IT : Where assessee's method of extracting yield of oil from groundnut seeds was consistently accepted in past, in absence of bringing on record any cogent reasons for rejecting same, addition made by Assessing Officer merely on basis of its own estimation of production, was not sustainable
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[2013] 38 taxmann.com 241 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -II
v.
Patidar Oilcake Industries*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
Tax Appeal No. 931 of 2011
SEPTEMBER 15, 2012
Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of income [Oil Industries] - Assessment year 2007-08 - Assessee was engaged in extraction of oil from groundnut seeds - In course of assessment, Assessing Officer worked out yield of oil at 38.94 per cent as against 35.26 per cent declared by assessee - Excess yield was applied to compute excess production of oil and by applying average sale price thereto, certain addition was made to assessee's income - Commissioner (Appeals) found that expert opinion, more particularly, that of Government approved laboratory in fact supported case of assessee and reasonability of yield declared - Commissioner (Appeals) further noted that assessee had followed its method of computing yield consistently in past and as such same could not have been rejected without any cogent reasons - Accordingly, impugned addition made by Assessing Officer was deleted - Tribunal confirmed order of Commissioner (Appeals) - Whether finding recorded by appellate authorities being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 7] [In favour of assessee]
Pranav G Desai for the Appellant.
ORDER
Ms. Harsha Devani, J. - The appellant-revenue has challenged order dated 7.1.2011 passed by the Income-tax Appellate Tribunal (in short "the Tribunal") by proposing the following questions stated to be substantial questions of law:
| "(A) | Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.52, 44, 064/- made on account of low recovery of oil? | |
| (B) | Whether on the fact and in the circumstance of the case the order of the Income Tax Appellate Tribunal is suffering from non-application of mind and is not reasoned order and therefore, is perverse?" |
2. The assessment year is 2007-2008 and the relevant accounting period is 2006-2007. The assessee is engaged in the business of de-oiled cake powder from groundnut oil cake by solvent extractions and running an oil mill and vegetable plant at Dhoraji. Upon crushing of seeds in the oil mill, oil and oil cakes are produced. The assessee filed return on income showing total loss of Rs.53,79,000/- for the assessment year under consideration. The assessee declared a gross profit of Rs.35,72,930/- out of a total turnover of Rs.11,68,59,538/- which was worked out to 3.05% as against 6.35% shown in the immediately preceding year. According to the Assessing Officer, based on analysis reports containing details of percentage of yield of oil, recovery of oil from groundnut seeds was shown to be ranging from 46% to 53%. The Assessing Officer also relied upon the statement of an employee who had stated that groundnut seeds are purchased on the condition that the seeds should give yield of 48%. He, accordingly, recomputed the yield and worked out the same at 38.94% yield of oil as against 35.26% declared by the assessee and applied the excess yield of 3.68% to compute excess production of oil at 101315 kgs and applying the average sale price thereto, computed low recovery of oil at Rs. 52,44,064/- and made addition of the same to the income declared by the assessee. The assessee went in appeal before the Commissioner (Appeals) who vide order dated 14.6.2010 allowed the said ground of appeal. The revenue carried the matter in appeal before the Tribunal but did not succeed.
3. Mr. Pranav Desai, learned counsel for the appellant submitted that the assessee had not explained the difference in percentage yield of groundnut oil shown in the analysis reports found during the course of survey and the statements recorded on this issue of the Laboratory Assistant, the accountant of the assessee firm and its employees . It was submitted that the material on record clearly indicates that the yield of groundnut is in the range of 48% to 52% and as such the Assessing Officer had rightly worked out the yield at 38.94% whereas the assessee had suppressed the oil production by 3.68% by showing yield at 35.26%. It was submitted that the Commissioner (Appeals) as well as the Tribunal had failed to appreciate the evidence on record in proper perspective rendering the impugned order perverse.
