INCOME TAX ACT, 1961

Section 143(3)

Assessment - Ad hoc addition on account of low production of oil in comparison to preceding year - Negligible difference and AO ignored various factors like quality of seed and climate condition, etc. -

Assessee firm was engaged in manufacturing and trading of edible oil, oil cakes from mustard, Tarameera and groundnuts. AO noticed that for the year under consideration, assessee declared low yield ratio in respect of groundnut, mustard and Tarameera seeds in comparison to proceeding years. Accordingly, AO made addition by adopting yield ratio of preceding year, i.e., assessment year 2011-12 in respect of all three oil products. Assessee contended that trading addition could not be made without pointing out defects in books of account.Held: Though addition made by AO was not in the nature of trading addition but was addition on acount of low production of oil from oil seeds in comparison to earlier years. Variation in yield ratio was very meager and in some of the cases it was less than 1% which could be due to various factors and reasons including quality of seed, oil contents in seeds due to elimate condition for a particular season which affects the quality of crop itsef. Ignoring all these factors as explained by assessee in reply to show cause notice of AO ad hoc addition made by AO was not justified.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 37(1)

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