assessing Officer that the above request of the assessee was rejected. There is evidence in the assessment order that books and records were produced before the Assessing Officer. There are the following pertinent observations in the assessment order : "The undersigned fixed camp at Chandigarh on February 28, 1992, as the administrative office of the assessee-company is located near Chandigarh. This has been done to facilitate the production of the books of account and complete vouchers. On February 28, 1992 books were only partly produced. Cash book was not produced nor were most of the vouchers and purchase books. This was duly recorded in the order sheet on February 28, 1992 and the proceedings were closed." It is evident that all books of account were produced by the assessee except cash book. How cash book or vouchers were relevant for the issue raised by the Assessing Officer is not evident from the record. Again it is recorded that on March 3, 1992, i.e., two days aft....
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....ions are extracted in the earlier part of this order, that the Assessing Officer fixed camp at Chandigarh on February 28, 1992 to facilitate the production of the books of account by the assessee. It is recorded that the books of account were produced on that date along with the voluminous records except cash book and some vouchers. The Assessing Officer has not shown in the assessment order how cash book was relevant to the controversy raised by him relating to production. Which of the vouchers not produced was relevant is also not clear from the assessment order. However, in order to avoid complications, the assessee took voluminous record to Solan for examination of the Assessing Officer on March 3, 1992. The assessment order was passed on March 25, 1992. Thus between 3rd March and the date of the order, there were clearly 22 days period available and the Assessing Officer could have very easily examined and seen whatever he wanted to see with reference to the books of account. We may take liberty to add that how entries in the books of account were relevant for examining the explanation of the assessee relating to fall in production of the main item and increase in production o....
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....at GP rate in the year under consideration is quite comparable with the GP rate of the assessment year 1988-89 although production and sale in the period under consideration is almost double than that of the assessment year 1988-89. It may be noted that production capacity was increased from 15,000 mt. last year to 18,750 mt. and, therefore, efficiency should have increased as it takes time to get stabilise. The production capacity was raised and in fact there has been a higher production but whether higher production led to higher efficiency is a relative question. What is efficiency A higher production or higher profit or higher by-product? In our considered opinion, we need not give importance to the above question. It would be important to examine whether addition made by the Assessing Officer for under production of 438 mt. is justified. It is evident from the chart that conclusion of suppressed production of 438 mt, is based on the assessed production taken by the Assessing Officer in the period relevant to the assessment year 1988-89, as in that year also, the Assessing Officer had concluded that there was suppression of 234 mt. and this way addition of Rs. 45,39,600 was mad....
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.... 1988-89. Consumption of coal and electricity was also found to be higher. On the above reasoning, the Assessing Officer justified the addition. 29. On appeal, before the Commissioner of Income-tax (Appeals), the assessee raised the following contentions :- "(i) That the appellant is a public limited co. engaged in the manufacture of vanaspati and its by-products which are all excisable goods. The entire manufacturing process starting from raw materials to finished products are done under supervision of the excise authorities and records as maintained under the Central Excise Rules are periodically checked by such authorities. Hence there is no scope of suppressed production. (ii) Consumption of materials may vary from year to year due to inefficient working, break downs of machinery, technical faults and such other factors. (iii) Out of total coal consumption, D-grade coal which is of much inferior quality accounted for 47.3 percent of total consumption. This explains higher coal consumption. (iv) As regards excessive electricity, it was pointed out that during this year more rice bran oil, solvent extract-mustard oil and Mohuva oil were used....
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....e thus found that by-product in the period relevant to the assessment year 1988-89 was much higher and held that 6.48 percent of in-put had been recovered by way of by-product. The quantity of end product, i.e., vanaspati has to be less. He observed that the Assessing Officer has failed to appreciate the logic of the above facts and acted in an illogical manner against the appellant. The learned Commissioner of Income-tax (Appeals) also noted that as per chart issued by Vanaspati Manufacturers Association of India, consumption ratio should be 1.73 mt. against 1.74 mt. of the assessee. The difference was insignificant. 31. The learned Commissioner of Income-tax (Appeals) also addressed the question of higher consumption of coal and electricity. He held that when D-grade or inferior quality of coal was consumed, quantity will go up. The Commissioner of Income-tax (Appeals) took into account figures furnished by the Bureau of Industrial Cost and Price (BICP) and held that the assessee's consumption was more than 419 mt. against 430 mt. reflected in the figures of the Bureau. Likewise, he found that 12 units of electricity in excess were consumed for production of 1 mt. of vanaspati....
