VIJAY SOLVEX LTD. Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This Income Tax Appeal, under Section 260A of the Income Tax Act, 1961, was admitted on the questions of law as follows:

(2.) On the question No. 1, it is submitted that the books of accounts of the assessee were not rejected, nor they were found to be inaccurate, incorrect or incomplete, and thus the Assessing Officer was not justified in adding Rs. 5 lacs, only on the ground that the profit rate shown by the assessee was much lower than the previous year. It is submitted that the appellate authority found, after it was held by Assessing Officer, that the regular books of accounts have been maintained, and purchase and sales are fully vouched, and quality details were also maintained and produced before the Assessing Officer, and on such findings the books of accounts could not be disbelieved. The observation of the Assessing Officer that the appellant was trying to suppress his real profit, was not supported by any material, the appellate authority held that in the instant case, the books of accounts are properly maintained and unless the books are rejected, the estimation could not be made. He found that the Assessing Officer has nowhere found any defect in the books of accounts of the appellant, therefore, lump sum addition of Rs. 5 lacs cannot be sustained.

(3.) The Income Tax Appellate Tribunal allowed the second appeal with the findings that assessee-company derives income from crushing of oil seeds through oil mill, and solvent plant and also by trading of its products. The Assessing Officer observed that in view of the crushing of different kind of oil seeds and oil cakes proper comparison cannot be visualised in the business of the assessee company. The assessee company deals in purchase of various oil seeds, out of which certain oil seeds give more and better yield rate, whereas the lower quality of the oil seeds and oil cakes give lower yield rate, which cannot be compared with others. Tracing the history of the profits, the Assessing Officer found that despite continuous profits, the profit rate started decreasing from 19.84% in assessment year 1990-91 to 11.18% in assessment year 1993-94. In view of these factors, and specially the fact that the assessee had maintained the books of accounts properly, the books of accounts of the assessee were rightly not rejected by the Assessing Officer, but the addition of Rs. 5 lacs, on the unexplained reduction of profit rate was justified.