Yenkey Roller Flour Mills, Calicut V. ACIT, Calicut

ITA 900/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4356 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-10-2008
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPH
• Assessee Lawyers: A S NARAYANAMOORTHY
• Section: 143(3); 153A; 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL COCHIN BENCH, COC HIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY ARORA , AM I.T.A. NO. 900/COCH./ 2008 ASSESSMENT YEAR : 2005-06 YENKEY ROLLER FLOUR MILLS, 6/1183, CHEROOTY ROAD, CALICUT. [PAN: AAAFY 2787L] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, CALICUT. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI A.S.NARAYANAMOORTHY, CA REVENUE BY DR. BABU JOSEPH, SR. DR O R D E R PER SANJAY ARORA, AM : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCHI (CIT(A) FOR SHORT) DATED 18.8.2008, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 2005-06. 2. THE APPEAL RAISES A SINGLE ISSUE, I.E., THE MAIN TAINABILITY OF THE ADDITION OF RS. 18,81,035/- MADE BY THE ASSESSING OFFICER (AO) ON A CCOUNT OF SHORT PRODUCTION OF WHEAT PRODUCTS BY THE ASSESSEE, A FIRM RUNNING A FL OUR MILL AT CALICUT, VIDE ORDER U/S. 143(3) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREI NAFTER) DATED 19.12 2007, HAVING BEEN CONFIRMED BY THE LD. CIT(A) WITH MINOR ADJUSTM ENTS. 3. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDI NGS REJECTED THE ASSESSEES CLAIM OF WASTAGE IN THE MANUFACTURE OF WHEAT PRODUC TS AT 541.646 M.T., WHICH WORKED TO 2.44% OF THE INPUT WHEAT. THE MANUFACTURI NG PROCESS WAS EXAMINED BY HIM IN DETAIL, AND DISCUSSED AT PARAS 3 & 4 OF HIS ORDER. THE SAME COULD BE CATEGORIZED INTO THREE PROCESSES, VIZ. CLEANING, CO NDITIONING AND MILLING. AT THE CLEANING STAGE, PHYSICAL IMPURITIES LIKE DIRT, CHAF F, SMALL STONES, ETC. ALONG-WITH WHEAT ITA. NO. 900/COCH./2008 2 DUST, SMALL PIECES OF WHEAT GRAINS AND BROKEN WHEAT ARE REMOVED. THIS PROCESS IS REFERRED TO AS `REFRACTION LOSS, AND THE LOSS THER EIN RANGES BETWEEN 2% TO 3.5% OF THE INPUT WEIGHT OF WHEAT, DEPENDING UPON ITS QUALITY. THE REFRACTION LOSS IS SOLD AS CATTLE FEED, BIRD FEED, OR EVEN FOR THE CONSUMPTION OF THE POOR. IN THE SECOND STAGE, THE WHEAT IS CONDITIONED TO MAKE IT FIT FOR MILLING/FLO URING. WATER IS ADDED TO SOFTEN THE HARD WHEAT, ABSORBPTION OF WHICH RANGES FROM 2.5% T O 4% OF THE WEIGHT OF CLEANED WHEAT, I.E., AFTER REFRACTION, AGAIN DEPENDING UPON THE MOISTURE CONTENT THEREIN. THE MOIST WHEAT IS ALLOWED TO SETTLE FOR ABOUT 24 HOURS , SOAKING THE MOISTURE. THE THIRD AND THE FINAL PROCESS IS