A.O. may reject Books of Account if Assessee does not furnish proper records of production

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IN THE ITAT CHANDIGARH BENCH ‘A’

Pawan Kumar v. ITO

IT APPEAL NOS. 1119 & 1145 (CHD.) OF 2011

[ASSESSMENT YEAR 2008-09]

The discrepancies pointed out by the Assessing Officer while rejecting the book results have not been satisfactorily explained by the assessee. The Assessing Officer has observed that although the quantity of cotton seed, mustard and groundnut crushed during the previous year were shown separately but the yield of oil and oil cakes have been given in consolidated form at 13.02 per cent and 83.91 per cent respectively. Further, the sales of oil and oil cakes have been shown in the manufacturing account in consolidated form although there was a wide variation in the market price of these products. It is also true that there is always a wide variation in the percentage of yield of oil and sale rates of oil and oil cakes in the market. However, the assessee has preferred to put up a consolidated account of different types of oil seeds for the reasons best known to him. The assessee was asked by the Assessing Officer to rework the yield of oil and oil cakes separately from different types of oil, oil seeds crushed by him. The assessee was also asked to explain the reasons for mixing up the cotton, mustard and groundnut oil seeds in the same category when there was vast variation in market price of these types of oil seeds and other products. When Assessing Officer asked the assessee to give the explanation, the assessee stated that there was not much difference in the market price of both these oils and, therefore, he has made the sales of khal and oil of both these varieties jointly. It is opined that the Assessing Officer has correctly rejected the above explanation of the assessee stating that assessee’s statement in this behalf is not correct, therefore, under no circumstances is acceptable. Unless the yield of oil obtained on the crushing of three types of oil seeds is separately given, the manufacturing results cannot be appreciated in their proper perspective.

There were sufficient reasons to hold that the books of account maintained by the assessee are unreliable, incorrect and incomplete. Therefore, the books of account of the assessee have correctly been rejected under section 145(3). The Commissioner (Appeals) has correctly upheld the action of the Assessing Officer in rejecting the books of account.

As regards, the low yield of oil from cotton seeds, the Assessing Officer has adopted the yield at 11 per cent and made the addition of Rs.8,68,800 on account of suppression of sales proceeds of cotton seed oil. On appeal, the Commissioner (Appeals) reduced the addition to Rs. 2 lakhs.

In view of the comments given by Punjab Agriculture University Authority, it is crystal clear that yield of oil from cotton seeds depends upon many factors and cannot be fixed, such as date of sowing and time of harvesting, quality of seeds, quality/type of extraction mill. Traditional Ghanis yields lower oil recovery than solvent extraction and yield also depends upon the fact that whether extraction is made from kohlu or through skilled or unskilled labour. The above authority has also clearly stated that he cannot certify the exact yield during the year under consideration. Keeping in view the entire facts and circumstances of the present case, the addition of Rs. 3 lakhs in this case will meet the ends of justice.