4. As can be seen from the impugned order, the Tribunal has not recorded any independent findings but has placed reliance upon its earlier orders passed in the assessee's own case in relation to assessment years 2006-2007 on identical set of facts and has upheld the order passed by the Commissioner (Appeals). It would therefore, be necessary to advert to the order passed by the Commissioner (Appeals) wherein, he has, inter alia, observed as under:
"3.2 I have carefully considered the above reply of the AR of the appellant. It is noteworthy that no defects in accounts have been found by the A.O. Books of account have also been rejected. The accounts of the appellant are audited. The appellant is found to have maintained and disclosed complete quantitative information as regards its materials and products, as stated in the audited accounting reports. It is also noted that in past, including by way of orders u/s. 143 (3) of the Act percentage yield of oil and other products in the same business and in the same mill and plant have been accepted as declared and the book result has not been rejected. The appellant has also drawn additional support from other assessees engaged in similar business and certificates from such other parties have been placed in the paperbook and which were also submitted during assessment proceedings. It is found from the material available that the yield of oil revolves around 35% of groundnut consumption whereas during the year the yield declared is 35.12%. Besides, expert opinion, particularly from Govt. approved laboratory also supports the contentions of the appellant and the reasonability of the declared yield. It also emerges from the study of the process of manufacture that it is the groundnut along with the shell that is crushed in the oil mill and after the crushing process, groundnut oil, oil cake and husk are generated in one single process. Therefore, unlike what is presumed and applied by the Assessing Officer, the husk is not first reduced because the bare seeds are not crushed independently. As explained by the appellant, the laboratory reports referred to by the Assessing Officer speak of the pure yield of 48% of bare seeds only in laboratory condition for testing purposes only of the quality of the seeds. It does not refer to the overall oil recovery from the entire process. After all the process equation has to balance as per the two stage process of crushing and extracting right up to its logical and technical end. Apart from above, it is also seen that no reason other than above for suppression of production and sales have been given by the Assessing Officer and nothing is stated to be found during survey showing unaccounted production or sales outside books of account. The method of computing yield is being followed by the appellant consistently all years in past and therefore there is no reasons why the same can be rejected without any cogent evidence. The technical certificates and comparative figures given by the appellant have not been controverted by the Assessing Officer. Moreover, the yield declared is not only comparable but favourable as compared to earlier years and other instances. In view of above, it is held that the Assessing Officer misdirected himself in making the addition by way of low recovery of oil, Hence the addition on this ground is not sustainable, and therefore, the Assessing officer is directed to delete the addition of Rs. 5244064/-. I have adopted same view on similar facts in the appellant's appeals for the Assessment years 2003-04 to 2006-07 and has deleted the additions made on account of suppression of oil production based on yield. Further, it is found that the Hon'ble ITAT Rajkot Bench in the appellant's own case for the assessment years 2006-07, 2005-06 and 2003-04 has confirmed the CIT (A)'s order on same issue and has deleted the addition made by the Assessing Officer. Considering all above facts and decision of Hon'ble ITAT Rajkot Bench, the addition made this year is also order to be deleted. Appellant gets relief accordingly. This ground of appeal is allowed."
5. Thus, the Commissioner (Appeals) after appreciating the material on record has found that the expert opinion, more particularly, that of the Government approved laboratory in fact supports the case of the assessee and the reasonability of the yield declared. The Commissioner (Appeals) has found that the Assessing Officer had proceeded on an erroneous understanding of the process of oil extraction. He has further noted that the assessee had followed the method of computing yield consistently in the past and as such the same could not have been rejected without any cogent reasons. The Commissioner (Appeals) has also found as a matter of fact that during the course of survey nothing was found to indicate unaccounted production or sales outside the books. The Tribunal has concurred with the findings of fact recorded by Commissioner (Appeals).
6. Having regard to the above findings recorded by Commissioner (Appeals) upon appreciation of the material on record, no infirmity can be found in the reasoning adopted by him. Though it has been contended that the findings recorded by the Tribunal are perverse, the learned counsel for the appellant is not in a position to point out any material to the contrary so as to dislodge the findings of fact recorded by the Commissioner (Appeals) with which the Tribunal, after appreciating the material on record, has concurred.
7. Under the circumstances, the impugned order of the Tribunal being based upon concurrent findings of fact recorded by it after appreciating the material on record, in absence of any perversity being pointed out therein, does not give rise to any question of law, much less, a substantial question of law. The appeal is, accordingly, dismissed.
SUNIL Regards
Prarthana Jalan
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