OF MILLING, WHEREIN THE M OIST WHEAT IS GROUND TO FINAL PRODUCTS LIKE MAIDA, SOOJI, ATTA, BRAN AND FLAKES. THERE IS A SMALL LOSS, NOT MORE THAN 0.5% BY WEIGHT, OF THE WHEAT DURING MILLING. THE CO MBINED WEIGHT GAIN ON ACCOUNT OF MOISTURE, IN THE CONDITIONING AND MILLING PROCESSES , SHOULD BE ABOUT 2%. AS SUCH, EVEN CONSIDERING THE REFRACTION LOSS AT THE MAXIMUM LEVEL OF 3.5%, THE YIELD, WHEN RECKONED WITH REFERENCE TO THE INPUT WHEAT, WOULD N OT BE LESS THAN 98.43% (100 - 3.5 = 96.5 X 102% = 98.43). THE ASSESSEE HAS, AGAINST T HE INPUT WHEAT OF 22,207.616 MT, SHOWN FINISHED PRODUCTS AT 21665.970 MT, SO THAT TH ERE IS A SHORTAGE IN YIELD, OR EXCESS WASTAGE, CLAIMED AT 192.986 M.T. (I.E., 2220 7.616 X 98.43% - 21665.970). THE SAME STOOD VALUED BY HIM AT RS. 9747/-, BEING T HE AVERAGE PRICE REALIZED DURING THE RELEVANT YEAR IN RESPECT OF THE FINAL PRODUCTS. IN APPEAL, THE LD. CIT(A), FOLLOWING THE DECISION BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 AND 2004-05, WHEREIN THE WASTAGE, CLAIMED AT 1.8% AND 2.4% FOR T HE TWO CONSECUTIVE YEARS RESPECTIVELY, STOOD UPHELD AT 1.6%, I.E., AS AGAINS T AT 1.57% BY THE AO, AS IN THE PRESENT CASE, DIRECTED THE ADOPTION OF WASTAGE AT 1 .6%, OR THE ACTUAL YIELD AT 98.4%, AS AGAINST 98.43% ASSESSED BY THE AO. AGGRIEVED, THE A SSESSEE IS IN APPEAL. 4. BEFORE US, LIKE SUBMISSIONS STOOD RAISED BY EITH ER SIDE. THE YEARS, BEING AY 2003-04 & 2004-05, THE ASSESSMENTS (AS FINALIZED) F OR WHICH ARE SOUGHT TO BE ADOPTED BY THE REVENUE, IT WAS ARGUED BY THE LD. AR, WERE S EARCH YEARS, AND ACCORDINGLY MADE U/S. 153A. THE FINDINGS FOR THE SAID YEARS WOULD, T HEREFORE, NOT IMPACT THE ASSESSMENT FOR THE CURRENT YEAR. THE BASIC DEFECT POINTED OUT BY THE REVENUE IS WITH REFERENCE TO ITA. NO. 900/COCH./2008 3 THE DETAILED MAINTENANCE OF STOCK RECORDS BY THE AS SESSEE, AND WHICH IS NOT PRACTICAL, GIVEN THE CONTINUOUS NATURE OF THE PRODUCTION PROCE SS. AS SUCH, ONLY PRACTICAL METHODS CAN, AND ARE, EMPLOYED, WHEREBY THE INPUT W HEAT AND THE FINAL OUTPUT WHEAT STANDS RECORDED BY THE ASSESSEE, AND WHEREIN NO DIS CREPANCY HAS BEEN OBSERVED. NO COMPARABLE CASES HAVE BEEN CITED. EVEN UNDER SEC. 1 44 ASSESSMENT, THE ASSESSING AUTHORITY IS OBLIGED TO BE OBJECTIVE, AND BASE THE ASSESSMENT ON SOME DEFINITE AND COGENT MATERIAL. FINALLY, EVEN IF ADDITION, TO ANY EXTENT, STANDS SUSTAINED, THE SAME WOULD RESULT IN INCREASE IN THE VALUE OF THE CLOSIN G STOCK. THIS IS AS NO DEFECT IN THE RECORDING OF THE SALES STANDS POINTED OUT NOR ANY I NSTANCE OF SALE OUTSIDE THE BOOKS FOUND. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT T HAT THE ASSESSEES CASE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE TRIBUNALS ORDER IN ITS OWN CASE FOR THE IMMEDIATELY PRECEDING TWO YEARS (IN ITA NO. 88 & 89 /COCH./2007 DTD. 31/1/2008, COPY ON RECORD). SECONDLY, THE TRIBUNAL IN THE CASE OF ANOTHER GROUP CONCERN `PARISONS FLOUR MILLS PVT.LTD., ALSO ENGAGED IN TH E SAME TRADE, VIDE ITS ORDER DATED 8.1.2008, UPHELD THE INFERENCES DRAWN BY THE AO CON SIDERING THE UNSATISFACTORY STATE OF BOOK-KEEPING IN RESPECT OF PRODUCTION BY THE ASS ESSEE AND DIRECTED ADOPTION OF YIELD AT 98.43%, PLACING A COPY THEREOF ON RECORD. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 THE ASSESSEE CLAIMS NON-INTERFERENCE WITH IT S BOOK RESULTS; IT MAINTAINING ITS RECORDS TO THE EXTENT PRACTICABLE UNDER THE CIRCUMS TANCES, AND WHEREIN NO DEFECT(S) STANDS POINTED OUT BY THE REVENUE. FURTHER, NO COM PARABLE CASES STAND POINTED OUT, EVEN AS TWO CONCERNS, VIZ. M/S. PEEKAY ROLLER FLOUR MILLS LTD. AND AHAMMED ROLLER FLOUR MILLS LTD., STAND LISTED BY IT, WHEREIN WASTA GE RATIO RANGING FROM 1.89% TO AS HIGH AS 2.91% FOR DIFFERENT YEARS (FROM A.Y 1999-20 00 TO 2005-06 / PB PG. 5) STOOD ACCEPTED VIDE ASSESSMENTS U/S. 143(3) OF THE ACT. E VEN IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS (FROM A.Y.1995-96 TO 1997-98), WH EREIN THE WASTAGE RATIO VARIED FROM 1.95% TO 2.44%, STOOD ACCEPTED U/S. 143(3) (PB PG. 4). THE REVENUES CASE, ON THE OTHER HAND, IS OF THE FINDINGS BY THE TRIBUNAL IN ITS CASE FOR THE EARLIER YEARS BEING ITA. NO. 900/COCH./2008 4 SQUARELY APPLICABLE FOR THE CURRENT YEAR; NO CHANGE IN THE FACTS AND CIRCUMSTANCES, INCLUDING THE PRODUCTION PROCESS OR METHODOLOGY, OR IN THE MANNER OF BOOK-KEEPING, HAVING BEEN BROUGHT FORTH OR POINTED OUT BY THE ASS ESSEE. 5.2 WE SHALL EXAMINE THE RESPECTIVE CASES OF THE PA RTIES FOR THEIR MAINTAINABILITY. NO DOUBT, THE ASSESSMENTS FOR THE EARLIER YEARS WER E PURSUANT TO A SEARCH AND, ACCORDINGLY, U/S. 153A OF THE ACT. WE HAVE GONE THR OUGH THE TRIBUNALS ORDER RELIED UPON BY THE REVENUE, CONFIRMING THE WASTAGE IN THE ASSESSEES CASE AT 1.6%, IN DETAIL. THE ONLY SEARCH MATERIAL RELIED UPON IN FRAMING THE ASSESSMENTS IS THE SWORN STATEMENTS BY THE TECHNICAL AND OFFICE STAFF OF THE ASSESSEE, WHICH, COUPLED WITH THE OTHER INFORMATION WITH REGARD TO THE MANUFACTURING PROCESS, SHED LIGHT THEREON, BRINGING TO FOCUS THE INCOMPLETE NATURE OF THE QUAN TITATIVE RECORDS BEING MAINTAINED BY THE ASSESSEE. THE SAME WOULD BE EQUALLY APPLICA BLE FOR THE CURRENT YEAR, WITH NO CHANGE IN ANY OF THE RELEVANT PARAMETERS HAVING BEE N REPORTED. UNDER THE