TMI Blog1991 (1) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner since the shortage claimed for assessment year 1984-85 and immediatedy preceding year is 1984-85 was only 5% and considering the shortage in other cases, the assessee's claim was excessive this year. He therefore calculated the value of the difference for these two years at Rs. 3,68,000 and Rs. 2,86,230 respectively. Thus the ITO's order therefore was erroneous and prejudicial to the interests of revenue. He invited the assessee's objection, considered it and ultimately passed the following order : " In the present case, I find that the assessee does not maintain the books of accounts properly inasmuch as there is no corroborating evidence of the turmeric sent for powdering and polishing to the mills. There is no check on the closing stock of the assessee in the form of physical verification by the Auditors and due to these two defects the books of accounts of the assessee are defective and as stated in the sub-section (2) of section 145 of the IT Act, 1961, the correctness or the completeness of the assessee is in doubt. Accordingly, the impugned assessment orders passed by the ITO are considered to be erroneous in so far as they are prejudicial to the interest of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed that the ITO had taken into account the amount of shortage claimed by the assessee. He submitted that accounts up to 1984-85 had been accepted and there was no action by the Commissioner under section 263. Lower yield this year was no ground for action under section 263 relying upon the decisions in B.F. Verghese (No. 2) v. State of Kerala [1969] 72 ITR 726 (Ker.) and International Forest Co. v. CIT [1975] 101 ITR 721 (JK). He particularly criticised the expression of doubt by the Commissioner in the above quotation from his order and submitted that for exercise of powers under section 263 the Commissioner had to give definite finding regarding the defect and mere expression of doubt was not sufficient for drawing a conclusion which the Commissioner had done. He also filed Commissioner's appellate order in the case of one Kabra Co., where the deficit of 6% had been accepted. He emphasised that the burden of showing that the accounts were defective was on the department relying upon the decision of the Kerala High Court in the case of St. Teresa's Oil Mills v. State of Kerala [1970] 76 ITR 365. He relied upon ITO v. Arun Oil Industries [1985] 13 ITD 769 (Jp.) and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 312 (Guj.); Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi); and Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). He referred to the ITO's order and the enquiries which had been made under section 143(2) which according to him showed that there was no specific question regarding the higher shortage this year. According to him over the past several years the shortage, did not exceed 5%. It was standardised and so the sudden steep rise in these two years justified the Commissioner's order. He pointed out that the assessee had done nothing to show before the Commissioner that the purchases for these two years were from Nizamabad and so were of inferior quality. According to him the fact that gross profit had not been disturbed by the Commissioner made no difference to the question of shortage. He pointed out that in this case since the goods were not weighed before processing. The assessee's method of accounting was such that the shortage and consequently the income could not be ascertained and so action under section 145(2) was justified relying upon the following decisions : CIT v. McMillan Co. [1958] 33 ITR 182 (SC) ; S.N. Namasivayam Chettiar v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained and they should be accepted but that amounts to nothing more than stating that what he says must be accepted without any independent proof. The books cannot state anything more than what the assessee says and the assessee cannot say anything more than what the books show. The books are the assessee's own books and they are no more and no less than the assessee's own statement. It is a fact in this case that the goods were given to the mill for processing without any weight and the only thing that is known is weight of the goods after processing. The only way in which the shortage can be ascertained is to deduct the weight of the processed goods from the weight of the goods sent for processing when the latter quantity is not available the only method of knowing the shortage is denied to an independent enquiry. What then is to be done ? This particular glaring defect coupled with the remarkable rise in the shortage claimed in one year at 2% and in other at 4% does put a person on enquiry as to how and why this has occurred and whether such a claim of shortage is justified. The learned counsel has criticised the Commissioner's order stating that the Commissioner has procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel's criticism of the Commissioner's observation regarding the auditor's note is justified but even accepting that or above conclusion regarding justification for a direction for enquiry under section 263 would still remain for the above reasons. 8. However, we do find that the Commissioner's order goes too far and is too specific regarding the additions to be made. As stated above there is justification for an enquiry but that justification goes so far only as enquiry. The assessee's counsel has expressed the apprehension that it leaves no option to the ITO regarding the additions to be made and we find that there is some justification for this apprehension. The learned counsel has stated that since the Commissioner has expressed a doubt the order under section 263 could not be passed but that very expression of doubt can mean, as rightly contended by the learned Departmental Representative, that the direction regarding the amount of additions to be made was not definite. But with all that doubt the other parts of the above Commissioner's order show certain imperative directions to the ITO which, in our view, is incorrect. The assessee should have an opportunity to show to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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