1. The Special Bench was constituted for these cases on the representation of the assessees themselves as also on the basis of the request made by the Rice Millers Association. It appears that there were conflicting decisions of the Amritsar Bench of the Tribunal pertaining to the yield of rice and its by-products. We must, however, categorically state that it is not the endeavour of this Special Bench to decide the percentages of yield applicable to each and every assessee as these would depend on the facts of each case and vary from assessee to assessee depending on numerous factors which would be discussed in detail subsequently.
2. At the outset we would like to mention that the ld. counsel for the first mentioned appellant raised a preliminary objection to the 'appointment' of Shri Rakesh Goel, Jr. Departmental Representative at Chandigarh, as the authorised representative of the revenue to argue the appeals but which after some submissions was not pressed.
Similarly, Shri Rakesh Goel raised a preliminary objection to the constitution of this Special Bench but which he could not substantiate by any effective argument. It may be mentioned that this issue is no longer res integra having been settled by the Hon'ble Supreme Court in the case of ITAT v. Dy. CIT  218 ITR 275.
3. After dealing with the aforesaid preliminary objections we come to the specific facts in each of the appeals which are henceforth decided.
4. M/s. Shanker Rice Co. - It is a registered firm which has taken on lease a rice shelter belonging to M/s. Ganesh Rice Mills, Moga Road, Kotkapura. During the year of assessment, the paddy milled was 37,500 qtls. giving production of khudi phak at 445 qtls. According to the Assessing Officer, this was on the lower side as other concerns had shown the yield at more than 2% and if this percentage was applied in the assessee's case, the yield would come to 750 qtls. as against 445 qtls. shown, the difference being 305 qtls. The Assessing Officer accordingly applied 2% and consequentially the difference of 305 qtls.
was worked out.
5. On the question of valuation of closing stock, the Assessing Officer noticed that the assessee had shown a rate of Rs. 70.15 per qtl. but noticing the value shown by certain other assessees at Rs. 74.36 per qtl. and Rs. 150 per qtl. the Assessing Officer adopted the value at Rs. 75 per qtl. and arrived at a figure of Rs. 56,250 and after adjusting the value shown i.e. Rs. 31,150 made an addition of Rs. 25,100.
6. Addition on account of Rice Bran - The yield shown was 1192 qtls.
which was less than 5% of the rice procured i.e. 24,215 qtls. According to the Assessing Officer, the yield should have been 5% of the rice procured and working out a difference of 18 qtls. and valuing the same at Rs. 104 per qtl. the Assessing Officer made an addition of Rs. 1,872.
7. Yield of rice - On milling of paddy weighing 37,500 qtls., the assessee showed yield at 24,215 qtls. which gave a percentage of 64.57% as against yield of 64.50% fixed by the D.F.C. authorities. The Assessing Officer asked the assessee to explain reasons for showing uniform figure of yield on noticing that in the months of October, November and December, 1988 the yield percentage had been shown at 64.72%, 64.46% and 64.30% respectively.
(i) Yield of rice depended on numerous factors, specially the paddy of the same quality milled resulting in the same yield. (ii) The norm of yield was fixed by the State Government after taking into account all relevant factors.
(iii) Registers maintained by the assessee were periodically checked by the D.F.C. authorities.
(iv) From the varieties of paddy available in the area, the yield of 64.50% was apt and this was without any allowance of 2% on account of moisture and 10% on account of dust and other foreign material.
(v) The paddy milled was not weighed by any of the shelters but the same was recorded from the empty bags obtained from the milling and these bags were converted into weight on the presumption that each bag contained 65 kgs. of paddy as originally weighed on purchase from the market.
(vi) Actual production depended on the quality of the machinery and capability of the staff and other factors.
(vii) The capacity of the truck which carried the commodity was 9 tons but it normally carried 15 tons.
(viii) The assessee's case was not comparable with that of another assessee of Bhikhi area where the CIT(A) had upheld yield of 65.66%.
9. As against the aforesaid, the Assessing Officer came across the following facts :- (i) The capacity of the shelter was 1.5 tons per hour whereas paddy milled was at more than the aforesaid capacity.
(ii) The assessee had made purchases varying from Rs. 163 per qtl.
to Rs. 206 per qtl. but did not furnish any evidence in support of the contention that there was rise in prices.
(iii) In the case of the assessee the paddy was available in the open market in abundance and it could not be said that the assessee purchased the same quality of paddy for the whole season.
(iv) If the paddy had been purchased for a higher rate then the yield would be higher and if it had been purchased for a lower rate then the yield of rice would be on the lower side.
(v) The assessee's contention that the paddy of the area in which it was located gave a yield of 64.50% could not be accepted as on going through the paddy milling register on a number of dates it was seen that the assessee had shown yield at almost the same figure which was fixed by the Govt. If in any month a higher yield had been shown then in subsequent months a lower yield had been reflected and this in fact was a manipulation of the figures in a manner that the overall yield remained at 64.57%.
(vi) The capacity of the shelter was 1.5 ton of paddy per hour and the maximum which could be obtained if the shelter worked continuously for 24 hours would be 500 qtls. approximately whereas the assessee had shown paddy milled at 600 qtls. in a day on certain dates in October and November, 1988.
(vii) As lin the case of a Tata Truck, in which according to the assessee, load taken was more than the stipulated figure as also in the case of plant and machinery which as per assessee's version was utilised to show milling of 600 qtls. as against the maximum of 500 qtls. those could not run for a long time as they were bound to collapse some day.
(viii) The assessee had not produced the attendance register to substantiate its submission that milling of paddy had taken place even on Sundays and Gazetted holidays. Further, the maintenance of attendance register was necessary under the Factories Act.
On the basis of the aforesaid facts, the Assessing Officer applied proviso to section 145(1) on the ground that the correct profits could not be deduced from the books of account maintained. Taking note of the order passed by the CIT(A) in the case of Ganesh Rice Mills, Bhikhi, he applied yield of 65.66% which meant in terms of weight 24,622 qtls. as against 24,215 qtls. shown by the assessee.
The difference of 407 qtls was treated as having been sold outside the books of account and adopting a figure of Rs. 322 per qtl. which was the average sale price, the Assessing Officer made an addition of Rs. 1,31,054.
10. The ld. counsel for the appellant at the outset took up the issue pertaining to addition on account of yield of rice contending that this was the first year of business and in the course of original assessment no addition had been made. It was stated that whereas the assessee had shown a yield of 64.57%, the Assessing Officer had proceeded to apply a rate of 65.67% taking cue from the order passed by the CIT(A) in the case of M/s. Ganesh Rice Mill, Bhikhi which was not at all comparable.
According to the ld. counsel, the assessee's accounts were audited under section 44AB and all statutory records and registers required to be maintained by the Civil Supplies Department of the State Govt. were so maintained and regularly checked by them from time to time. It was stated by the ld. counsel that 75% of the rice milled was taken by the Govt. and it was only the balance 25% which was sold in the open market after taking due permission from the authorities.
11. The ld. counsel also invited attention to the certification of the various statutory registers by the Govt. authorities concerned highlighting that no defects had been pointed out by the said authorities in any of the registers so maintained. It was also the further plea that the trade was regulated by the Punjab General Sales Tax Act. According to the ld. counsel, husk was tax-free whereas the rice and bran were taxable being liable to sales tax whereas the purchase tax was levied on paddy. Attention was invited to the fact that E.T.O. had checked the assessee's records and it was also the further submission that the trade was regulated by the Market Committee concerned which was a requirement of the Punjab Agricultural Produce Markets Act, 1961.