CIRCUMSTANCES, THE FINDINGS BY THE TRIBUNAL IN THE ASSESSEES CASE FOR THE IMMEDIATELY PRECEDING TWO YEARS WOULD HAVE A DIRECT BEARING ON ITS ASSESSMENT FOR THE CURRENT YEAR, UNLESS, OF COURSE, THE ASSESSEE SHOWS ANY ALL EVIATING FACTORS. AS SUCH, THE ASSESSEES CONTENTION OF THE SAID ORDER BEING NOT A PPLICABLE, BEING IN RELATION TO A SEARCH ASSESSMENT, WOULD NOT HOLD. CONTINUING FURTH ER, THE TRIBUNAL FOUND THAT THE ASSESSEE HAD NOT PROPERLY REFLECTED THE INCREASE IN THE INTERMEDIARY QUANTUM, SO THAT NO FRUITFUL COMPARISON EXERCISE COULD BE MADE. IN O THER WORDS, THE QUANTITATIVE RECORDS AS MAINTAINED BY THE ASSESSEE DID NOT REFLE CT THE PLANT LEVEL OPERATIONS SATISFACTORILY AND, THUS, THE AOS CONCLUSION THAT THE WASTAGE AS CLAIMED BY THE ASSESSEE WAS NOT VERIFIABLE IS JUSTIFIABLE AND VALI D. THERE IS NOTHING ON RECORD TO SHOW OF ANY CHANGE, AS NOTED EARLIER, EITHER IN THE ASSE SSEES OPERATIONS OR IN THE MANNER OF THE MAINTENANCE OF ITS RECORDS, WHICH IS ESSENTIAL IF WE ARE TO CONSIDER AND, CONSEQUENTLY, HOLD THE SAID FINDING AS BEING NOT AP PLICABLE FOR THE CURRENT YEAR. 5.3 NEXT, WE CONSIDER THE ASSESSEES SECOND OBJE CTION, I.E., IT BEING UNFEASIBLE TO MAINTAIN PROCESS-WISE RECORDS IN VIEW OF THE CONTIN UOUS NATURE OF THE PRODUCTION ITA. NO. 900/COCH./2008 5 PROCESS. WE, HOWEVER, ARE UNABLE TO BE IN AGREEMENT . THIS IS FOR THE REASON THAT THE ASSERTION IS COMPLETELY UNSUBSTANTIATED. IN FACT, B EING A MATTER OF PRIMARY FACT, IT OUGHT TO HAVE BEEN BROUGHT TO THE NOTICE OF THE ASS ESSING AUTHORITY, I.E., AT THE FIRST STAGE ITSELF, WHILE IT HAS NOT BEEN EVEN UP TO THE FIRST APPELLATE STAGE. FURTHER, WE OBSERVE THAT NO SUCH CONTENTION STOOD RAISED BY THE ASSESSEE AND, RESULTANTLY, NO FINDING IN THE MATTER BY THE AUTHORITIES BELOW, AS WELL AS BY THE TRIBUNAL - IN ITS ASSESSMENTS FOR THE TWO PRECEDING YEARS THAT TRAVEL LED UP TO IT - AND WHICH IS SURPRISING TO SAY THE LEAST, AND FOR THE SAME REASO N, I.E., BEING A PRIMARY FACT, WHICH IS, AS CLAIMED, OPERATING AS AN IMPEDIMENT IN THE MAINT ENANCE OF DETAILED RECORDS, FOR WANT OF WHICH THE PROVISION OF S. 145 STOOD INVOKED IN ITS CASE, PROPOSING AND EFFECTING ADDITIONS ON TRADING ACCOUNT, WHICH STOOD CONFIRMED. THAT APART, AS APPARENT, THERE IS A CLEAR TRANSFER OF WHEAT FROM O NE STAGE TO ANOTHER, I.E., THE INPUT WHEAT TO THE CLEANING PROCESS - THE CLEANED WHEAT B EING THE OUTPUT, AND FINALLY, THE SOAKED WHEAT TO THE MILLING PROCESS. UNTIL AND UNLE SS ALL THESE PROCESSES ARE UNDERTAKEN IN AN INTEGRATED PLANT, WITH THE WHEAT B EING CONVEYED AUTOMATICALLY FROM ONE STAGE TO ANOTHER, IT CANNOT BE