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2004 DIGILAW 966 (PNJ)

Guru Proteins Ltd. v. Commissioner Of Income Tax

2004-08-26

ADARSH KUMAR GOEL, N.K.SUD

body2004
Judgment Adarsh Kumar Goel, J. 1. This appeal has been preferred by the assessee against order of the Tribunal, Chandigarh Bench B in respect of asst. yr. 1995-96. 2. Only question relevant for decision of this appeal is the estimation of yield of rice bran oil. 3. On 17th Jan., 1995, search was conducted at the business premises of the assessee. Stock was found short to the tune of Rs. 30,50,700. In view of discrepancies in the stock, a surrender of Rs, 3 lakhs was made on account of profit earned on the unaccounted sales. In view of admission of the assessee that sales outside the books of account had been made, books of account were rejected. Yield of rice bran oil was taken at the rate of 12.25 per cent, as per the previous year as against assessees claim being 11.59 per cent. The AO also made addition of Rs. 1,21,699 in respect of purchases made by the assessee. 4. On appeal, the CIT(A) held that it will be fair to restrict the yield rate to 11.75 per cent as, against 12.25 per cent. Reference was made to lab. examination register containing information as to oil contents in the raw material purchased from the rice millers, according to which yield worked out to be 11.9 per cent but since in the actual processing, yield is slightly lower, the same was taken at 11.75 per cent. The assessee as well as the Revenue preferred appeal against the order of the CIT(A). 5. The Tribunal observed that average yield recorded in the lab. examination report was not on entire rice bran but on a sample of 11.88 MT of nee bran. There was large variation in the average yield of rice bran oil and assessee had neither maintained record of day-to-day processing nor of day-to-day yield of rice bran oil extracted. It was held that the assessee had adopted yield rate of 12.17 per cent in the preceding assessment year and not 12.25 per cent as observed by the AO. Accordingly, the Tribunal held that it would be fair and reasonable to apply yield rate of 12.17 per cent. The finding of the Tribunal is as under: "4.7. We have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below. Accordingly, the Tribunal held that it would be fair and reasonable to apply yield rate of 12.17 per cent. The finding of the Tribunal is as under: "4.7. We have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below. On perusing the order of CIT(A), we find that in arriving at average yield of rice bran oil at 11.7 per cent against 12.25 per cent applied by the AO, and against 11.57 per cent shown by the assessee, the CIT{A) has placed sole reliance upon the lab. examination record found and seized during search. It is not in dispute that the total rice bran processed by the assessee for extracting the rice bran oil was 8935 MT out of which the assessee has shown 1036 MT of rice bran oil being extracted by the assessee. It is also not in dispute that this lab. examination report giving the average yield of 11.90 per cent by the assessee has been obtained while conducting the lab. examination on rice bran of 511.88 MT, which means that this lab. examination report is nothing but a sample study conducted by the assessee and not the actual average yield taken on the entire rice bran of 8935 MT processed during the year under consideration by the assessee, which makes it clear that the average yield recorded in the lab. examination report is not on entire rice bran processed by the assessee but is on the sample of 511.88 MT of rice bran and hence it can safely be said that this report is not based on the total actual rice bran processed by the assessee. It is also important to note that in this report, there is a large variation in the average yield of rice bran oil from rice bran and so it cannot be safely adopted for determining the actual yield of rice bran oil from the total rice bran processed by the assessee. It is also not in dispute that the assessee has neither maintained a record of day-to-day processing of rice bran nor day-to- day yield of rice bran oil extracted out of the same. It is also not in dispute that the assessee has neither maintained a record of day-to-day processing of rice bran nor day-to- day yield of rice bran oil extracted out of the same. From this report, it is further clear that in fact the actual status of the rice bran processed and the rice bran oil extracted out of the same by the assessee meaning thereby that it simply gives a possible yield of rice bran oil which can be extracted from the rice bran and not the actual yield of rice bran oil extracted by the assessee. Hence, we are of the opinion that self-prepared lab. examination report of the assessee giving a possible yield of 11.90 per cent cannot be taken as a parameter for determining the actual yield of rice bran oil extracted by the assessee from the rice bran processed by the assessee. In this view of the matter, we are of the opinion that the CIT(A) was not justified in basing this lab. examination report as a sole parameter for determining the average yield of rice bran oil actually manufactured by the assessee. Hence, we are of the opinion that the AO was perfectly justified in adopting the average yield of rice bran oil extracted by the assessee in the year under consideration, on the basis of yield rate shown by the assessee in the preceding assessment year. It is not disputed that in the preceding assessment year, the assessee has shown the yield rate of 12.17 per cent and so we are of the opinion that the AO was not justified in adopting the yield rate of 12.25 per cent against 12.17 per cent shown by the assessee in the preceding year because the AO has not given any justifiable basis for adopting this yield rate of 12.25 per cent in the year under consideration. We are further of the opinion that once the AO rejected the book results of the assessee, then in order to apply the yield rate he should always look into the past history of the assessee. We are further of the opinion that once the AO rejected the book results of the assessee, then in order to apply the yield rate he should always look into the past history of the assessee. In this case, it is not disputed that the assessee has shown yield rate of 12.17 per cent in the preceding assessment year and so, it would be fair and reasonable to apply the yield rate for 12.17 per cent in the year under consideration against 12.25 per cent applied by the AO, and against 11.75 per cent applied by the GIT(A), and 11.57 per cent shown by the assessee." 6. Learned counsel for the assessee submitted that the yield of oil as claimed by the assessee was fully verifiable on the basis of the lab. examination. reports of the entire stock. It was contended that the Tribunal had wrongly observed that the reports only pertained to 11.88 MT of rice stock. Learned counsel also contended that the Tribunal has failed to appreciate that such reports in respect of entire stock had been produced before the AO for verification. It was, therefore, contended that the authority ought to have gone not only by the seized documents but also by the records produced for the period not covered by the seized documents. 7. Learned counsel for the Revenue has produced a copy of the letter dt. 22nd Jan., 1997 submitted on behalf of the assessee claiming that yield was in consonance with the seized record and for the period not covered by the seized documents, records were offered for examination. 8. From the impugned orders, we find that no reference is made to the records other than the seized documents which are stated to have been produced for examination. We are, therefore, of the view that records said to have been produced by the assessee ought to be examined by the AO for the purpose of determining the yield of oil on the basis of records of lab. examination for the entire stock of rice bran. For this limited purpose, we remand the matter to the AO for passing a fresh order in accordance with law. 9. The Appeal is, accordingly, disposed of.