12. The ld. counsel further stated that the Assessing Officer at page 3 of the assessment order referred to the figures of paddy husked for a period of three months only whereas page 9 of the assessee's paper-book contained the figures of six months which clearly revealed that the observation of the Assessing Officer to the effect that the yield was uniform was not correct. The ld. counsel further stated that the assessee had purchased only one variety of paddy i.e. PR-106 which was a coarse variety and no comparable case was confronted to the assessee except the one which was mentioned in the orders of the tax authorities pertaining to Bhikhi but whose facts were never intimated. According to the ld. counsel, the geographical features of both the cases differed and therefore the case relied upon was not applicable to the facts of the assessee's case.
13. The ld. counsel at this stage referred to the correspondence exchanged between the Assessing Officer and the assessee pointing out that the Assessing Officer came to the conclusion that he did picked only three purchases out of ten in one month and 9 out of 21 in another i.e. October, 1988, to come to the conclusion that the purchase price varied between one figure and the other and the assessee could not place on record any evidence to substantiate the increase. According to the ld. counsel, average purchase price was Rs. 197 and odd whereas the price fixed by the Govt. was Rs. 205 per qtl. of paddy. It was further stated that milling of rice was seasonal and there was only one crop per year. Further, it was stated that the capacity of the plant was 560 qtl. per day and not 500 qtls. as mentioned by the Assessing Officer and it was also contended that there was bound to be some variation as there was something known as "tolerable capacity" in the working of a plant. As regards the working shown on Sundays and other holidays, the ld. counsel stated that the production for these days had been declared by the assessee although it may be a violation of the law.
14. The ld. counsel also invited attention to the fact that the CIT(A) decided the appeal ex parts on the first date itself and in disposing of the same he took into account imaginary figures and facts which had no relevance to those available on record. Referring to the percentage of yield fixed by the F.C.I. and which had been mentioned in the order of the CIT(A), the ld. counsel stated that the object of F.C.I. was to procure rice for the Public Distribution System and Govt. Welfare Schemes and paddy of F.C.I. did not consist of quality milling. The plea in other words was that the facts and figures pertaining to F.C.I.were not relevant and a specific reference was made to page 22B of the compilation filed contending that large stocks were found unfit for human consumption. As against the aforesaid it was stated that the purchases by the Food & Civil Supplies Deptt. of the State Government were of quality produce and there could, therefore, be no comparison with the facts and figures pertaining to F.C.I. According to the ld.counsel, the tax authorities were comparing like to unlike. The ld.counsel at this stage referred to the fact that even F.C.I. was giving benefit of 2% to bring it in conformity with the D.F.C. pattern.
15. At this stage the ld. counsel stated that in the subsequent assessment years the yield shown by the assessee had been accepted by the department although in proceedings under section 143(1). Further, the total wages paid in the subsequent assessment years were more and these stood allowed. As regards purchases of paddy, the ld. counsel stated that these were all made from approved markets and in any case not doubted by the Assessing Officer and further all relevant records pertaining to each aspect of the trading of the assessee were maintained and these had not been adversely commented upon by the revenue.
16. It may be mentioned at this stage that during the course of the hearing the assessee pressed forth for the consideration of the Special Bench, the following additional ground :- "That on the facts and circumstances of the case, CIT(A) erred in law in confirming that proviso to section 145(1) is applicable." It was submitted that no fresh or additional material was required to dispose off the additional ground which was strictly legal in nature.
According to ld. counsel, the aforesaid additional ground could not be categorised so speaking strictly as it was only an elaboration of the grounds already raised and was in fact intimately connected. According to the ld. counsel, the aforesaid additional ground was required to be admitted and on the merits it was urged that proviso to section 145 (1) was not applicable and the yield adopted by the tax authorities was without any basis or valid justification and further no reasonable opportunity had been given before invoking the proviso.
17. In support of the various arguments advanced, the ld. counsel placed reliance on the following decisions :- (i) Jhandu Mal Tara Chand Rice Mills v. CIT  73 ITR 192 (Pun.
& Har.); (iv) R. B. Bansilal Abirchand Spg. & Wvg. Mills v. CIT  75 ITR 260 (Bom.); (vi) ITO v. Mahavir Rice & Genl. Mills [IT Appeal. No. 216 (Asr.) of 1991; (vii) Saraswati Rice Mills v. ITO [IT Appeal No. 1489 (Chd.) of 1989]; and As regards the yield of khudi phak, the ld. counsel stated that the declared percentage was 1.91 and the Assessing Officer had applied 2% without any basis or confronting the assessee with any comparable cases although the assessment order mentioned such cases. A reference was made to page 18 of department's paper-book for the contention that in the case of M/s. Singla Rice Mills, Rampura Phul, yield of phak for assessment year 1989-90 had been shown/adopted at 1%. The ld. counsel also challenged the valuation adopted by the Assessing Officer for purposes of making the addition.
18. Coming to the addition on account of rice bran, the ld. counsel stated that as against percentage of 4.92 shown, the Assessing Officer had applied 5% leading to a minor addition of Rs. 1872 which was once again without any basis. In respect of this addition as also the one on account of khudi phak, the ld. counsel urged that these be deleted.
19. At this stage Shri Gopal & Sood, Advocate, advanced the following arguments in the capacity of an intervenor :- (i) Yield of rice and its by-products depended on numerous factors such as unseasonal rain, climate, moisture contents of the paddy etc.
(ii) Data of any type filed by either the assessee or the department would not be accurate and the same was bound to differ from year to year.
(iii) There was an absence of high quality rice shelters in Punjab and most of them were operating with old rice manufacturing machinery.
The ld. counsel also placed on record an article in a Newspaper to support his arguments contending that ground realities were duly taken care of in the said article. He also relied heavily on the decision of the Hon'ble Punjab & Haryana High Court in the case of Jhandu Mal Tara Chand Rice Mills (supra) which was also pressed into service by the ld.counsel in the appeal of Shanker Rice Co. the first mentioned appellant. In concluding, the ld. counsel urged that his arguments be considered by the Special Bench as his endeavour was only to assist the Court in deciding the issues raised.
20. The ld. Departmental Representative, on the other hand, at the outset filed a paper-book contending that it was relevant for all the cases. It was stated that there were certain additional documents on the paper-book which were in the nature of 'Public documents' which may be admitted as these were relevant to the issue. According to the ld.D.R., technical rules of the Indian Evidence Act would not apply and he in fact sought to invoke rule 29 of the Appellate Tribunal Rules.
21. The ld. D.R. also opposed the admission of the 'additional ground' raised by the assessee contending that this had not been raised earlier and it was bound to explain the delay of 7 years and odd in pressing forth the same. Reliance was placed in support of the aforesaid submisions on the following decisions (i) Panchura Estate Ltd. v. Government of Madras  87 ITR 698 (Mad.); (ii) CIT v. Edward Keventer (Successors) (P.) Ltd.  123 ITR 200 (Delhi); (iii) CIT v. Orient Prospecting Co.  141 ITR 301 at 308 (Guj.).
According to the ld. DR., the Assessing Officer had given specific notice to the assessee before invoking proviso to section 145(1) and the assessee had not given any reply although a written communication was sent to the Assessing Officer dated 18-1-1991. The ld. counsel for the assessee countered by stating that the assessee had offered his comments in a letter dated 7-1-1991. Both the parties were, however, agreed to the effect that the, CIT(A) by confirming the estimates of yield had upheld proviso to section 145(1).