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....ted by the Revenue and no further appeal was filed. We do not know why for this year on identical circumstances the matter has been brought in appeal before the Tribunal. No distinguishable feature has been brought to our notice. Gross profit rates lower than one disclosed in this year were accepted in the earlier and subsequent years and, therefore, we do not see any ground to sustain addition on account of low gross profit rate. We are of the view that the learned Commissioner of Income-tax (Appeals) in his detailed order took into account all the relevant facts and circumstances while deleting the impugned addition. All the points raised by the Assessing Officer have been met in the impugned order. We do not find any legal error in the approach of the learned Commissioner of Income-tax (Appeals) and confirm his order. Deletion of addition is hereby upheld. 35. In the next ground of appeal, the Revenue has challenged the deletion of disallowance of Rs. 19,339 made on account of foreign travelling of managing director. The Assessing Officer disallowed the above amount as not relating to business. On appeal, the Commissioner of Income-tax (Appeals) held that the managing directo....
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....with no alternative but to analyse the available data and past records and compare it with the results for the assessment years 1987-88 and 1988-89. The Assessing Officer noted the following figures :- "Item 1st period 2nd period Total Last years Assessment year 1988-89 Assessment year 1987-88 1. Oil consumption pmt production 1.084 1.064 1.075 1.074 1.044 2. By products manufactured 1412 1015 2427 1188 615 3. Coal consumption pmt of production 3769 5225 3959 419 338 4. Power consumption (in units) pmt of production 292 334 309 298 286 5. Processing cost mt of production 853 1074 884 6. Actual consumption of oil 18885 13203 32088 18341 7. Actual production of vanaspati ghe 17419 12414 29833 17069 8. Installed capacity 18750 14062 32812 1875....
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.... the results of the assessee with its own case and in its own case, this factor of higher cost remains constant for all the years because every year the assessee has to procure raw materials from other States. In fact, the reply of the assessee has side tracked the issue and cannot be considered at all. 2. In respect of the contention of the assessee that the electricity expenses are duly supported by bills and as such it cannot be said that there has been excessive payment of electricity, it may be mentioned that the Assessing Officer never made this issue that electricity charges were more. On the contrary, the Assessing Officer's observation was that per unit consumption of electricity is more. It was due to this fact that the Assessing Officer observed that there has been suppression of production and sale outside the books made by the assessee during the year under consideration. 3. The submissions of the assessee that the books of account were produced from time to time at Chandigarh camp and at Solan, is totally alien to the facts as books of account as desired by the Assessing Officer were never produced in spite of repeated opportunities. Production recor....
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....ee that when its books of account are verified by the Excise department, its manufacturing results cannot be doubted. In my opinion this finding of the Commissioner of Income-tax (Appeals) is very strange. If this is the law, the Revenue will not have any right to inspect the books in the case of manufacturing concern where the production is subject to excise duty because they are examined by the excise authorities. The finding of the Commissioner of Income-tax (Appeals) under the facts of the case will tantamount to certifying the correctness of the accounts maintained by the assessee even though these were never examined by the Assessing Officer. There may be a situation that the books are impounded by the Excise department or the Excise department would have raised objection. For this opportunity is required to be given to the Assessing Officer. In my opinion if the proposition of law as laid down by the Commissioner of Income-tax (Appeals) is upheld, the purpose of assessment get defeated and the provisions of sections 143(3) and 142(1) would become otiose. 8. In para. 10 of the proposed order, in which the finding of the Commissioner of Income-tax (Appeals) under para. 2(iv....
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.... b. The Commissioner of Income-tax (Appeals) while justifying the excessive loss, the non-conventional oil which constitutes only 15 percent of the total oil consumed is compared ignoring the comparison of the mix of total oil consumed. Nothing is on record whether, in balance 85 percent superior or inferior oil is consumed. Therefore, in the absence of correct data which can be provided by the assessee, this pick and choose method of the Commissioner of Income-tax (Appeals) cannot be accepted. c. That nowhere, the assessee has specified the basis that the oil wastage is more in non-conventional oil. d. That price factor of conventional and non-conventional oil has not been looked into." 9. In para. 2(iv)(c) of the Commissioner of Income-tax (Appeals) order as produced in para. 10 (page 129 supra) by learned Brother, the addition was deleted on the basis of the finding given in the preceding year. It is pertinent to note that in the preceding year the Commissioner of Income-tax (Appeals) has held that the assessee's production capacity has increased from 15,000 mt. to 18,750 mt. and since that was the first year of expansion, losses are bound to be more than....
