INCOME TAX OFFICER Vs. MANGALAM CHEMICALS

JUDGEMENT

(1.) Appeal by the revenue is directed against the order dated 3 -7 -1996, of the learned Commissioner (Appeals), Ranchi and the relevant assessment year is 1993 -94.

(2.) In grounds of appeal, the assessee has set forth as many as 4 grounds, but in effect they are against the deletion of Rs. 92,418 from trading account having accepted fresh evidence in violation of rule 46A of the Income Tax Rules. The assessee is a registered firm. It is engaged in reclamation of used lubricant oil. For the assessment year under consideration it filed its return of income on 27 -10 -1993, disclosing total income of Rs. 6,400 which was processed under section 143(1)(a) of the Income Tax Act. But, however, later on the same was taken up for scrutiny. In course of assessment proceedings the assessee filed its audited books of accounts and audited manufacturing and trading account, etc. It was noted that on total sale of Rs. 1,02,67,414 the assessee disclosed gross profit of Rs. 16,53,043 which was 16. 10 per cent. According to the assessing officer it was low in comparison to the earlier years. In 1990 -91 it was 18.30 per cent and in 1992 -93 17.29 per cent. The assessing officer required the assessee to explain the fall in gross profit rate. The assessee explained that recovery of fresh lubricant out of burnt or used lubricants depended upon various facts particularly the quality of used lubricant itself. It was said that over the past few years the quality of used lubricants drastically fell due to enhanced usage of lubricant by the customers themselves. It was added that the plant got old and the condensing unit did not work efficiently as used to work in the beginning. It was also said that the oil filter placed in the machine also could not extract full oil from spent fallen earth. However, those explanation did not find favour with the assessing officer. He noted that the assessee did not maintain stock register. He further noted that purchases made from different reasons and from different places were also not on uniform basis rather some of the purchases and sales were on internal vouchers. The assessing officer pointed out certain payments which were made on internal vouchers. The assessing officer, therefore, rejected the books of account and having adopted the gross profit rate at 17 per cent worked out the same at Rs. 17,45,460 on the total sale of Rs. 1,02,67,414. After adjusting the gross profit disclosed at Rs. 16,53,042. The difference amount of Rs. 92,418 was added in the total income of the assessee. Aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) who deleted the same because before him it was contended that the assessee maintained proper books of account and even stock register. The learned Commissioner (Appeals) found that stock register was duly produced before the assessing officer which was not a new evidence. The learned Commissioner (Appeals) further noted that except some doubt about the payment for purchase the assessing officer did not find any specific defect. According to the learned Commissioner (Appeals) defect pointed out by the assessing officer were not such that no profit could be determined or deduced. According to him the assessing officer rejected the books of account on flimsy grounds which was bad in law and not acceptable and in support of that he placed reliance on the following decisions :

(3.) I have heard Smt. A. Sinha, the learned Departmental Representative of the revenue , and Shri K.C. Tak, the learned authorised representative of the assessee. I agree with the finding of the learned Commissioner (Appeals),that the assessing officer has not made out a strong case for rejection of books of account. It is to be noted that the assessee has maintained proper books of account which have been duly audited and the auditors have not pointed out any defect. No doubt, the assessing officer has pointed out that some of the payments were not on proper vouchers. But he has not doubted the genuineness of the payments. The genuineness of the internal vouchers cannot lightly be disbelieved. To disbelieve the internal voucher the revenue has to bring evidence in rebuttal but that has not been done. If the assessing officer had any doubt about the purchases and payments thereof, he could have inquired the matter from the persons from whom the assessee had purchased used lubricant. It is to be further noted that the assessee had maintained stock register which was produced before the assessing officer and that is why he even mentioned the stock position on the close of the accounting period i.e., raw -material for Rs. 4,30,200. Finished goods for Rs. 3,10,925 and work -in -progress for Rs. 8,38,295. It is to be noted that the objection raised that the Commissioner (Appeals) admitted fresh evidence in violation of rule 46A is not correct. The learned Commissioner (Appeals) has rightly held that the assessing officer has not made out any strong case for rejection of books of account and so the addition of Rs. 92,418 is unjustified. It is to be noted that mere fall in gross profit will not necessarily usher for addition on ad hoc basis by rejecting the books of account. It is to be reiterated that the learned Commissioner (Appeals) has found that the assessee has maintained proper books of account in regular course of business which have been duly audited and there is no defect. So regard being had the entire facts and circumstances of the case I do not find that there is merit in the case of the revenue . The order of the learned Commissioner (Appeals) is justified and so I uphold.