TMI Blog1978 (3) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... The ITO did not accept the explanation of the assessee as there was lesser consumption of coarser counts of yarn in the relevant year and an increase in the consumption of fine and superfine counts of yarn. The ITO, accordingly, made an addition of Rs. 34,000 valuing the excess wastage at the average rate of sale price of cloth. The assessee preferred an appeal before the AAC and contended that the ITO did not give any valid reasons for not accepting the higher wastage. The AAC was of the view that several factors, such as, moisture, dust contents of the cotton, the efficiency of the blowing, carding and spinning of yarn resulted in wastage. He did not consider the extra wastage of 1.1% as excessive and deleted the addition. The revenue preferred an appeal before the Tribunal against the said order of the AAC. On behalf of the revenue, it was urged that the AAC in holding the wastage as not excessive proceeded on a wrong basis, as in the relevant year the assessee had only purchased the yarn and woven the cloth. It did not undertake any spinning and, therefore, could not be given the benefit of wastage that would occur in the production of yarn. It was further urged that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified and restored the assessment of the ITO. Thereafter, on reference proceedings initiated by the assessee, this court directed the Tribunal under s. 256(2) of the Act to refer the following question : " Whether, there was any material(s) on record on which a sum of Rs. 34,000 was included in the total income of the company on account of alleged understated production of cloths ? " Dr. Debi Pal, learned counsel on behalf of the assessee, urged that the consumption register and production register have been found to be duly kept and maintained. The ITO found them to be correct. Therefore, the observation of the Tribunal that " it is open to the Income-tax Officer to subject such records to scrutiny and if he found that the quantity alleged to be consumed cannot be explained satisfactorily, there was no reason why he could not consider the same as not a faithful record of consumption " is based on mere assumption. Dr. Pal submitted that once the registers are accepted as correct, the increase in the percentage of wastage as recorded in these books should have been accepted as correct and proper. According to Dr. Pal, use of sized beams and the age of the machinery purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to an inference that thereby there has been a suppression in the weight of yarn that is produced. We are not satisfied that on the material on record the sum of Rs. 50,000 could be included in the total income of the assessee on account of the alleged understated production of yarn and soft waste. We, therefore, answer the second question referred to us in the negative and in favour of the assessee. " Dr. Pal next cited C. Arumugaswami Nadar v. CIT [1961] 42 ITR 237 (Mad). In that case, the assessee manufactured safety matches. Its books showing the consumption of chlorate were not accepted and certain sums were not accepted and certain sums were accordingly added as income. On this consumption there were certain discrepancies between the Report of the Madras Analytical Laboratory and that of the Alipore Test House. The question referred to the Madras High Court was, firstly, whether there was any material to justify the addition by the Tribunal on the ground that the assessee's books did not show correct consumption and, secondly, that whether there were any materials to justify the rejection of the book results and to invoke the proviso to s. 13 to the Act. The Madras High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question was not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. " (b) Gobald Motor Service (P.) Ltd. v. CIT [1966] 60 ITR 417 (SC). The Supreme Court in this case, while agreeing with the contentions of the assessee, that none of the relevant principles as laid down by the Supreme Court in an earlier case (viz., Gangadhar Banerjee's case [1965] 57 ITR 176) were considered by the ITO, did not allow the assessee to raise those points before the Supreme Court as the same had not been canvassed before the authorities earlier. (c) CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194. Here the Supreme Court laid down that it is not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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