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....y submissions by learned Authorised Representative that the assessee made a request on February 28, 1992 that it be given further time to produce the books and the same were not considered or rejected by the Assessing Officer. Even the books were not produced before the learned Commissioner of Income-tax (Appeals) and he has also not examined the same. 11. The fact remains that the Assessing Officer asked for books of account as early as in November 1991, and the assessee did not produce the same for one reason or the other till February 28, 1992, the date when the Assessing Officer had already completed the proceedings, in spite of the fact that the Assessing Officer camped at Chandigarh, only to verify the books, as per order sheet entry dated February 28, 1992, which is clear from the following observations in the assessment order : "The undersigned fixed camp at Chandigarh on February 28, 1992 as Administration Office of the assessee-company are located near Chandigarh. This has been done to facilitate the production of the books of account and complete vouchers. On February 28, 1992 books were only partly produced. Cash book was not produced nor were most of the vo....
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....turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered, it could not be questioned. It was wrong to hold that the officer must have material before him to prove the exact turnover suppressed." 16. Principles of res judicata will not apply to income-tax matters. Moreover, the earlier year order is the order of the learned Commissioner of Income-tax (Appeals) and not the Income-tax Appellate Tribunal, if the additions were deleted because the learned Commissioner of Income-tax (Appeals) set aside the order for examination of books of account and other record. On set aside, in fact the Assessing Officer has examined the books of account in the earlier year and after examining the books of account the additions were made which were deleted by the learned Commissioner of Income-tax (Appeals). Thus the issue in the earlier year was of appreciation of evidence which was duly produced by the assessee before the Assessing Officer but in the case before us, the evidence in the shape of books of account was not produced before the Assessing Officer. Therefore, in the absence of non-product....
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....B. M. Kothari (Accountant Member). 1. There was a difference of opinion between the hon'ble Members of "A" Bench, Chandigarh, and the following point of difference was referred by them to the hon'ble President under section 255(4) of the Income-tax Act, 1961 : "Whether on the facts and in the circumstances of the case, trading addition of Rs. 96,09,720 made by the Assessing Officer and deleted by the Commissioner of Income-tax (Appeals) should be sustained or deleted ?" 2. The hon'ble President, Income-tax Appellate Tribunal, nominated my name as Third Member. The case was accordingly, heard on December 8, 2003. 3. The assessee, a public limited company is engaged in the business of manufacture and sale of vanaspati ghee. The Assessing Officer, in view of elaborate reasons recorded in the assessment order, arrived at the conclusion that the assessee must have suppressed production to the extent of 438 mt. of vanaspati ghee and also must have sold such suppressed production by way of suppressed sales. He, therefore, applied the average selling price of Rs. 21,940 per mt. on the alleged suppressed sales of 438 mt. and thereby made an addition of Rs. 96,09,720. The A....
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....tified in resorting to estimation of production, sales and profit thereon. He drew my attention to the order-sheet entry dated February 28, 1992 of the assessment records pertaining to the year under consideration, in which it was, inter alia, stated that a camp was fixed by the Assessing Officer at Chandigarh on February 28, 1992, to facilitate the production of the books of account and complete vouchers. On February 28, 1992, the books were only partly produced. Cash books, most of the vouchers and purchase books were not produced. The learned Departmental Representative strongly urged that the view expressed by the learned Accountant Member is supported by convincing reasons and the same should be accepted. 9. Learned counsel appearing for the assessee strongly relied upon the detailed reasons given in the order proposed by the then learned Vice President deleting the aforesaid addition. He submitted that voluminous records were produced before the Assessing Officer during his camp at Chandigarh on February 28, 1992. The Assessing Officer in the afternoon required the assessee to produce some more records for which the assessee requested for grant of some reasonable time. Lea....
