D. Biswas, J.— By this judgment and order, both the references made under section 256 (2) of the Income Tax Act, hereinafter referred to as the Act, are being disposed of. 2. The identical questions to be answered are as follows: “(i) Whether in the facts and circumstances of the case the finding of the Tribunal partly sustaining the additions made by the Income Tax Officer in the Broom Account and the Rape Seed oil account is supported by any material and is perverse ? (ii) Whether in the facts and circumstances of the case the Tribunal was justified in sustaining the order of the Income Tax Officer disallowing part of interest on borrowings ?” 3. We have heard Mr. R. Gogoi, learned senior counsel assisted by Mr. RK Joshi, Advocate for the applicant and Mr. U. Bhuyan, leaned Standing Counsel for the Revenue. 4. In both the reference, the Assessing Officer made addition of Rs.72,669 and 30,862 in respect of Broom Account on the ground that the books of accounts maintained by the assessee firm do not reflect the actual transaction so as to enable him to compute the correct income. In respect of the Rape Seed Oil Account, the Assessing Officer made addition of Rs.72,669 and Rs. 41,676 on the ground that the shortage claimed by the assessee firm is on the higher side. The learned Tribunal, on appeal by the assessee, eventually upheld the reasons for addition of the aforesaid amount but restricted the same to Rs.55,000 in respect of Broom Account and Rs. 80,000 in respect of Rape Seed Oil Account for the assessment year 1984-85. In respect of the account for the year 1985-86, the amount was restricted to Rs.20,000 in respect of Broom Account while the addition of Rs.41,676 in respect of Rape Seed Oil Account was sustained. It would appear that the Assessing Officer while making the addition invoked the provisions of the proviso to sub-section (1) of section 145 of the Act and rejected the claim for deduction. 5. Question No. 2 is related to the claim of deduction of interest of unsecured loan. The assessee firm claimed deduction of Rs. 3,41,600 on unsecured loan of Rs. 26,30,919 for the year 1984-85. 5. Question No. 2 is related to the claim of deduction of interest of unsecured loan. The assessee firm claimed deduction of Rs. 3,41,600 on unsecured loan of Rs. 26,30,919 for the year 1984-85. The Assessing Officer noted that the assessee firm made investment of Rs.2,59,325 in the said year in the house property belonging to M/s Keshrichand Jaisukhlal, HUE According to the Assessing Officer, the interest related to the said investment of Rs.2,59,325 should have been debited to M/s Keshrichand Jaisukhlal. The Assessing Officer added Rs. 38,898 as the interest on the aforesaid amount at the rate of 15% to the total income of the assessee firm. The addition of Rs.38, 898 by way of interest was deleted by the Commissioner of Income Tax (Appeal). On further appeal, the learned Tribunal came to the conclusion that the addition was wrongly deleted by the Commissioner of Income Tax (Appeals) and reversed the order and restored the assessment made by the Assessing Officer. 6. The additions have been made in view of various shortcomings and absence of details. Mr. Bhuyan, learned counsel for the Revenue submitted that there has been marked deviation in maintaining the books of accounts from the normal practice which compelled the Assessing Officer to reject the claim for deduction on account of Broom Account and Rape Seed Oil Account. According to the learned counsel, in view of the irregularities and inconsistencies, the Assessing Officer had to invoke the powers under the proviso to sub-section (1) of section 145 of the Act in order to arrive at a just computation of the income for the assessment years. Therefore, the decision of the Assessment Officer cannot be faulted with. 7. In the similar way, for the assessment year 1985-86 the assessee firm claimed deduction of interest of Rs.3,07,036 on unsecured loan of Rs.24,26,876. The Assessing Officer found that the assessee firm made investment of about Rs.2,64,530 in the house property belonging to M/s Keshrichand Jaisukhlal, HUF without charging any interest. The Assessing Officer worked out Rs.39,680 as interest on the investments of Rs.2,64,530 at the rate of 15 percent and added this amount to the total income of the assessee. On appeal, the Commissioner of Income Tax (Appeals) deleted the addition of Rs. The Assessing Officer worked out Rs.39,680 as interest on the investments of Rs.2,64,530 at the rate of 15 percent and added this amount to the total income of the assessee. On appeal, the Commissioner of Income Tax (Appeals) deleted the addition of Rs. 39,680 on the ground that the assessee firm had not charged the interest on the ground that assessee firm took on rent the premises covering approximately 11,100 square feet on a nominal rent of Rs. 12,000. 