22. Dealing with the arguments of the parties on the "additional ground" this Special Bench finds that the ground is not strictly in the category of an 'additional ground' as it is merely an amplification/clarification of the grounds already taken and in fact intimately connected. The estimation on account of percentage of rice and the various by-products means application of proviso to section 145(1). The objections of the ld. D.R., therefore, stand rejected and the authorities are not found applicable in the light of our finding that the ground raised is not in the nature of an "additional ground".
23. The decision of the Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT  229 ITR 383/97 Taxman 358, enjoins upon the Tribunal a duty to correctly assess the tax liability of an assessee considering all such grounds including additional grounds raised which go to the root of the matter and are relevant and incidental to the issue raised, provided the facts are on the record.
24. Another objection was raised by the ld. D.R. and that being to the effect that the arguments of Shri Gopal K. Sood, Advocate, be not considered as he was not representing any assessee before the Tribunal.
According to him, an 'intervenor' could only be an assessee who had an appeal pending bel ore the Tribunal on an identical issue. This Special Bench notes that the arguments of Shri Sood are more or less a reiteration of those raised by the ld. counsel for the first-mentioned assessee before us and already reproduced earlier. In other words, we do not find it necessary to decide the issue raised by the ld. D.R. on the intervention by Shri Sood but may, however, state that we are in agreement with Shri Sood that the Court has powers to ask any lawyer present to assist the Court but this according to us does not extend to any lawyer offering his voluntary services to assist the Court when not called upon to do so.
25. On merits, however, the ld. D.R. replied to his arguments contending that the Newspaper cutting filed was not relevant and it did not indicate the area which was covered by the article. The decision of the Punjab & Haryana High Court in Jhandu Mal Tara Chand Rice Mills' case (supra) was also sought to be distinguished on the ground that it spoke only of a drayage register whereas there were various other defects pointed out by the Assessing Officer.
26. Before we come to the arguments of the ld. D.R. on the merits of the case vis-a-vis the first appellant we would like to deal with the objection of the ld. counsel to the paper-book filed by the department requesting that the papers/documents placed therein be taken on record and considered under rule 29 of the Appellate Tribunal Rules. According to the ld. D.R., the "documents" in question were relevant to the issue but it must be emphasised that a party cannot be allowed to put on record any document at any stage of the proceedings as he wishes. There are rules and provisions for these matters and rule 29 cannot be invoked at random. Ld. D.R. has not been able to point out to any circumstance whereby this Special Bench should allow the filing of these documents under rule 29 and it must be categorically stated that the ld. D.R. cannot improve upon the view expressed by the Assessing Officer by placing himself in the position of the Assessing Officer. He is expected to defend the views already expressed by the Assessing Officer. It is another matter that the Tribunal for the disposal of an appeal may ask the parties to file evidence or details which in its opinion is necessary to decide the issues. We will further comment on the documents sought to be filed by the ld. D.R. at the appropriate juncture when dealing with the merits of the base.
27. Ld. D.R. vehemently supported at the outset the orders of the Assessing Officer and CIT(A) reiterating the reasons cited by these authorities in making and confirming the additions. According to him the books of account and records maintained by the assessee were "manufactured" and periodic verification and signing by "any other authority" was not relevant for income-tax purposes. Further the entries on the date of verification may be valid but not on the other days during the year. The ld. D.R. further referred to the fact that a constant yield percentage had been shown for a period of 30 days which did not reflect a normal situation. According to him there were bound to be power failures and various other adverse factors during the shelling process and it was therefore not possible to show a uniform percentage. The assessee as stated by the ld. D.R. had shown percentage yield of rice at little above the norm of 64.5% as prescribed by the D.F.C., Punjab. The audit report under section 44AB, according to the ld. D.R., was not relevant as this only represented a certification of accounts and did not throw any light on the yield percentage.
28. The absence of a wages register to substantiate working on Sundays/other holidays as also the production more than the alleged capacity was also highlighted. As regards the state of plant and machinery the ld. D.R. stated that the latest technology was available in the rice shelters in Punjab. As regards the acceptance of the yield percentage in subsequent years, the ld. D.R. stated that an assessment under section 143(1) could not come to the aid of the assessee in the year under consideration where the matter had been processed after due verification under section 143(3).
29. Coming to the compilation filed running into 129 pages, we must at the outset mention that the ld. D.R. referred to only some of the documents appended therein and these being at pages 24, 112, 117, 122, 125 and 129. It was stated that Punjab Agricultural University, Ludhiana and other institutions had recommended yield of 73.21% for PR-106 variety for the kharif season of 1993 and again at 73.50%, 69.67% and 76.30% respectively whereas the yield shown by the assessee was nowhere near these figures. It was also the argument of the ld.D.R. that the assessee's figures did not compare favourably even with those of the F.C.I. He was, however, fair enough to admit that the aforesaid documents did not cover the period under appeal.
30. The ld. D.R. vehemently stressed on the application of proviso to section 145(1) further contending that the paddy had not been weighed and that the bag had extra capacity of 10% above the stipulated figure.
According to the ld. D.R., an addition could be made even without invoking proviso to section 145(1). The further submission was to the effect that reasonable opportunity for hearing had been given by the CIT(A) at his camp office and it was for the assessee's counsel to adjust his engagements to be present on the date of hearing.
31. As regards the decisions relied upon by the ld. counsel, the ld.D.R. sought to distinguish Pandit Bros.' case (supra) contending that this had been considered in Chhabildas Tribhuvandas Shah v. CIT  59 ITR 733 (SC) on which he was relying in support of revenue's case.
He also relied on the following decisions :- (v) Dabros Industrial Co. (P.) Ltd. v. CIT  108 ITR 424 (Cal.);Orissa Fisheries Development Corpn. Ltd. v. CIT  111 ITR 923 (Ori.); (vii) Bharat Milk Products v. CIT  128 ITR 682/6 Taxman 163 (All.); (x) Bastiram Narayandas Maheshri v. CIT  210 ITR 438/74 Taxman 454 (Bom.); (xi) Vazhakkala Estates (P.) Ltd. v. State of Kerala  209 ITR 461 (Ker.).
The ld. DR. also placed reliance on the various unreported decisions of the Amritsar Bench of the ITAT appended at pages 25 to 83 of the departmental paper-book.
32. In respect of the other two additions, sustained by the CIT(A) on account of rice bran and khudi phak, the ld. D.R. vehemently supported the action of the tax authorities in making and confirming the additions of Rs. 1,872 and Rs. 25,100 respectively.
33. In reply the ld. counsel for the first mentioned appellant stated that the fresh evidence placed by the ld. D.R. on the paper-book of the department pertained to the correspondence between various departments of the Government and this did not throw any light on the point at issue as these documents only contained facts, figures and %ages in normal situations irrespective of the actual facts in a given case.
According to the ld. counsel, some of these documents in fact supported the assessee's line of argument. A reference was made to the page 11 of the paper-book filed by the department contending that the Punjab Govt.
itself had fixed a norm of 64.5% in respect of PR-106 variety. To the same effect was the reference of the ld. counsel to the documents appended at pages 12, 13 and 15. As regards pages 14 and 15 of the compilation, the ld. counsel pointed out that these were copies of the correspondence exchanged between various officers of Income-tax Department including the D.R. at Amritsar and the %ages mentioned therein in fact supported the assessee's case. A reference was also made to page 16 of the compilation which once again was part of the correspondence between various officers of the I.T. Department for the submission that the yield in respect of phak was stated at 1% in respect of another assessee, namely, M/s. Singla Rice Mills, Rampura Phul the assessment year being 1989-90. The ld. counsel also referred to the documents appended at pages 18 and 24 of the compilation in respect of yield percentage of rice and various by-products. The ld.counsel also referred to pages 16, 16A, 17 and 17A of his paper-book which contained copies of the questionnaire dated 3-1-1991 issued by the Assessing Officer and reply dated 7-1-1991 filed by the assessee.
