TMI Blog1961 (1) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... is in favour of the assessee, whether on the facts and in the circumstances of the case, there are materials to justify the rejection of books results and to invoke the proviso to section 13 of the Income-tax Act? The assessment years in question are 1947-48, the accounting year for which is the calendar year 1946, and 1949-50, the relevant calendar year being 1948. In respect of the assessment year 1947-48, an assessment was originally made on August 2, 1948, and the net income of ₹ 32,433, returned in respect of the match manufacturing business of the assessee was accepted. Subsequently in 1953, proceedings were initiated under section 34 of the Act. The Income-tax Officer concluded as a result of these proceedings that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 8,000 for the first year. For the second year, he directed the Income-tax Officer to recalculate the addition on the basis of the average purchase price of the chlorate as against the price of ₹ 1-4-0 per pound, which had been adopted by the Income-tax Officer. Appeals were taken to the Income-tax Appellate Tribunal. The Tribunal, while conceding that a uniform standard for chlorate consumption could not be adopted by reason of the very nature of the trade, was still of the view that there was a case for the estimation of the chlorate consumption. It purported to adopt such consumption as 17 pounds per 100 gross of matches and directed the recomputation of the additions to be effected on this head. On the directions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correlation of the issues of the chemical with the production could not be established. It was in the absence of such important record that the Tribunal proceeded to hold that the proviso to section 13 was attracted. This reasoning is strangely at variance with the observations of the Tribunal in its appellate order. There the Tribunal observed: The difficulties in fixing a percentage for all manufacturers are numerous. The consumption of chlorate is acknowledged on all hands to vary from manufacturer to manufacturer, no doubt, within reasonable margin, depending upon the territory for which the matches are made to be sold in; damp places require a larger proportion than relatively drier areas....In cottage industries where machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the entire book results of the manufacturing concern became unreliable. A point of some considerable importance has really been lost sight of by the Tribunal. It appears that a test lot of matches produced by the assessee's factory was sent for chemical analysis both to the Analytical Laboratory Madras, and to the Alipore Test House at Calcutta. The Madras Laboratory found that the big medium and small matches produced by the factory accounted for the consumption of 21.74 pounds of chlorate, 19.63 pounds and 20.64 pounds per 100 gross matches; the Alipore test house found that big size matches accounted for the consumption of 20.70 pounds the medium size 18.20 pounds and small size 17.30 pounds of chlorate per 100 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inly not justified by the real state of things. It appears further that in the case of this manufacturer different sizes of matches are produced. The assessee contended that the Tribunal had failed to consider certain detailed statements of the production of matches of various categories, and in the directions under section 66(2) of the Act this court called upon the Tribunal to report how far this material was considered. While the statement of the case does not appear to deny that detailed statements of this kind appearing as annexure C were before the Department it is suggested by the Tribunal that the contents of these statements were not pressed in the course of the arguments. We are not however, satisfied that the approach of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f uniformity and economy in the production can be secured. Equally where the production reaches what may be called the optimum figure economy in the use of the materials may reasonably be expected. But the production of a much less quantity than what the factory is capable of producing leads necessarily to loss of efficiency that is to say excessive consumption of materials is likely to result therefrom. In relying upon the average consumption of chlorate as revealed by the figures for the calendar years 1950 and 1951, and applying those very figures to the calendar years 1946 and 1948, the Tribunal appears to have overlooked these salient features. We are satisfied that on the materials made available by annexure C , the Tribunal was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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