8. The Commissioner of Income Tax (Appeals) accepted the contention of the assessee firm that interest free advance was made to M/s Keshrichand Jaisukhlal in order to compensate the loss on account of nominal rent. But on appeal, the learned Tribunal noted that the unsecured loan was borrowed on interest payable at the rate between 12 percent to 18 percent and the same was diverted and advanced to M/s Keshrichand Jaisukhlal. The learned Tribunal also rejected the contention of the assessee firm that the partners would have utilised their capital in any manner they would have liked. The Tribunal observed that as soon as any capital whether in cash or kind was brought by the partner in the partnership firm, the partner ceases to be the owner of the money. On this finding, the learned Tribunal reversed the order of the Commissioner of Income Tax (Appeals) and restored that of the Assessing Officer. 9. In so far as the Broom Account for the assessment year 1984-85 is concerned, it would appear that the Assessing Officer noticed that the purchases are not supported by vouchers/memos and that the three truck owners examined by the assessee under section 131 of the Act also failed to produce any documentary evidence in support of transaction with the assessee firm. They also could not furnish any details with regard to the price of the Brooms sold by the assessee firm. That apart, the Dagpatty Bahi maintained by the assessee-firm for purchase of Brooms reflected the names of the parties in abbreviated form. The assessee firm was not in a position to furnish the identity pf the parties and information about their present whereabouts. The purchase price and sale price of the Brooms have been shown to be the same, while the assessee firm charged commission at the rate of Rs.4 per quintal in addition to the purchase price of the Brooms and other incidental charges. The purchase price and sale price of the Brooms have been shown to be the same, while the assessee firm charged commission at the rate of Rs.4 per quintal in addition to the purchase price of the Brooms and other incidental charges. The opening stock of 79.10 quintals of Broom could not be corroborated with the sales reflected in the books of accounts. The assessee also failed to corroborate the same. In their written reply dated 19.3.83, the assessee firm submitted that 57.50 quintals were sold on 26.5.83 at the rate of Rs.251 and 21.50 quintals @ Rs.250 whereas the value of the opening stock has been shown at the rate of Rs. 230 per quintal. The Assessing Officer found that on the same day 60 quintals of Brooms were purchased at the rate of Rs.261 per quintal. The sale price of the opening stock of 79.01 quintals at the rate of Rs.251 and 250 per quintal could not be explained. Since the value of the pending stock has been shown at the rate of Rs.230 per quintal, the assessee should have charged the same amount for despatch of the opening stock to the outside parties with its usual commission of Rs.4 per quintal and other incidental charges. The assessee also could not furnish any satisfactory explanation as to why there has been wide variation in the value of the closing stock shown by the assessee with that of the purchase and sale price of the Broom on the last day of the accounting year. The Assessing Officer also noticed that the assessee has b charged more price than the purchase price in addition to Rs.4 per quintal. Instances of such transaction are reflected in the assessment order. This is a deviation from the normal practice followed in the business of Brooms. That apart, the assessee also failed to explain the sale of Brooms at a lower price than the purchase price. In view of all these inconsistencies and infirmities, the Assessing Officer came to the finding that income from the dealings in Brooms c cannot be properly deduced from the books of accounts produced by the assessee firm and on that ground the sales and GP have been reconstituted as per provisions of the proviso to the sub section (1) of section 145 of the Act, 1961. 10. 