According to the ld. counsel, the entire matter had been explained in the aforesaid letter and he also sought to clarify that the observation of the tax authorities to the effect that a constant yield had been shown was not correct. It was the further submission of the ld. counsel that the season started from September when the writing of the Registers also commenced and further the submissions of the ld. D.R.about the validity of the audit report under section 44AB were erroneous, incorrect and not at all valid in law. By once again referring to the reply dated 7-1-1991 addressed to the Assessing Officer, the ld. counsel urged that the assessee's case should be compared with other cases in the same area and not cases of rice shelters in other districts.
34. As regards the addition on account of rice bran, the ld. counsel pointed out vide page 2 of the assessment order that the Assessing Officer had adopted the norms as fixed by the Punjab Government whereas in respect of other item such as rice phak etc. the same very norms had not been taken into account and different percentages had been adopted leading to impugned additions.
35. Coming to the various decisions relied upon by the ld. D.R., the ld. counsel stated that Chhabildas Tribhuvandas Shah's case (supra) had been considered in Jhandu Mal Tara Chand Rice Mills' case (supra) and in the same very judgment S. N. Namasivayam Chettiar's case (supra) had been distinguished. As regards Orissa Fisheries Development Corpn.
Ltd.'s case (supra), the submission of the ld. counsel was to the effect that in that case no stock register had been maintained and the C.A. had given adverse report whereas this was not so in the present case. In respect of the other decisions cited, the ld. counsel contended that these were not on ma tenance/non-maintenance of stock registers and therefore not relevant to the facts of the assessee's case. The ld. counsel also sought to distinguish the various other decisions of the Amritsar Bench of the Tribunal relied upon by the ld.D.R. once again reiterating reliance on the decisions cited by him including those of the various Benches of the Tribunal including Chandigarh and Amritsar.
36. We have considered the rival submissions and also perused the material on record to which our attention was invited during the course of the hearing. The decisions cited at the bar have also been considered. At the outset we would like to mention that the question of "opportunity" by the CIT(A) to the assessee becomes academic as it has never been the case of the assessee that the matter be restored back for readjudication. We, therefore, leave the matter at that.
37. It is an accepted fact between the parties that in the last few years various Benches of the Tribunal at Amritsar and Chandigarh have been taking a consistent view in respect of assessees engaged in running rice shelters holding that additions on account of yield of rice and its by-products are not called for where by and large the following facts exist :- (2) Statutory registers required by the State authorities to be maintained are kept and no defects are pointed out in such registers, records etc.
(4) The yield in any given year compares favourably with the earlier years as also with reference to the norms fixed by the DFC. (5) The orders of the tax authorities have proceeded on surmises and conjectures without pointing out any defects in the accounts and other records maintained.
The aforesaid are "illustrative" and not exhaustive and particular facts in a given case which have to be kept in mind.
38. In the case of Shanker Rice Co., the following facts emerging from the record are not challenged by revenue :- (1) Regular books of account are maintained and are duly audited by Chartered Accountants.
(2) Statutory registers prescribed by the Government are maintained and these are periodically subjected to check by the Department of Food & Civil Supplies. These registers are :- (3) Purchases and sales are regulated by the relevant provisions of the Punjab Agriculture Produce Markets Act, 1961.
(4) Paddy is liable to purchase tax under the Punjab Central Sales Tax Act and the purchases made have been duly accepted by the Excise & Taxation Dept., Govt. of Punjab.
The tax authorities have clearly ignored, the aforesaid facts and proceeded to reject the books of account on grounds which are not valid and some of these are clearly in the realm of surmises and conjectures.
For instance, the assessee in a communication to the Assessing Officer categorically stated that it had purchased only one quality of paddy for milling i.e. PR-106 and that also at the market rate and the entire purchases had been made during a period of 39 days only. The Assessing Officer without any rebuttal chose to assume that different qualities must have been purchased and a better quality would give higher yield.Similarly, an adverse inference was drawn on the variation in the purchase price between Rs. 163 and Rs. 206 per qtl. when it was the assessee's case that this represented the market price. Further it is seen that these figures are from 21-9-1988 to 12-10-1988 only and Rs. 163 is the rate on 29-9-1988 whereas on other dates the variation is between Rs. 186 and Rs. 206. As already stated by us earlier it is a fact not disputed by revenue that the purchases are not doubted either by the department or any of the other authorities such as the DFC or the Sales Tax Department.
39. On the allegation of the Assessing Officer that a uniform yield of rice had been shown, the assessee's explanation was that stock registers were maintained and these were subjected to regular checks by State Govt. authorities and the yield shown at 64.57% was appropriate vis-a-vis the quality of paddy purchased i.e. PR-106. At page 9 of the assessee's paper-book details of yield percentage of rice is given from October, 1988 to March, 1989 and the Assessing Officer has picked up the figures for the months of October, November and December, 1988 whereas January, 1989 gives a percentage of 66.45%. These percentages, in our opinion, should not lead to the automatic conclusion that the yield shown is abnormal or the percentages are sought to be "maintained" at a particular figure. After all the DFC while fixing a norm of 64.5% in respect of PR-106 variety did take into consideration all relevant facts and circumstances. As against this the ld. D.R. in support of the revenue's case has placed on record material not used by either the Assessing Officer or the CIT(A) and the same not being relevant vis-a-vis the period or the point at stake.
40. Dealing with the documents referred to by the ld. D.R., page 24 is a communication from the Punjab Agricultural University, Ludhiana which starts with the words "It is quite difficult to give a definite percentage of rice recovery...." but thereafter proceeds to give a percentage of 70 to 73. It is, however, stated in the same communication that "the above parameters may vary to some extent depending upon climatic conditions at the time of maturity, degree of drying and milling equipment". Further, it is mentioned that the information pertains to Rubber Rollers and the figure of driage losses are from 4% to 8%. It is nobody's case that the assessee has used ultra modern equipment in its shelling unit including the rubber rollers. The Chandigarh Bench of the Tribunal in numerous decisions has taken the view that the opinion of the Punjab Agricultural University, Ludhiana is not the gospel truth but only represents guidelines. Further the Bench has held that yield of rice and various by-products depends on climatic conditions, quality of paddy milled, the type of machinery used and this varies not only from State to State but also from District to District within the same State. The document at page 24, therefore, does not advance revenue's case as the same indicates percentages subject to various facts and circumstances and assuming an ideal situation. As regards page 112 of paper-book, this once again pertains to PAU, Ludhiana and the study from pages 108 to 112 is an analysis of PR-111 variety and the period apparently is the beginning of 1994 whereas we have before us assessment year 1989-90 in the first-mentioned appeal. At page 112 is the comparative data between 3 varieties i.e. PR-111, PR-110 and PR-106. The ld. DR. has heavily relied on the percentage shown i.e. 73.21 for PR-106 but it must be appreciated that neither is the period relevant nor the data and it must be seen that the percentages are worked out on the basis of data processed in laboratories as page 111 states "data recorded under artificial inoculation conditions". The other pages/documents referred to are also not found relevant once again with reference to the period or the point at issue. The ld. D.R. has been quick in highlighting percentages without taking this Bench through the entire document. For instance, page 117 relied upon is part of the documents beginning page 113 which has the heading "Proposal for release of rice varieties PR-108 and PR-109". Similarly, reference to document at page 122 is neither here nor there as it is part of the documents starting with page 118 and the learned D.R. has not adverted to either page 118 or the subsequent pages i.e. 119 to 121. Again the document at page 125 is referred to and this is part of the documents beginning page 123 and contains a proposal submitted to the Punjab Agricultural University, Ludhiana in respect of rice variety PR-113 the period being 1998. The relevance of this proposal was not highlighted by the ld. D.R. and as already seen the period is much later to the assessment year involved in appeal. To the same effect are our observations in respect of page 129 of the department's paper-book.
