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2017 (8) TMI 375 - HC - Income TaxRejection of books of accounts - Applicability of section 145(3) - additions on account of excessive wastage - input/output ratio inconsistency - Estimation of wastage In Production of bone china wares - Held that:- Inconsistency which has been duly explained by the assessee vide letter dated March 26, 2004 and the second objection by the Assessing Officer was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated March 26, 2004. Therefore, the inconsistency in the input/output ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated March 26, 2004 which was ignored by the Assessing Officer and the Assessing Officer has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the Assessing Officer has not brought on record any cogent material to prove that the assessee has sold the under-production out of the books of account. The objection of the learned Departmental representative that the learned Commissioner of Income-tax (Appeals) has not relied upon the CGCRI report, Calcutta, the learned authorised representative has pointed out that in the same report it has been mentioned that the said organisation is not involved production practice and they are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of the books of account and making an estimation of wastage - Decided in favour of assessee.
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