10. Almost the same infirmities as has been noticed by the Assessing Officer in respect of assessment year 1985-86 have been found in the books of accounts produced. It is pertinent to mention here that the assessee made a purchase of 116 quintals of Brooms at the rate of Rs.221 on 28.3.85 and as there was no sale thereafter before closing of the accounting year, the closing stock should have included 116 quintals purchased at the rate of Rs.221. But the books of accounts reflected only 112.50 quintals as against 116 quintals, thus 3.50 quintals of a particular variety of Broom in a day or two taking into consideration that the total e shortage during the year has been shown at 1.50 quintals in the trading account. That apart, 23 quintals of Brooms purchased at the rate of Rs. 425 in the later part of the year which remained unsold was valued in the closing stock at the rate of Rs.421 per quintal. This deviation in the closing stock also could not be explained. No evidence could be produced in support of the claim of the assessee that the stock has been valued on the basis of market report. The Assessing Officer refused to accept the explanation given by the assessee firm with regard to shortfall in GP rate in comparison to the GP rate of the previous year. Assessee firm claimed that in view of complaints from the customers for higher profit charged last year, the Brooms were sold with a nominal profit. This explanation has not been accepted by the Assessing Officer mainly on the ground that purchases were not supported by vouchers/memos from the sellers of the products. For all these reasons, the Assessing Officer was of the opinion that the income from the dealings in the Brooms has not been disclosed correctly in the books of account and, therefore, he invoked the proviso to sub section (1) of section 145 of the Act, 1961 taking the GP at the rate of 4 percent. 11. The invocation of the provisions incorporated in the proviso to sub- section (1) of section 145 of the Income Tax Act, 1961 has been upheld by the Commissioner of Income Tax (Appeals). The Tribunal, after considering the nature and line of business, profit earnings, extent of business and other surrounding circumstances also affirmed the same. 11. The invocation of the provisions incorporated in the proviso to sub- section (1) of section 145 of the Income Tax Act, 1961 has been upheld by the Commissioner of Income Tax (Appeals). The Tribunal, after considering the nature and line of business, profit earnings, extent of business and other surrounding circumstances also affirmed the same. However, the Tribunal restricted the addition to a lesser amount as indicated herein before. 12. Shri R. Gogoi, learned counsel for the assessee submitted that the Assessing Officer has not given any reason in the Assessment Order while taking the GP at the rate of 4 percent. This action, according to Shri Gogoi, is arbitrary. That apart, on the facts and circumstances of the case, Shri Gogoi also assailed the invocation of the proviso to sub section (1) of section 145 of the Act, 1961. 13. We have given our thoughtful consideration to the above submission with regard to the Broom stock account. The infirmities and the inconsistencies evinced by the Assessing Officer and also affirmed by the Commissioner (Appeals) and the learned Tribunal suggest that there is deviation from the normal practice generally followed in this line of business. The Assessing Officer, because of the infirmities and inconsistencies was not in a position to deduce the correct income of the assessee firm, and as such, he had to take recourse to the extra­ordinary powers vested in him under the proviso to sub-section (1) of section 145. The nature of deviation in the books of accounts and the infirmities and inconsistencies which remained unexplained appear to be the compulsion on the Assessing Officer to apply the proviso to sub-section (1) of section 145. We are, therefore, of the opinion that under the given circumstances the Assessing Officer had no other alternative but to evolve a method of his own to deduce the correct income. We find no error in the procedure adopted by the Assessing Officer. 14. The Assessing Officer computed the profit taking the GP at the rate of 4 percent. Shri Gogoi, learned counsel for the assessee objected to the figure being arbitrary and unjust. He also found fault with the rate of GP for want of reasons. We have given our thoughtful consideration to the submission of Sri Gogoi. 