41. So much for the documents relied upon by the ld. D.R. to support the revenue's case. All that we would like to observe is that a party before the Tribunal whether it is the assessee or it be the revenue must render effective assistance to the Court in interpreting technical data/documents. Their relevance to the point at issue must be highlighted and it is necessary that the party relying on such documents must understand the first rather than make futile attempts to rely on a figure here or a sentence there. It is the whole document which must be explained to the Court. We are not experts on technical matters and we presume neither is the ld. D.R. on the highly technical nature of (sic).
42. Coming now to another aspect of the arguments of the ld. D.R., namely, the submission that the books of account and records maintained by the assessee were "manufactured". In our opinion, this is a highly irresponsible statement unsupported by any material or evidence. It must be emphasised that the assessee maintains regular books of account and other statutory registers the latter prescribed by the State Govt.
authorities and these are not only subject to audit by Chartered Accountants but periodical checks by the State Govt. officials as well.
To this is linked the other submission of the ld. D.R. that in respect of statutory registers the validation is only of the entries on the dates when these are checked and not the others. We have yet to come across a more irrelevant submission since the system of test check/periodical check envisages random examination and whatever is found correct on check leads to a very safe assumption that the rest is also correct. No assessee would hope that he can make correct and wrong entries on different dates and pray that only the correct ones are verified and not the others. We do hope that such arguments are in future not foisted upon the Tribunal unless there is conclusive evidence to support them and it must be emphasised that this is a Special Bench constituted to deal with important issues.
43. Another allegation against the assessee is that it is showing production more than its capacity and that it has milled the paddy even on gazetted holidays and Sundays there being no proof tendered in the form of attendance register etc. We really to not appreciate the logic for drawing any adverse inference on this score. It is not the case of the revenue that the production on such days i.e. Sundays and gazetted holidays is not reflected in the books of account maintained in the normal course.
44. The revenue in the present case has not been able to point out any difference between the manner in which the assessee is carrying on its business and the way in which the others in the same line are carrying on theirs. The application of yield at 65.66% in respect of rice relying on the order of CIT(A) in the case of M/s Ganesh Rice Mills, Bhikhi is improper as similarity between the two cases is not detailed in the orders of the tax authorities. It would be great hardship to an assessee carrying on a particular trade if his trading results are rejected and proviso to section 145(1) is applied just because some other assessee in the same trade is showing something more may be even less than 1%. After all, the facts of one's own case cannot be ignored and audited accounts and checking by State authorities of statutory registers cannot be brushed aside in a casual manner. Just because the Assessing Officer feels that so and so fact is not correct and he should straightaway draw adverse inference. Section 145(1) is not to be casually invoked and assumptions and presumptions have no role to play where the books are to be rejected. The Assessing Officer must proceed on positive evidence and material and in the case of Shankar Rice Co.
there is nothing to show that the yield was more than the figure stated and that it had been sold outside the books of account. In the various decisions of the Amritsar Bench relied upon by the ld. D.R. (pages 25 to 83 of department's paper-book), the facts are quite identical to those considered by the Assessing Officer in the case of Shankar Rice Co. We have gone through these decisions and do note that the order in the case of Shakti Rice & General Mills [IT Appeal No. 1126 (Asr.) of 1991, dated 16-2-1998] has been followed in other cases decided by the Amritsar Bench. Coining to this decision placed at pages 38 to 46 of department's paper-book it is quite apparent that the Tribunal has "distinguished" each and every decision of the Tribunal cited before it on behalf of the assessee on one ground or the other and to mention two of these "factual position was not before the ITAT" and "ld. ITAT has not discussed the variety of paddy for which percentage of yield is under discussion". The Tribunal has chosen instead to uphold action of the CIT (A) who in his order has referred to the figures of the FCI and the Tribunal has further noted the mention of comparable cases by the Assessing Officer. According to the Bench, "the position of FCI is on more sound basis and there is more logical business propriety involved in the yield fixed by the FCI". The percentage fixed by the District Food & Civil Supplies Department, Govt. of Punjab, has not been accepted as the opinion of an expert. In our opinion, the rule of consistency is an important aspect of tax proceedings and views should not be changed on the same set of facts and the position of law remaining the same the rule of res judicata notwithstanding. In respect of application of proviso to section 145(1), the Benches at Amritsar and Chandigarh have been consistently taking the view that the same cannot be invoked where the accounts are audited, proper books of account are maintained, statutory registers and records as required by the State Government are kept and no defect is pointed out either in the books of account or the statutory registers maintained. The yield percentage fixed by the Food & Civil Supplies Deptt. was duly taken into account by the Tribunal. All the aforesaid facts are clear from the decision of the Amritsar Bench in the case of ITO v. Mahavir Rice & General Mills [IT Appeal No. 216 (Asr.) of 1989 dated 30-11-1993] when the following decision of the CIT (A) came to be confirmed :- "5. I have given a careful consideration to the submissions of the learned counsel, firstly, the appellant firm had been maintained the stock register and no defect had been pointed out by the Assessing Officer. As observed by the Hon'ble Punjab and Haryana High Court in 73 ITR 192 that the business of the assessee-firm is controlled by the Food & Civil Supplies Deptt. and no defect, at all, had been found by that Agency in respect of the stock. It would have been a serious matter for the assessee-firm if the purchase of paddy or the production of rice etc. had not been accepted by the Food and Civil Supplies Department as it might have involved criminal prosecution and cancellation of the licence. In these circumstances, I see no justification for the rejection of the book results.
6. Coming to the merits of the case, the appellant-firm had been showing a uniform yield of 68% for PR-8 at 64.5% for PR-106 variety for a number of years and the same had been accepted by the department. The Food & Civil Supplies Department had also been accepting this yield for the purpose of levy. Therefore, it cannot be said that the yield shown by the assessee was lower. As regards the low yield compared to that shown on the paddy belonging to the other Government agencies, the assessee-firm has a valid explanation inasmuch as that inferior quality of paddy has been purchased. This is evident from the fact that the average purchase price of PR-106 paddy came to about Rs. 144 per qntl. as against the support price of Rs. 150 fixed by the Government for 18% moisture. This would imply that the assessee-firm had purchased paddy which had a higher moisture content with the result that the yield of rice would also be lower. The lower yield of rice had been more than compensated by the lower price paid by the appellant firm for the purchase of paddy. In these circumstances, I see no justification for the addition of Rs. 2,71,386 and the same is, therefore, deleted." 45. The facts in the present case are quite akin to those considered in the case of Jhandu Mal Tara Chand Rice Mills' case (supra) followed by the Amritsar Bench, supra The only grounds for applying proviso to section 13 of the 1922 Act were the non-maintenance of a dryage register and some other assessee having a higher yield. The tax authorities in the present case have not pointed out any defects pertaining to maintenance of either the books of account or the statutory registers prescribed by the State Government but referred to certain facts which we have already considered in the earlier part of the present order holding that these are not relevant. Any production undertaken on holidays has gone into the books of account and so also is the position with the yield beyond the milling capacity. That apart the Assessing Officer has adopted the yield confirmed by the CIT (A) in another case. It is seen from a study of a number of case heard by the Benches at Chandigarh and Amritsar that the figure of yield is always disturbed irrespective of the percentage shown. It is the practice with the department to increase whatever the assessee shows whether it is near 64.5% which is the norm fixed by the DFC or more than this figure.