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....r of the Commissioner of Incometax (Appeals) for the assessment year 1988-89 has been accepted by the Revenue and no further appeal has been filed. The rule of consistency fully applies to the facts of the present case, as the facts relating to the year under consideration are exactly similar and identical as that in the assessment year 1988-89. The Assessing Officer has made the addition on the basis of findings given by him in the assessment year 1988-89. Learned counsel placed reliance on the judgments in reported Pandit Bros. v. CIT [1954] 26 ITR 159 (Punj) ; Jhandu Mal Tara Chand Rice Mills v. CIT [1969] 73 ITR 192 (P&H) ; CIT v. Bharat Rice Mills [2001] 250 ITR 584 (P&H) ; International Forest Co. v. CIT [1975] 101 ITR 721 (J&K) ; B. F. Varghese (No. 2) v. State of Kerala [1969] 72 ITR 726 (Ker) ; Motipur Sugar Factory P. Ltd. v. CIT [1974] 95 ITR 401 (Patna) and ITO v. Amarnath Ram Kumar [1995] 52 TTJ 162 (Chandigarh) to support his contention that the rule of consistency will apply to the facts of the present case and the addition made in the declared manufacturing/trading results has rightly been deleted by the Commissioner of Income-tax (Appeals). 11. Learned counsel a....
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.... the judgments cited by the learned representatives. 14. The relevant facts have already been elaborately discussed in the orders proposed by the then learned Vice-President and the learned Accountant Member. I, therefore, need not repeat the facts, once again. 15.The learned Accountant Member in the order proposed by him has, inter alia, observed that the assessee failed to produce the required books of account before the Assessing Officer. The Assessing Officer was justified in not examining the books of account when produced on March 3, 1992 as the proceedings had been closed on February 28, 1992. He has also observed that the correctness of the declared results as per books of account could not be accepted as the same was not produced and verified by the Assessing Officer. The learned Accountant Member has also observed that the reliance placed by the Commissioner of Income-tax (Appeals) on the decision reported in [1968] 68 ITR 1 is not correct as no such decision has been reported there. He has also observed that the principles of res judicata will not apply to income-tax matters and, therefore, no reliance can be placed on the order of the Commissioner of Income-tax (A....
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....the corresponding figures of the assessment years 1987-88 and 1988-89. The relevant extracts from the assessment order have been reproduced in para. 22 (page 135 supra) of the order proposed by the then learned VicePresident. It is pertinent to note that the Assessing Officer did not make the impugned addition on the basis of variation in the consumption ratio of electricity or on the basis of the ratio of by-products obtained in the process of manufacture of vanaspati ghee. The entire addition of Rs. 96,09,720 was made by the Assessing Officer by applying the ratio of consumption of raw material for manufacturing of 1 mt. of vanaspati ghee as assessed by him in the assessment year 1988-89. The learned Assessing Officer has applied the same formula as was applied by him in the assessment year 1988-89 and has thereby estimated the alleged suppressed production to the tune of 438 mt. He has further observed that the average selling price during the year was Rs. 21,940 per mt. The Assessing Officer applied this rate to sup pressed/hypothetical production of 438 mt. and made an addition of Rs. 96,09,720. It is, therefore, clear that the addition was made by the Assessing Officer by pla....
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....t the principles of res judicata do not apply to income-tax proceedings but equally important, is the rule of consistency, which has been held to be applicable in tax proceedings by the hon'ble apex court in various cases. If the facts and circumstances of the earlier year are similar, the same view should ordinarily be followed in the subsequent years. It may be relevant here to refer to some of the judgments of the hon'ble Supreme Court which support the application of rule of consistency in cases where facts and circumstances are similar as in the earlier years. The hon'ble Supreme Court in the case of CIT v. Narendra Doshi [2002] 254 ITR 606, held that the Department had not challenged the correctness of the two decisions of the Gujarat High Court, the Revenue was, therefore, bound by the principles laid down therein. The civil appeal filed by the Commissioner of Income-tax was dismissed on this ground. The hon'ble Supreme Court in the case of Union of India v. Satish Panalal Shah [2001] 249 ITR 221, dismissed the appeal submitted by the Department holding that it was not open to the Revenue to accept the earlier judgment in the case of one assessee and challenge its correctnes....
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....s not initiated any penalty for any alleged non-compliance with notices under section 142(1) or 143(2). Even assuming that there was some default of non-producing some of the records, the Assessing Officer was only entitled to make the assessment according to his best judgment. The limits of powers are implicit in the expression "best of his judgment". The judgment is a faculty to decide matters, which weighs with wisdom, truly and legally. The judgment does not depend upon an arbitrary caprice of a judge but on settled and invariable principles of justice. It should not be a wild one but should have a reasonable nexus to the available material and circumstances of each case. The Assessing Officer adopted the basis on which similar additions were made in the assessment year 1988-89. He has estimated the hypothetical suppressed production and suppressed sales by adopting the ratio of consumption of raw material adopted and assessed in the assessment year 1988-89. Since the addition made in the assessment year 198889 on similar basis has been deleted by the Commissioner of Income-tax (Appeals), the very foundation and basis on which the impugned addition was made in the year under co....
