Law: Income Tax Act, 1922

Section: 13

Income-tax Act (XI of 1922)---S. 13-- Rejection of account books--Assessee showing different figures in wastage of goods for three successive years of assessment--Income-tax Officer not disputing rest of account of assessee but merely challenging wastage figures because of variation of wastage in material during period of tax-holiday and thereafter-- Assessee giving various explanations, most important of which being that variation was not only due to wastage in manufacturing but also including storage and transit losses; that increase in wastage was also due to rejection of more finished goods as assessee had to apply rigid quality control to push sales; that raw material of rejected product was sold out and sale proceeds thereof credited to miscellaneous receipts account Income-tax Officer rejecting explanations of assessee disallowing excessive variation and wastage and making addition on the ground that percentage variation of waste was excessive and it was not possible to pinpoint and complete over all result although day to day stock register had been maintained--Appellate Assistant Commissioner accepting explanations offered by assessee in appeal---Income-tax Appellate Tribunal agreeing with Income-tax Officer that assessee failed to satisfy Income-tax Officer by showing day today and stagewise production record to verify shortage claimed by assessee and that Income-tax Officer rightly rejected book version of assessee--Held: Material explanation was offered by assessee for variations and wastage but same was not taken into consideration-­Tribunal, therefore, was not justified in rejecting books of accounts maintained by assessee--Explanations of assessee in respect of storage and transit losses in sale of raw material had been accepted by Assistant Appellate Commissioner; it was, therefore, necessary for Tribunal to deal with these questions and Tribunal erred in failing to apply its mind to questions of transit/storage losses incurred prior to commencement of manufacturing process--Both, Income-tax Officer and Tribunal also failed to pinpoint specific deficiency in accounts and they merely used abstract expressions which was hardly sufficient to reject…

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