There is no reasonable basis or justification to reject the books of account and make an addition in such cases as is the consistent view of the Chandigarh and Amritsar Benches all along. In the decision of the Amritsar Bench in the case of Shakti Rice General Mills (supra), there is no mention about the norms fixed by the DFC and why these are to be rejected and those of FCI are preferable and are to be treated as the views of an expert. The Bench in the decision impugned has not given any benefit of the audited accounts and maintenance of statutory registers prescribed by the State Govt. and which admittedly have undergone periodical checks. Their Lordships of the Punjab & Haryana High Court in the case of Jhandu Mal Tara Chand Rice Mills (supra), at page 199, observed : "It may be noticed at this stage that the milling of paddy and the sale of rice were controlled in the assessment year 1958-59 under the Essential Supplies Act and the stocks in the possession of rice dealers and millers were from time to time checked by the Food and Civil Supplies Department. The District Food and Supplies Controller had given his certificate which showed that department did not doubt the correctness of the accounts maintained by the assessee-firm. It was a serious matter for the assessee-firm if the purchases of paddy or the production of rice and sale thereof were not accepted by the Food and Civil Supplies Department as it involved criminal prosecution and the cancellation of licence. The Income-tax Officer in such a case should have been slow to disbelieve the accounts maintained by the assessee-firm unless very strong evidence was available to him to prove that the accounts maintained were false and did not exhibit the correct position." No detailed enquiry has been made by the Assessing Officer in the present case to prove that the yield of rice was more than the figure shown and that the same was sold outside the books of account and incidentally the Assessing Officer himself in the next two assessment years has accepted yield at 64.60% and 64.53% no doubt under section 143(1) but nothing prevented the Assessing Officer from making a scrutiny assessment in the light of the view expressed in assessment year 1989-90 making an addition on account of yield of rice.
46. In the case of Pandit Bros. (supra) it would be necessary to refer to page 160 of the report which sets out the facts and the decision of the Hon'ble High Court on the application of proviso to section 13 of the 1922 Act as follows : "The assessee carrying on a business returned an income and filed a statement of profit and loss. The Income-tax Officer however added a certain sum to the profit as given by the assessee on the ground that the profit disclosed by him was low and there was no stock register. The assessee maintained regular accounts of his purchases and sales and the Income-tax Officer did not say that the method employed by the assessee was such that in his opinion "the income, profits and gains could not properly be deduced therefrom". Held, that there was no definite finding by the Income-tax Officer that the case fell within the proviso to section 13. Even if such finding were to be implied from his order it could not be said that there was material before him which would enable him to come to such a finding. The fact that the profits appeared to him to be insufficient and the fact that no stock register was maintained by the assessee were not materials upon which such a finding could be given, but they were circumstances which might provoke an enquiry.
The Income-tax Officer must discover evidence or material aliunde before he could give such a finding. In increasing the taxable income the Income-tax Officer did not adopt any method or basis and he was not acting according to the provisions of the statute." 47. Similarly, in the decision of the Hon'ble Bombay High Court in the case of R. B. Bansilal Abirchand Spg. & Wvg. Mills (supra), their Lordships took the view that the mere fact that the percentage of dead loss of cotton was high in a particular year cannot lead to an inference that there had been a suppression of production in a spinning mill. Their Lordships further emphasised the recording of a specific finding before applying proviso to section 13 as to the unacceptability of the method and irregularity of the accounts kept. In the present case before the Special Bench the Assessing Officer referred to various facts which we have discussed earlier and these, in our opinion, are not the grounds on which proviso to section 145(1) can be applied. To reiterate, the said proviso is to be applied only on the basis of the positive material and evidence in possession of the department and not on the basis of any surmises and conjectures.
48. We now deal with some of the decisions relied upon by the ld. D.R.in support of revenue's case as follows :- On the ground that the profits disclosed were low in comparison with the earlier years and that there were no day-to-day stock details, the ITO rejected the trading accounts and added a sum of Rs. 75,000 to the returned income. The Tribunal upheld the addition on the ground that in the absence of a stock tally in respect of the major items pertaining to the trading account, the fall in the margin of profits could not be satisfactorily explained and further the fall in the margin of profits was all the more difficult to explain in view of the fact that the assessee had a quota of imports worth about Rs. 8 lakhs which could have given the assessee a handsome margin of profit. Their Lordships of the Hon'ble Supreme Court upheld the finding of the Tribunal holding that no question of law arose out of its order. This decision has been taken on its own facts and, as already stated in the present case, the ITO has not pointed out any defects in the books of account maintained or in the statutory registers directed to be maintained by the State Government. This decision is, therefore, not applicable.
In this case, the ITO noticed that the accounts were not written in the usual course of business as these had been written at a stretch at regular intervals. It was further noticed that the yield shown by the assessee was very low and further the agreement was not a registered one and its credibility was open to doubt since the date of issue of the stamp paper was not recorded. Further, the plot was inspected by the Agrl. ITO on a particular date and at that time the agreement was not produced. The rejection of accounts by the ITO and the fixation of the quantum were confirmed on revision and on an application for revision under section 78 of the Kerala Agriculture Income-tax Act, 1950, their Lordships of the Kerala High Court confirmed the view taken by the ITO on all the grounds. The facts in the present case are quite distinguishable and this judgment would therefore not apply.
This was a case of a bidi manufacturing business where no day-to-day records of manufacture were kept. The ITO rejected the books of account and their Lordships of the Hon'ble Bombay High Court confirmed the view taken by the ITO on the ground that day-to-day record of manufacture had not been produced and the Tribunal under these circumstances had correctly held that the ITO was not satisfied about the fairness or correctness of the accounts of the assessee and, therefore, best judgment assessment under section 144 was valid. In the present case, the assessee has maintained books of account in the normal course of business and it has also maintained statutory records and registers required by the State Govt.
vis-a-vis the trade of rice shelling in which it is engaged. The assessee cannot be expected to maintain books of account or records which are not practicable or keep records for which there is no requirement either under the income-tax law or any other law. This decision would therefore not apply.
This was a case in which no day-to-day stock analysis was maintained and the ITO relying on a comparable case rejected the book version and applied a flat rate of 10% over the total turnover disclosed and added a sum of Rs. 31,056. The Tribunal on further appeal found that the estimate made by the ITO had not been guided by such a comparable case and while estimating the profit rate the ITO had applied altogether a different standard going by the facts of the case. On reference under section 256(2) at the instance of the assessee, their Lordships noted that the finding of the Tribunal that the assessee's rate of GP was below the market rate was a finding of fact which had not been challenged. Further, it was noticed that before the Tribunal the assessee had not challenged the comparable case. On the facts of the case their Lordships held that the assessee who was dealing in wholesale spices did not maintain stock accounts and which in the opinion of the Hon'ble High Court constituted a substantial defect. On the aforesaid facts, their Lordships confirmed the view taken by the Tribunal in holding that the estimate was quite reasonable and fair taking into account the cumulative view of all the factors present in the case. In the present case before us the revenue has not challenged any of the aforesaid aspects but has referred to various other facts with which we have already dealt with. This decision would also therefore not apply.