SAID THAT THE PR OCESS IS A CONTINUOUS ONE, EVEN AS ANY MANUFACTURE IS ESSENTIALLY A CYCLICAL, OR MORE APTL Y, A SERIAL PROCESS, WITH THE OUTPUT OF ONE PROCESS BECOMING THE FEEDSTOCK FOR THE NEXT ONE . IN FACT, IN MOST MODERN PLANTS, AS WE UNDERSTAND THE ASSESSEES PRODUCTION FACILITY TO BE, THERE ARE INBUILT CALIBRATORS, WEIGHING THE MATERIAL INPUT AS WELL AS OUTPUT. RATH ER, THE MACHINE HAS AN INBUILT PROVISION FOR `SETTING OF THE VARIOUS PRODUCTION P ARAMETERS, INCLUDING MOISTURE, SO THAT THE PROCESSING, INSTEAD OF BEING MANUALLY CONT ROLLED, IS SELF-REGULATED, BEING EITHER TOTAL OR SEMI AUTOMATIC. FURTHER, AS ALSO AD MITTED BY THE LD. AR DURING HEARING, THE ASSESSEE IS HAVING A COMPLETE AND FUNCTIONAL LA BORATORY WHEREIN THE INPUT AND OUTPUT IS REGULARLY PHYSICALLY AND CHEMICALLY TESTE D. AS SUCH, EVEN WHERE MANUALLY OPERATED, ALL THAT IS REQUIRED, THEREFORE, IS TO WI THDRAW SAMPLES, FOR EACH LOT (OR AT PERIODIC INTERVALS OF TIME), FROM EACH PROCESS, AND SUBJECT THEM TO A SIMPLE MOISTURE CONTENT TEST. EVEN IF THE MOISTURE RATIO RECORD IS AVAILABLE FOR THE INPUT AND THE FINAL OUTPUT, IT WOULD GO A LONG WAY IN ESTABLISHING THE ASSESSEES CLAIM. THIS IS AS THE AO HAVING ADOPTED THE REFRACTION LOSS AT THE MAXIMUM R ATIO OBTAINING, THE DISPUTE IN THE ITA. NO. 900/COCH./2008 6 PRESENT CASE IS ESSENTIALLY WITH REGARD TO THE MOIS TURE OR THE SOAKING GAIN. RATHER, FOR ALL WE KNOW, THE ASSESSEE, HAVING SET UP A COMPLETE TESTING FACILITY, MIGHT AS WELL BE DOING SO, I.E., SUBJECTING THE MATERIALS TO TEST. T HIS IS ALSO FOR THE REASON THAT MOISTURE REGULATION CONSTITUTES A VERY IMPORTANT ASPECT OF T HE PROCESS, AND ANY LOSS OF MOISTURE OVER AND ABOVE THAT CONSIDERED NORMATIVE OR VALID, WOULD HAVE A DETRIMENTAL EFFECT ON THE PRODUCT QUALITY AS WELL AS RESULT IN LOSS OF WE IGHT AND, THUS, VALUE, DIRECTLY IMPACTING THE PROFIT. THE MOISTURE CONTENT OF THE I NPUT AND OUTPUT WOULD THUS GIVE A CLEAR INDICATION OF THE INCREASE IN WEIGHT ON ACCOU NT OF THE SAME AND, THUS, THE YIELD OBTAINED FOR EACH LOT/DAY. IT WOULD BE PERTINENT T O ADD THAT THE ASSESSEE HAS CLAIMED BROKEN WHEAT AT 661 MT ON A GROSS WHEAT CONSUMPTION OF 22207 MT, WHICH WORKS TO 3%. THE SAME IS IN CONFORMITY WITH THE REFRACTION L OSS ASSUMED BY THE AO AT 3.5% (THOUGH ONLY IN THE ABSENCE OF ANY DAY TO DAY RECOR D IN ITS RESPECT). AS SUCH, THE MOISTURE CONTENT IN THE INPUT AND THE OUTPUT WHEAT, PARTICULARLY WHERE MAINTAINED IN THE REGULAR COURSE OF BUSINESS, WHICH WOULD ALSO EX HIBIT THE VARIATION THEREIN ON ACCOUNT OF SEVERAL INCIDENTAL FACTORS, WOULD AT ONC E ESTABLISH THE ASSESSEES CLAIM. THE ASSESSEES ASSERTION WITH REGARD TO THE IMPRACTICAB ILITY ATTENDING THE MAINTENANCE OF PROPER RECORDS, OR OF NO DEFECT HAVING BEEN OBSERVE D BY THE REVENUE, THUS, CANNOT BE ACCEPTED. 