- (1.) THE present appeal is filed by the assessee against the order dated 29.07.2005, passed by the Income Tax Appellate Tribunal, Delhi in I.T.A. No.1275/Del/2000 for the assessment year 1995 -96. On 24.04.2009, the appeal was admitted by a Co -ordinate Bench on the following substantial questions of law: - "A. Whether upon the facts and circumstances of the case the Tribunal was justified in confirming the addition of Rs. 12,77,457/ - on account of disallowance of claim of driage (shortage), without appreciating the fact that the book result declared by the appellant was accepted and without invoking the provisions of section 145 of Income tax Act, 1961, the impugned addition was injust and illegal. B. Whether upon the facts and circumstances of the case the Tribunal was legally correct in confirming the addition on account of driage claimed, ignoring the fact that driage depends upon the quality of sugarcane, climatic conditions and other factors and as such was justified in sustaining the impugned addition on the basis of the case of another Chini mill."
(2.) THE brief facts of the case are that the assessee was a co -operative society and engaged in business of manufacturing and sale of sugar. During the assessment year under consideration, the assessee has claimed driage (shortage) of raw material (sugarcane). Details furnished reveals that there was a opening stock of sugarcane at 29.12 quintals and total purchase was made for 43,67,454.57 quintals against which 43,41,481 quintals sugarcane were consumed. Thus, the closing stock should have been 26,002.65 quintals as against 11,552.09 quintals shown by the assessee. The shortage was shown on account of driage. For the purpose, the A.O. has taken a comperative case of another Sugar Mill namely M/s. Kisan Sahkari Chini Mill and made the addition of Rs. 12,77,457/ - which was confirmed by the appellate authorities. Being aggrieved, the assessee has filed the present appeal.
(3.) WITH this background, heard Sri Shakeel Ahmad, learned counsel for the assessee who submitted that this is a case of estimation. He also submitted that the books of account were regularly audited. There are number of checks and internal control procedure and system and as such the question of sale of sugar outside the books of account does not arise. He also submitted that in case of M/s. Kisan Sahkari Chini Mill the crashing capacity is in the larger quantity. The driage depends on the sugarcane quality, condition and other factors. The addition was made by the A.O., without rejecting the books of account, only on the basis of surmises and conjecture. Lastly, he made a request that the addition may kindly be deleted. On the other hand, Sri Dhananjay Awasthi, learned counsel for the respondent has supported the order passed by the lower authorities. He submitted that at the time of purchase of sugarcane from the canegrovers, certain percentage is deducted from the total weight of sugarcane in order to cover up the weight loss by way of driage. The loss shown by the assessee is an artificial loss.;