A.K.SENGUPTA, J. - (1.) THIS reference relates to the asst. yr. 1967-68 and 1970-71. The assessee is engaged in the business of production of mustard oil out of seeds. During the asst. yr. 1967-68, it declared the yield of oil at 36.36 per cent. of the cake at 62.90 per cent. and of gad at 0. 74 per cent. The ITO did not question these yields. He, however, made two additions, one of Rs. 15,922 to the gad account and the other of Rs. 16,923 for understatement of gross profit in the mustard oil and oil- cake accounts. About the gad, the assessee showed the average selling price at about Rs. 25.80 per quintal. The price of cake, on the other hand, was shown at Rs. 48.50 per quintal. The ITO did not think that the gad could be sold even below the price of cake. He, therefore, applied the rate of. Rs. 48.50 per quintal to gad also and made the impugned addition. The AAC confirmed the addition.
(2.) BEFORE the Tribunal, it was submitted that the yield in gad was higher this year, i.e., in the asst. yr. 1967-68 as compared to the earlier year 1966-67 when it was only 73 per cent. It was also submitted that no defect in the books of account was found and, therefore, the addition could not be justified. Besides the above, the ITO also found that if the gross profit shown in the miscellaneous items was excluded, then the gross profit in the oil and oil-cake accounts came to Rs. 1,36,021. He considered this to be low. He estimated the gross profit in oil at 2.6 per cent. and in oil-cake at 4 per cent. and made an addition of Rs. 16,923 to the production account. It was submitted before the Tribunal that the lower authorities were unable to find any defects in the maintenance of books of account, that the AAC failed to deal with this matter and, therefore, the addition could not be sustained. It was also submitted that even though the assessee had earned a gross profit of 3.56 per cent. and 3.39 per cent. in the asst. yrs. 1965-66 and 1966-67, it had earned lower profit of 2.60 per cent. in the year under reference because of an order of the Government restricting the profit to 25 per cent. only. It was also pointed out that in the case of the assessee's relative a lower rate of profit of 2 per cent. had been accepted by the ITO and the AAC .
(3.) THE Tribunal was of the opinion that it was necessary to view both the additions of Rs. 15,922 and Rs. 16,923 together. The Tribunal was also of the opinion that since the yields shown by the assessee were reasonable, no addition could be sustained on that ground. However, it was further of the opinion that the gross profit shown was not reasonable as compared to the earlier two years. It further observed that none of the contentions raised by the assessee could be accepted. It stated that no evidence appeared to have been led before the AAC in support of the fact that the book result could not be rejected, that besides a bare statement that the books had been properly maintained nothing else was stated and the fact that there was a Government order restricting the rate of profit was also not submitted before the AAC or before the ITO. The Tribunal, in the circumstances, did not allow this point to be taken before it for the first time as, according to it, it was clearly an afterthought. Similarly, the Tribunal stated that the case of the assessee's relative also could not be looked into at this stage as the facts in that case were not available in detail nor did it know the nature of his business. The Tribunal further observed that there was no reason for a steep fall in the rate of profit in view of the rising trend of the prices in the market throughout the period. Considering the circumstances of the case, it adopted a rate of 3 per cent. as gross profit and restricted the addition to Rs. 28,000 only.;