5.4 NEXT, WE CONSIDER THE ASSESSEES CONTENTIO N OF NON-CITING OF ANY COMPARABLE CASE BY THE AO. EVEN AS OBSERVED BY THE BENCH DURIN G THE HEARING, IN VIEW OF THE DEFINITE FINDINGS IN THE ASSESSEES OWN CASE FOR TH E PRECEDING YEARS, AND TO WHICH NO DISTINGUISHING FEATURE STANDS BROUGHT BY IT ON RECO RD, EVEN UP TO THE SECOND APPELLATE STAGE, IT WOULD OBVIATE THE NEED FOR THE REVENUE TO DRAW ANY COMPARISON WITH ANY OTHER CONCERN, WHICH IS ESSENTIALLY ONLY TO SUPPORT ITS ESTIMATION WITH SOME MATERIAL. WITH REGARD TO THE VARIABILITY OF THE YIELD, FOR WH ICH REFERENCE STANDS DRAWN BY THE LD. AR TO ITS ASSESSMENT AS FINALIZED FOR THE EARLIER Y EARS (PB PG.4), IT NEEDS TO BE CLARIFIED THAT THE ASSESSEES WASTAGE FOR ALL THE Y EARS, I.E., A.Y. 1995-96 TO 2000-01, STOOD ACCEPTED BY THE REVENUE U/S. 143(3) ON THE BA SIS OF ITS BOOK RESULTS. IT WAS ONLY AFTER THE SEARCH, ON MATERIALS AND INFORMATION ON T HE NATURE OF THE PROCESSES INVOLVED ITA. NO. 900/COCH./2008 7 COMING TO LIGHT, THAT THE REVENUE SOUGHT TO DISTING UISH THE SAME, I.E., A.Y. 1998-99 ONWARDS. AS REGARDS THE VARIATION, THERE CAN BE NO DOUBT THAT IN REALITY THERE WOULD BE A DIFFERENCE IN THE YIELD FROM YEAR TO YEAR. WHY, T HERE WOULD BE A DIFFERENCE FROM BATCH TO BATCH OR DAY TO DAY? BUT WHEN VERIFIABLE A ND RELIABLE RECORDS ARE NOT AVAILABLE, AS IN THE INSTANT CASE, THE SAME HAS TO BE NECESSARILY ASSESSED ON THE BASIS OF THE MATERIALS AND INFORMATION AVAILABLE, SO THAT WH AT ALONE IS RELEVANT FOR US AS THE SECOND APPELLATE AUTHORITY IS WHETHER THE INFERENCE S DRAWN BY THE REVENUE THERE-FROM ARE VALID AND COGENT AND, FURTHER, DO NOT SUFFER FR OM THE VICE OF EXCESSIVENESS, AND QUA WHICH THE ASSESSEE HAS NOT LED ANY MATERIAL TO SHO W US OF IT AS (NOT) SO. IN FACT, THE TRIBUNAL, AT PARA 18 OF ITS ORDER DATED 31/1/2 008, ITSELF NOTES OF THE SAID DIFFERENCE FOR THE TWO YEARS UNDER REFERENCE BEFORE IT, OBSERVING THAT THE ASSESSEE HAS NOT EXPLAINED THE SAME, I.E., PRECISELY WHAT STANDS OBSERVED BY US; THE `ACTUAL PRODUCTION FOR ANY YEAR BEING ONLY THE WEIGHTED AVE RAGE OF THE YIELDS OBTAINING DURING THE YEAR, I.E., SPREAD ACROSS ALL SEASONS, A ND DIFFERENT VARIETIES OR QUALITIES OF INPUT, IF NOT OUTPUT. IT IS, FURTHER, FOR THIS REAS ON THAT THE AO HAS ADOPTED THE REFRACTION LOSS AT THE MAXIMUM PERCENTAGE OF 3.5%. SIMILARLY, THE SOAKING OR MOISTURE GAIN STANDS ESTIMATED BY HIM AT THE NORMATIVE FIGURE