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....GP rate declared in the year under consideration with GP rate declared in the preceding year in para. 14 (page 131) of his order. He has observed that after excluding depreciation claim, the GP rate in the year under consideration comes to 4.14 percent as against corresponding figure of 4.42 percent in the preceding year. He has further observed that the meagre decline in GP rate after excluding depreciation in both the years is considered to be reasonable keeping in view the fact that the turnover in the assessment year under consideration is almost double than that of the last year. Such a view taken by the then learned Vice-President appears to be most reasonable and justified. 24. The learned Accountant Member in his order has, inter alia, relied upon the judgment of the hon'ble Supreme Court in the case of CST v. Esufali (H. M.) Abdulali (H. M.) [1973] 90 ITR 271. The facts of the said case are clearly distinguishable. In that case, the assessments were made primarily on the basis of the returns filed by the assessee and the books of account. Subsequently, the flying squad of Sales-tax Department inspected the business premises of the assessee and found a bill book for the ....
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....aring at page 261 are reproduced below : "The officer's right under the proviso to section 13 arises only after a finding is recorded as to the unacceptability of the method and irregularity of the accounts kept. In the absence of such a finding recorded by the authorities, the book results cannot be ignored or brushed aside. The mere fact that the percentage of dead loss of cotton is high in a particular year cannot lead to an inference that thereby there has been a suppression of the production in a spinning mill. Therefore, the addition of Rs. 50,000 to the total income of the assessee on account of the alleged understated production of yarn and soft waste was not justified." Jhandu Mal Tara Chand Rice Mills v. CIT [1969] 73 ITR 192 (P&H) : The relevant extracts from the headnote are reproduced below : "The accounts of the assessee were accepted in all years up to and inclusive of 1957-58 but in 1958-59 the Income-tax Officer rejected the accounts and applied the proviso to section 13 on the grounds that no day to day dryage register had been maintained and that in another case the yield proposed to be adopted by him was held to be reasonable by the Tribu....
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.... as under : "Held, that it was not proper or just for the Income-tax Department to throw doubt on the inspection of the royalty register without any proper basis and that the estimate made by the Department ignoring the royalty register which the assessee had to maintain statutorily, was arbitrary and capricious." 27. The hon'ble Patna High Court in the case of Motipur Sugar Factory P. Ltd. v. CIT [1974] 95 ITR 401 considered the question relating to addition of Rs. 2,25,000 made by the Assessing Officer mainly on the ground that the production of sugar was not correctly disclosed. The Assessing Officer was of the opinion that the yield of 8.86 percent shown by the assessee was lower as some other mills situated in North Bihar had shown recovery of 9.3 percent and 9.5 percent of sugar, respectively. The hon'ble High Court at page 409 observed that every factory owner producing sugar has to maintain various registers required under the Central Excise Rules, 1944. The entire manufacturing process of sugar from weighment of cane to the bagging of sugar was subject to the supervision and checking of the Central Excise Officer posted at the factory. The cane cess register as....
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....cted. The Assessing Officer must proceed on positive evidence and material and in the case of Shankar Rice Co., there is nothing to show that the yield was more than the figure stated and that it had been sold outside the books of account .. . . In our opinion, the rule of consistency is an important aspect of tax proceedings and views should not be changed on the same set of facts and the position of law remaining the same the rule of res judicata notwithstanding." 29. The order proposed by the then learned Vice-President deleting the impugned addition is fully supported by the aforesaid decision. 30. The learned Accountant Member has also placed reliance on decision reported in CIT v. Motor General Finance Ltd. [2002] 254 ITR 449 (Delhi) in para. 18 of his proposed order. In this case, the hon'ble Delhi High Court has held that adverse inference can be drawn in cases of failure of the assessee to produce documents as if those documents, if produced, would have gone against the assessee. The aforesaid judgment does not, in any manner, apply to the facts of the present case. The addition was made by the Assessing Officer on the basis of addition made on similar lines for t....