14. The Assessing Officer computed the profit taking the GP at the rate of 4 percent. Shri Gogoi, learned counsel for the assessee objected to the figure being arbitrary and unjust. He also found fault with the rate of GP for want of reasons. We have given our thoughtful consideration to the submission of Sri Gogoi. It appears that the assessee has all along maintained that they have been charging Rs.4 as commission over the purchase price per quintal. Therefore, the Assessing Officer was obviously not in error in accepting 4 percent as the GP for the purpose of computation of the income. We do not find any error in the finding of the Tribunal sustaining the method applied by the Assessing Officer in computing the income of the assessee firm applying GP at the rate of 4 per cent. 15. In so far as the Rape Seed Oil Account is concerned, the inconsistencies and irregularities as has been evinced in respect of Brooms Accounts are also very mush predominant there. For the assessment year 1984-85, the Assessing Officer noticed that huge shortage has been accounted for due to leakage of tin containers both in transit and in storing. The Assessing Officer rejected the contention on the ground that the shortage shown is abnormally high i.e. 4.2 per cent. According to the Assessing Officer, there cannot be any substantial loss of oil when stored in the godown since the oil leaking out could be very well refilled for marketing. The opening stock of Rape Seed Oil was 860 tin containers and the total purchase of Rape Seed Oil during the year was 12,666 tin containers. The total shortage has been shown at 573 tin containers but the assessee firm could not explain the manner in which 573 empty tin containers have been disposed of during the year. That apart, the Assessing Officer found that there was shortage of 231 tin containers of Rape Seed Oil out of 3,520 tin containers within a period of 10 days. This huge shortage, according to him, is an absurd proposition. Moreover, no shortage was reflected in the accounts at the time of receipt of the goods. This omission, according to the Assessing Officer, suggest that the shortage reported obviously took place in the godown during the storage. This huge shortage, according to him, is an absurd proposition. Moreover, no shortage was reflected in the accounts at the time of receipt of the goods. This omission, according to the Assessing Officer, suggest that the shortage reported obviously took place in the godown during the storage. The Assessing Officer on consideration of the circumstances was of the opinion on that such a huge quantity of Rape Seed Oil cannot ooze in the godown within such a short period. Therefore, the Assessing Officer allowed shortage at the rate of 2 percent and added the value of 302 tins of Rape Seed Oil to the income of the assessee. 16. With regard to the Assessment year 1985-86, the assessee claimed shortage of 1,777 tins during transit and storing. The contentions of the assessee are the same as taken for the previous year referred to above. For the same reasons, the Assessing Officer held that such a huge shortage of 6.8 per cent cannot occur in the godown during storage. No shortage was noticed when the assessee lifted the quota from the STC godown at Guwahati and there is no record of shortage on arrival of the Rape Seed Oil at the godown of the assessee. Therefore, the Assessing Officer as of the opinion that the shortage shown by the assessee is not the actual shortage as claimed. In the facts and circumstances, the Assessing Officer allowed shortage at the rate of 2 percent of the total d number of tins of Rape Seed Oil which works out to 894 tins. Thus, the shortage was brought down from 1,542 tins to 894 tins and the value of remaining 648 tins at the rate of Rs.153 being Rs.99, 144 was added. 17. The above conclusion on the facts and circumstances in respect of Rape Seed Oil was not disturbed by the learned Tribunal. After a careful consideration of the matter in its depth and for the reasons reproduced above, we are of the opinion that the Assessing Officer did not commit any error in adding the value of 648 tins to the total income of the assessee firm. 18. Discussions above do not warrant interference so far the decision with regard to the Broom Account and the Rape Seed Oil is concerned. Hence, our answer to the question No. 1 is against the assessee. 19. 18. Discussions above do not warrant interference so far the decision with regard to the Broom Account and the Rape Seed Oil is concerned. Hence, our answer to the question No. 1 is against the assessee. 