OF 2%, WHILE THE SAME MAY GO UP TO AS HIGH AS 4%. IN OTHER WORDS, HAS BEEN CONSERVATIV E IN THE ESTIMATION OF THE YIELD. THE TRIBUNAL, THE RATIO AS ACCEPTED BY WHICH STANDS ADOPTED BY THE LD. CIT(A) FOR THE CURRENT YEAR, BY FURTHER INCREASING THE WASTAGE RAT IO, ALBEIT MARGINALLY, HAS ONLY FURTHER MODERATED THE SAME AND, THUS, ONLY SOUGHT T O NORMALIZE THE VARIATION THAT MAY OBTAIN, FOR ANY REASON(S), IN THE YIELD, SO THAT TH E SAME MAY BE TRULY REPRESENTATIVE (OF THE ACTUAL RESULTS), WHICH IS WHAT THE OBJECTIVE OF ANY ESTIMATION EXERCISE OR `AVERAGE IS. JUXTAPOSE THIS WITH THE ASSESSEES CLAIM, WHICH IS WITHOUT ANY MATERIAL OR EVIDENCE, EXCEPT OF COURSE, ITS BOOKS OF ACCOUNT, WHICH, NOT BEARING THE RELEVANT DETAILS, HAVE BEEN FOUND AS NOT RELIABLE FOR THE PURPOSE. THIS WO ULD ALSO MEET THE ASSESSEES CLAIM OF THE REVENUES ASSESSMENT BEING NOT OBJECTIVE OR NOT BASED ON COGENT MATERIAL. 5.5 IN VIEW OF THE FOREGOING, WE FIND THE TRIBU NALS FINDING OF THE ASSESSEES WASTAGE AT 1.6% FOR THE PRECEDING YEARS, BEING AYS 2003-04 AND 2004-05, AS VERY ITA. NO. 900/COCH./2008 8 REASONABLE AND, CONSEQUENTLY, CONSIDER AS JUSTIFIAB LY APPLIED BY THE REVENUE FOR THE CURRENT YEAR, AND NO INFIRMITY ON THAT SCORE INFLIC TS THE IMPUGNED ORDER. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO THE DECISION BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ARCHDIOCESE OF VARAPOLY VS. AGRICULTURAL INCOME TAX OFFICER , 233 ITR 228 (KER.), WHEREIN IT STANDS HELD THAT THE ORD ER FOR THE EARLIER YEAR BY THE TRIBUNAL IS A COGENT PIECE OF EVIDENCE WHICH HAS TO BE GIVEN DUE REGARD BY THE AUTHORITIES BELOW. 5.6 IT STANDS ALSO ARGUED BEFORE US THAT THE ADDITI ON, IF AND TO THE EXTENT SUSTAINED, WOULD ONLY LEAD TO AN INCREASE IN THE CLOSING STOCK ; THE REVENUE HAVING NOT FOUND ANY OUT-OF-BOOK SALES, SO THAT DIRECTION TO THAT EFFECT BE GIVEN BY US. WE CONSIDER THE ARGUMENT AS MISCONCEIVED. THIS IS FOR THE SIMPLE RE ASON THAT THERE IS NOTHING TO SHOW THAT THE ASSESSEE HAD ACTUALLY ACCUMULATED ITS STOC K IN EXCESS TO THAT EXTENT, AND NOT ACTUALLY SOLD IT OUT, ALONG WITH ITS REGULAR (DISCL OSED) PRODUCTION, OF WHICH IT IS BUT AN INTEGRAL PART. IN THE ABSENCE OF DIRECT EVIDENCE, A S ALSO OBSERVED BY THE TRIBUNAL IN ITS CASE FOR THE IMMEDIATELY TWO PRECEDING YEARS, PRESU MPTION SHOULD ANSWER THE REASONING OF A COMMON MAN, AND WHICH CAN ONLY BE WI TH REGARD TO THE NORMATIVE STATE OF AFFAIRS, GOING BY THE RULE OF PREPONDERANCE OF P ROBABILITY. THE EXTRA PRODUCTION, IT NEEDS TO BE APPRECIATED, IS NOT FOR ACCUMULATION THE SAME BEING GENERATED IN ACTUALITY ALONG WITH