This was a case of the firm dealing in hosiery goods and readymade garments and which had not maintained any day-to-day stock account and nor had it furnished details of purchases and sales. The ITO further noticed that the sales-tax received from the customers was included in the sale price but sales tax paid was not debited to the trading account. The GP shown was also found to be low and on the basis of the aforesaid facts he rejected the books of account and estimated the profits at a percentage of the net sales. The Tribunal on further appeal held that the profit rate should be applied to the gross turnover including sales tax. On reference to the Hon'ble High Court, their Lordships held that proviso to section 145(1) was applicable. It also reversed the view taken by the Tribunal in holding that profit rate should be applied to the gross turnover including sales-tax. No defect has been pointed out by the tax authorities in the case before us and this decision would therefore not help the revenue.
This was a case of manufacture of condensed milk, cream, khoya and skimmed milk and on examination of the accounts, the ITO found that purchases and cash sales were not verifiable and no day-to-day production and manufacturing record had been maintained. On these facts he invoked proviso to section 145(1) and made an addition. On further appeal, the AAC allowed some relief and both the parties filed appeals to the Tribunal. The assessee pursuant to the decision of the Tribunal made a reference to the Hon'ble High Court which confirmed the view taken by the Tribunal in rejecting the accounts of the assessee and sustaining the addition on account of quantum.
This is also a case of specific defects having been pointed out and would not apply to the facts of the present case.
Orissa Fisheries Development Corpn. Ltd.'s case (supra) The assessee in this case carried on trade in fish and it was noted as a fact that no proper accounts were maintained for the stock of fish received and sold at different centres run by the assessee. Proper stock books were not produced before the Tribunal and it was noted as a fact that the assessee had not obtained regularly Municipal Certificates regarding the shortages due to shrinkage and wastage in transit. Accounts no doubt had been maintained but the Chartered Accountants had made a note to the effect that there was no proper control over stock of fish sold and there was no system of internal check. On the aforesaid facts the books were rejected u/s 145(1) and on reference to the Hon'ble High Court the view taken by the Tribunal was confirmed. This is once again a case where numerous defect shave been pointed out but no such allegations are made in the present case before the Tribunal.
This was a case in which the books of account were rejected and the profit estimated and which was done by the authorities on the basis of the performance of the predecessor-interest of the assessee, namely, the partnership firm. Apart from this, the Tribunal had before it the disclosed turnover of the assessee and there was ample material once again before the Tribunal to come to the conclusion that section 145(1) had been rightly applied and this conclusion of the Tribunal had not been challenged as being perverse. It is apparent that this decision of the Hon'ble Calcutta High Court is not applicable to the facts of the assessee's case.
This was a case where their Lordships of the Hon'ble Madras High Court held that the officer must give a specific finding that the method of accounting adopted by the assessee was not acceptable and the account books were not reliable and in the absence of such a finding the proviso to section 13 of the 1922 Act could not be invoked. On the facts of that case their Lordships took the view that there was substantial material on record to sustain the estimated additions and the reference was therefore answered against the assessee and in favour of revenue. As in the other cases, this decision is also found to be distinguishable.
This was a case of a best judgment assessment with reference to escaped turnover and on the facts their Lordships held that there was bound to be some guess work and the conclusion should be arrived at by the assessing authority on a rational basis without any bias and the said authority should not be vindictive or capricious. It was further held by their Lordships that if the estimate made by the assessing authority was a bona fide one based on a rational basis and the fact that there was no good proof in support of that estimate was immaterial. The issue in the present case is entirely different and this decision would therefore not apply.
Their Lordships of the Hon'ble Punjab High Court in the aforesaid decision took into account the earlier judgment of the same Court in the case of Pandit Bros. (supra) to hold that the ITO was not bound to compute the income in accordance with the method of accounting regularly employed by the assessee if that method in fact did not show the true income. Their Lordships further observed that the view that if accounts are regularly and prima facie kept and the ITO cannot find any particular flaw in the method of accounting, he is bound to accept the profits disclosed is not correct. According to their Lordships it was for the income-tax authorities to consider all the material placed before them and if after taking into account the absence of a stock register and other material they were of the opinion that correct profits could not be deduced from the accounts kept, then application of proviso to section 13 would be justified.
On the facts of the case, however, the business consisted only of buying raw-material and selling it after processing and the absence of a register showing the daily working of each factory was found to be a material defect alongwith the further fact that the yield of cotton was low in the accounting year compared with the earlier years and the explanation of the assessee was not believed by the ITO. It is apparent that this case has been decided on its own facts and the observations of their Lordships have to be considered in the light of the facts and circumstances as also the question posed and this decision cannot be made applicable de hors the facts of each case, more so the facts in the case of the first-mentioned appellant where it is stated to be the first year of business/assessment.
This was a case in which proviso to section 13 was applied taking note of the absence of vouchers, quantitative tally of stock, presence of entries regarding third party cheques and huge investments. It was noticed by their Lordships of the Hon'ble Supreme Court that the Tribunal itself had held that from the method of accounting adopted by the assessee the correct profits could not be deduced because of the various reasons. None of the aforesaid facts exist in the present case as already noted by us earlier and now reiterated the reasons for applying proviso to section 145(1) are not at all valid and tenable on the facts and circumstances of the case. Much more enquiry was required on the part of the department and cogent evidence had to be brought on record before applying the said proviso.
49. In the final analysis, we delete the addition of Rs. 1,31,054 on the ground that proviso to section 145(1) was not applicable and there was no material on record with the department to show that the yield of rice was higher than the figure stated by the assessee and that there was any sale outside the regular books of account maintained.
50. As regards ground No. 2 in the case of Shanker Rice Co., i.e. the first-mentioned appellant, the facts as noted in the orders of the tax authorities have been perused and due consideration has been given to the submissions made by the ld. D.R. In our opinion, the decision already given while dealing with the yield of rice would squarely apply as, in our opinion, the addition on account of khudi phak has also been made purely on surmises and conjectures and "considering" the percentage of yield shown by others in the same line of business. The assessee has declared 1.91% and the Assessing Officer has applied 2%.
The ld. counsel for the assessee referred to page 18 of the department's paper-book whereas in the case of Singla Rice Mills, Rampura Phool, yield of phak for assessment year 1989-90 had been shown /adopted at 1%. In other words, the department wants to make an addition in respect of each item although on the basis of assessment orders passed in various places in Punjab and as is the experience of the Division Benches at Amritsar and Chandigarh, the yield is higher or lower figure stated by the present assessee and the former having been accepted. We, therefore, find no valid basis on the part of the Assessing Officer to make the impugned addition on account of khudi phak and on the part of the CIT(A) to confirm the same. The said addition is, therefore, deleted.
51. The last ground in appeal involves an addition of Rs. 1,872 in the rice bran a/c and our decision while dealing with the earlier two grounds would squarely apply and we would only reiterate that such a nominal addition has been made only with a view to reject the results shown by the assessee. As against percentage of 4.92 shown, the Assessing Officer applied 5% without any basis. On the same line of reasoning as in the earlier two grounds, this addition also stands deleted.
52. The facts of this case are quite identical to those already considered while deciding the first-mentioned appeal, the only difference being that in the earlier appeal an addition had also been made on account of rice bran whereas in the present appeal the additions agitated are in respect of yield of rice i.e., Rs. 1,17,950 and in respect of phak the amount being Rs. 39,240.
