Pradeep Parikh, A.M. - (1.) THE Department is in appeal before us against the order of the learned CIT(A) dt. 11th October, 1991, for asst. yr. 1989-90. THE first ground in the appeal is against the deletion of the addition of Rs. 4,62,000.
(2.) The assessee is a registered firm engaged in the manufacturing and selling of hydrated lime. For the year under consideration, the assessee declared g.p. at the rate of 15.4 per cent. on total sales of Rs. 66,89,219 as against the rate of 17.7 per cent. in the preceding year on total sales of Rs. 32.61 lakhs. In the opinion of the AO, on conversion of raw material into finished product, the weight gain should have been 32 per cent. whereas the assessee had shown weight gain merely to the extent of 20 per cent. He estimated the weight gain at 30 per cent. at which rate the additional production was computed at 660 MT and at the selling rate of Rs. 700 per MT, the sales outside the books was computed at Rs. 4,62,000 which was added to the total income. The CIT(A) deleted the entire addition. The learned Departmental Representative reiterated the statistics relating to the gross profit highlighting its downfall in the current year and also about the alleged additional production outside the books, stressing upon the chemical formula on the basis of which the AO had detected suppression of production and its eventual sales. For his submissions the Departmental Representative relied on the decisions in Mangal Chand Gordhan Das vs. CIT (1954) 26 ITR 706 (Assam), Vimal Chandra Golecha vs. ITO (1982) 134 ITR 119 (Raj), Abdul Bhai Abdul Kadar vs. CIT (1952) 22 ITR 241 (Bom) and Homi Jehangir Cheesta vs. CIT (1961) 41 ITR 135 (SC). The learned counsel fully supported the order of the CIT(A).
(3.) WE have duly considered the rival submissions and the material on record. WE would have certainly given due credence to the submissions of the learned Departmental Representative had the AO supported his findings with an authoritative opinion from an expert in chemistry. The very fundamental principle under the IT Act has to be appreciated that income has to be determined as per books of account and not as per chemical formula. If the books are such from which correct income cannot be determined, or if there are sufficient reasons in the form of some material which point towards suppression of production, then, in addition, the AO should support his finding by an opinion of the expert. But merely by itself, neither a person who is an expert in a field other than accounts, nor a chemical formula can help one to conclude that the accounts are defective and do not give a true picture about the income. The CIT(A) has given very sound reasons to delete the addition and we fully endorse the same. WE sustain the deletion and do not disturb his order on this point.;