THE ADMITTED PRODUCTION BUT ONLY FOR ITS SALE. THE ASSESSEE MAY HAVE REALIZED CASH IN ITS RESPECT, OR IT MAY BE MAN IFEST AS DEBTORS, OR MAY HAVE EVEN EXPENDED THE SAID CASH, BUT THAT IS NOT FOR THE REV ENUE TO SHOW. SECONDLY, WOULD THAT MEAN THAT THE ASSESSEE IS CONCEDING TO HAVING UNDIS CLOSED STOCKS TO THAT EXTENT? THIS IS, AS THE ASSESSMENT OF ADDITIONAL CLOSING STOCK I S NOT BE A MATTER OF BOOK ENTRY, BUT IMPLIES ACTUAL ADDITIONAL STOCK TO THAT EXTENT, SIN CE ACCOUNTED FOR OR CAPITALIZED IN BOOKS OF ACCOUNTS. IT WOULD, THEREFORE, REQUIRE A S PECIFIC FINDING BY THE REVENUE IN ITS RESPECT, AND WHICH CANNOT BE IN THE ABSENCE OF ANY DIRECT OR COMPULSIVE EVIDENCE. DE HORS THE SAME, NO SUCH CLAIM IN ITS REGARD CAN BE ACCEP TED, AND THE ONUS IN RESPECT OF WHICH, BEING ITS CLAIM, IS SQUARELY ON THE ASSESSEE . BESIDES, THE SAME SHALL INVITE APPLICATION OF EXPLANATION 2 TO S. 271 (1)( C), BEING AN ADMISSION OF HAVING CO NCEALED ITA. NO. 900/COCH./2008 9 AND ALSO FURNISHED INACCURATE, PARTICULARS OF INCOM E; THE STOCK ONLY REPRESENTING THE FORM IN WHICH THE INCOME IS BEING HELD FOR THE TIME BEING BY THE ASSESSEE, BROUGHT TO TAX U/S. 69/69B OF THE ACT. 5.7 FINALLY, WE COME TO THE ASSESSEES GROUND NO. 4 , WHEREBY IT HAS IMPUGNED THE ADOPTION OF THE RATE OF RS. 9747/- PER M.T. BY THE REVENUE FOR VALUATION OF THE EXCESS PRODUCTION. AGAIN, THE ASSERTION IS A BALD ONE WITH OUT ANY MATERIAL IN SUPPORT. THE REVENUE, FOR ITS PART, HAS ADOPTED THE AVERAGE SALE RATE OBTAINING FOR THE RELEVANT YEAR, I.E., FOR THE ENTIRE RANGE OF ITS FINISHED PRODUCTS , VIZ. ATTA, MAIDA, SOOJI, ETC. THERE IS NOTHING TO SHOW THAT THE EXCESS YIELD IS OF A SPECI FIC PRODUCT; IN FACT, THERE IS NO DISCUSSION ON THE COMPOSITION OF THE MILLING OR FLO URING OUTPUT, AND WHICH, THEREFORE, STANDS ACCEPTED BY THE REVENUE AS RETURNED. AS SUCH , THE EXCESS YIELD COULD ONLY BE CONSIDERED AS BEARING THE SAME COMPOSITION AND, THU S, OF IT REALIZING THE SAME PRICE AS THAT BY THE DISCLOSED YIELD, FORMING AS MUCH A PART OF THE REGULAR PRODUCTION AS THAT ADMITTED BY THE ASSESSEE. WE, THEREFORE, DO NOT AGA IN FIND ANY MERIT IN THE ASSESSEES CASE ON THIS GROUND. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. SD/- SD/ - (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 22ND JUNE, 2010 GJ COPY TO: 1. M/S. YENKEY ROLLER FLOUR MILLS, 6/1183, CHEROOTT Y ROAD, CALICUT. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRA L CIRCLE, CALICUT. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R./I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTR AR) ITA. NO. 900/COCH./2008 10