53. To summarise the facts in respect of yield of rice, the assessee milled 28,750 qtls. of paddy and the yield of rice was shown as 18,544 qtls. the percentage being 64.5%. The Assessing Officer on the same set of facts as in the case of M/s. Shanker Rice Co. applied a GP rate of 65.66% working out a difference of 337 qtls. which, according to him, had been sold out side the books of account the monetary value thereof being Rs. 1,17,950. The CIT (A) on further appeal confirmed the addition on the same lines as done in the case of Shanker Rice Co.
54. Before us the ld. counsel for the appellant strongly relied upon the arguments advanced by the ld. counsel appearing in the first-mentioned case highlighting the following :- (1) This was not the first year in the case of the assessee since in the immediately preceding assessment year i.e. 1989-90 the yield had been accepted at 64.50%.
(2) The assessee did not have a drier and the drying process was done by spreading out in the open.
(3) No adverse finding had been recorded on grounds of uniform yield. (4) Pages 11 and 12 of the paper-book filed by the assessee revealed that supplies had been made to FCI on Sunday.
(5) In the preceding assessment year 1980-90, wages to the tune of Rs. 93,125 had been accepted and the claim of Rs. 97,820 during the assessment year under appeal compared favourably.
In view of the aforesaid, the ld. counsel urged that the addition made on account of yield of rice be deleted on the same grounds as contended in the first-mentioned appeal.
55. Coming to the addition on account of phak, the total paddy milled by the assessee was 49,773 qtls. which included 28,750 qtls. own paddy and 21,023 qtls. of paddy belonging to FCI. The yield of phak was shown at 482 qtls. at which represented less than 1% of the total paddy milled. In the course of the assessment proceedings, "comparative cases" were cited where the yield had been shown at a higher figure. In response to the query of the AO, the assessee contended that the yield of phak was to be in respect of the yield of rice and not the paddy milled. This contention was rejected. In concluding, the Assessing Officer applied a rate of 2% of the total paddy milled and worked out a yield of 995 qtls. as against which the assessee had shown 482 qtls.
The monetary value of the difference i.e., 513 qtls. was added on average sale price of Rs. 76.50 per qtl. leading to an addition of Rs. 39,240 which on further appeal was confirmed by the CIT(A).
56. The arguments of both the parties were the same as raised in the earlier appeal where we have deleted the addition not only in respect of the yield of rice but also in respect of phak. In our opinion, the view already expressed would squarely apply in respect of the two additions agitated in the present appeal. It may be further noted that in assessment year 1989-90, vide page 8 of the compilation filed by the assessee's counsel, a yield of 1.56% had been accepted whereas in the year under appeal i.e. 1990-91, the yield is stated to be 1.50% of the paddy milled. We do not find any abnormal difference to justify adverse inference and in the light of the earlier order, both the additions would stand deleted, more so when the facts are identical, the arguments by the parties are the same and the decisions cited at the Bar have also not undergone a change. The ld. D.R., in fact, stated that all his arguments advanced in the earlier appeal be considered in deciding the present appeal as well.
57. In the final analysis, the additions on account of yield of rice and phak are deleted following the earlier order.
58. M/s. Guru Nanak Rice Mills :- In the case of this concern, there is no dispute as to the yield of rice as the Assessing Officer himself accepted the percentages shown by the assessee and the only addition which was made was in respect of khudi phak. The brief facts are to the effect that the assessee had shown trading in khudi phak at 133 qtls.
on paddy milled to the tune of 40,013 qtls. and which according to the Assessing Officer was extremely low. The assessee was asked to show cause as to why the yield be not taken at 3% of the paddy milled. It was pleaded by the assessee that its yield in respect of paddy was higher as compared to normal yield and that it had sold chhilka for a sum of Rs. 90,000 during the year under consideration. The Assessing Officer, on the other hand, stated that the yield of rice shown was not excessive and similarly, the yield of rice bran manufactured had also been shown exactly at 5% of the rice. The Assessing Officer further noticed on checking the bill book pertaining to the sale of various items including khudi phak that certain bills were missing. Keeping in view the aforesaid, the Assessing Officer adopted yield of khudi phak at 3% of paddy milled which resulted in 1,200.39 qtls. and after allowing deduction on account of yield shown at 133 qtls. he worked out a difference of 1,067.39 qtls. and applying a rate of Rs. 100 per qtl.
made an addition of Rs. 1,06,739.
59. In appeal before the CIT (A) it was contended that the yield adopted at 3% was highly excessive and so was the rate of Rs. 100 per qtl. applied. A reference was made to certain assessment orders passed by the different Assessing Officers where yield of 1% and 1.5% had been accepted. As regards the rate to be applied, it was urged that khudi phak was being sold in Moga and Dharmkot at Rs. 35 to Rs. 40 per qtl.
and applying a rate of Rs. 100 per qtl. was excessive. The aforesaid submissions did not find favour with the CIT(A) and he in turn proceeded to refer to certain other cases of Bhatinda and Ferozepur Districts where the yield higher than 3% had been taken. The CIT(A) also referred to certain other cases in which he had upheld the yield of khudi phak at 3% as reasonable. Taking into account the various defects pointed out by the Assessing Officer, he confirmed the addition and further rejected the question of application of rate by referring to the sales effected by the assessee itself at Rs. 79 per qtl. and Rs. 77.50 per qtl. on two different occasions. The CIT (A) also highlighted the absence of 19 bills from the bill book of the assessee. In confirming rate of Rs. 100 per qtl. the CIT (A) referred to two other cases where the rates had been taken at Rs. 100 per qtl. and Rs. 150 per qtl.
60. The ld. counsel reiterated the arguments advanced before the tax authorities once again raising a grievance to the yield applied as also the rate placing reliance on the judgment of the Chandigarh Bench of the Tribunal reported in ITO v. Jagdamba Rice & General Mills  86 Taxman 46 but copy of which was not filed during the course of the hearing. In the case of Shanker Rice Co. decided earlier the assessee had declared yield of 1.91% and the Assessing Officer had applied 2%.
The Tribunal referred to the case of Singla Rice Mills, Rampura Phool where yield of phak for assessment year 1989-90 had been shown/adopted at 1%. In the present case, both the tax authorities have referred to the cases where different percentage had been adopted either by the Assessing Officer or by the first appellate authority and it, therefore, becomes a question of each case being decided on its own facts. As already stated by us, the facts prevailing in the earlier two appeals are not relevant to decide the issue pertaining to the solitary addition of khudi phak made in the present case as different considerations have weighed with the tax authorities-the Assessing Officer in making the addition and the CIT (A) in confirming the same.
On the facts of the case, we hold that it would be fair and just to adopt the yield of khudi phak at 2% as against 3% applied by the tax authorities and instead of quantifying the same at Rs. 100 per qtl., it would be appropriate to apply a rate of Rs. 79 per qtl. as done by the assessee itself while disposing of 65 qtls. on a particular date in the previous year as against its plea that the figure of Rs. 50 per qtl. be applied as done by the Chandigarh Bench of the Tribunal in the decision cited. It has not been disputed before us by the ld. counsel for the assessee that 19 bills are missing from the sale book and which is a fact leading to adverse inference against the assessee. The Assessing Officer is directed to recompute the addition on the lines indicated.
61. In the result, I.T.A. Nos. 149/ASR/92 and 137/ASR/92 are allowed whereas I.T.A. No. 1230/ASR/91 is treated as partly allowed.