19. The next point for consideration is whether the decision of the Assessing Officer in respect of addition of interest of Rs.72,669 for the assessment year 1985-86 and Rs.39,680 for the preceding year for unsecured loan is sustainable in law. For the year 1984-85, the Assessing Officer noticed that the assessee firm made investment of Rs. 2,64,530 in the house property belonging to M/s Keshrichand Jaisukhlal HUF, without charging any interest. And amount of Rs. 39,680 was worked out at the rate of 15% and added back to the total income. Similarly, for the year 1985-86 a sum of Rs.2,59,325 was invested in the house property belonging to the said HUF. The Assessing Officer worked out Rs. 38,898 as interest payable at the rate of 15% on the said investment and added back the said amount to the total income of the assessee. Eventually the Tribunal rejecting the contention of the assessee firm affirmed the addition made by the Assessing Officer. The Tribunal while reversing the order passed by the Commissioner of Income Tax (Appeals) observed that as soon as the amount of capital is brought by the partner in the partnership firm, the partner ceased to be a owner of the said amount and of the purpose of income tax, the firm being a separate entity and having utilised the amount in its working capital of fixed capital, the said amount could not be held as the exclusive property of the partner. On this ground, the tribunal restored the addition made by the Assessing Officer. 20. The contention of the assessee firm was that they have been in use of the premises of the HUF at a nominal rent and as a consideration thereof, interest fee loan was extended. This contention did not find favour with the Assessing Officer as well as the Tribunal on the ground that the assessee firm claimed exemption of interest paid on unsecured loan of Rs. 24,26,876 for the assessment year 1984-85 and on unsecured loan of Rs.26,30,919 for the following year. 21. This contention did not find favour with the Assessing Officer as well as the Tribunal on the ground that the assessee firm claimed exemption of interest paid on unsecured loan of Rs. 24,26,876 for the assessment year 1984-85 and on unsecured loan of Rs.26,30,919 for the following year. 21. An identical question was dealt with by a Division Bench of this Court in Income Tax Reference No.l of 1996, M/s B & A Plantations & Industries Ltd vs. Commissioner of Income Tax, NE Region, Shillong 2000 (1) GLJ 519). In the said case, notional interest was added to the income on the interest free advance of Rs. 19,58,256 to M/s Jorhat Investments Ltd, a sister concern of the applicant firm. Assessee's case was that they had not charged interest on that advance in consideration of the fact that they got the premises of the sister firm at a very low rent. A Division Bench of this Court following the decision rendered by this Court in Highways Construction Co Pvt Ltd vs. Commissioner of Income Tax, NE Region, Shillong, (1992) 2 GLR 385 (1993 (1) GLJ 5), answered the question in favour of the assessee and against the Revenue. The relevant observation of this Court in Highways Construction Co Pvt Ltd (supra) is reproduced below for better appreciation : “There is no finding of the fact to the effect that actually loan had been granted to Managing Director or any other person on interest or that interest had actually been collected and the collection of the interest was not reflected in the accounts, the finding of the Income Tax Officer is that the assessee ought to have collected interest. In other words, in the view of the Income Tax Officer, which has been accepted by the Tribunal, the assessee as a good business concern should not have granted interest free loan or should have insisted on payment of interest. If the assessee had not bargained for interest, or had not collected interest, we fail to see how the income tax authorities can fix a notional interest as due, or collected by the assessee. Our attention has not been invited to any provision of the Income Tax Act empowering the income tax authorities to include in the income interest which was not due or not collected. Our attention has not been invited to any provision of the Income Tax Act empowering the income tax authorities to include in the income interest which was not due or not collected. In this view, we answer question No. (ii) in the negative, that is, in favour of the assessee and against the revenue.” 22. We do not find any reason to deviate from the decisions rendered by this Court in the cases, referred to above. Our answer will be obviously in favour of the assessee and against the Revenue. 23. The references are disposed of. Question No. (i) is answered against the assessee and in favour of the Revenue and Question No. (ii) is answered in favour of the assessee and against the Revenue.