1980 PLP (Trib (PTD)

2. The assessee‑firm carries on ginning and crushing business. A preliminary objection was set up by the D. R. on the ground that the appeal before the A. A. C. was not competent as taxes were not paid as required under section 22‑A of the Income‑tax Act and the learned A. A. C. was not justified in entertaining and deciding the appeal even though the taxes were paid before the appeal was heard. A perusal of the records shows that the demand notice was served on 14‑2‑1977 and the appeal was lodged before the A. C. in time on 16‑3‑1977. Before the A. A. C. also this preliminary objection was raised regarding the late filing of the appeal. The A. R. of the assessee‑appellant, however, explained to the learned A. A. C. that the taxes were paid before the date of hearing and in this connection relied on a decision of the Tribunal in I. T. A. No. 311 of 1974‑75 dated 3‑12‑1977 wherein it was held that if the taxes required to be paid under the law are paid even on the date of hearing the appeal could be heard as it becomes competent and, therefore, the appellate authority cannot dismiss the same on this ground alone. It was on the basis of this factual and legal submission that the learned A. A. C. entertained the appeal and decided it on merits. The D. R. again objects to the admissi6n of this appeal and its adjudication before the learned A. A. C. by placing reliance on a decision, reported as (1961) 4 Taxation

51. The respondent‑assessee's representative places reliance on a decision of Tribunal, reported as (1964) 9 Taxation 13 (Trio.) as also the decision relied upon before the learned A. A. C. It is also contended that the ratio of the decision, reported as, (1961) 4 Taxation 51 does not place a bar on appeal altogether. It is stated that the real purport of this decision is only to the extent that an appeal which is not in order in all respects can still be entertained if the various flaws thereof, are removed before the date of hearing and if this is done late at worst the appeal may be treated as late in which event the question of condonation of delay would arise. After considering this delay and reasons for the same, the appellate authority can still admit the appeal and adjudicate upon it if condones the delay. It is stated in the present case, there was no flaw, except the non‑payment of the admitted tax liability and since this was paid before the date of hearing, the appeal or the date of hearing was competent. At worst it could be treated as filed late and beyond time. Since the learned A. A. C. in this case admitted, heard, and adjudicated the appeal, in all respects, the presumption is that the delay if any, was duly, condoned by him It was stated that as the flaw was of a technical nature and the defect was duly cured although out of time, the learned A. A. C. was within his jurisdiction to condone the delay and admit the appeal as within time, since in all other respect the appeal was competent and was also filed originally within the period of limitation. After going through the ratio of various decisions in this behalf we are of the opinion that even the decision relied upon by the Department does not bar an appeal altogether, for the non‑payment of taxes. All it does is to clarify the position that such a flaw in an appeal would not be a total bar, if the defect is cured before the date of hearing, At worst if the defect is cured after the period of limitation, the appeal could be termed as late. It was of course the discretion of the appellate authority to consider whether the delay in filing the appeal could be con doned. Since it was within his competence to condone the delay, the action of the A. A. C. in admitting the appeal, entertaining it and hearing it, it automatically leads to the irresistible 'conclusion that the delay, if any stood duly condoned by him. It is not the Department's grievance that the delay should not be condoned. Therefore, we rule out this preliminary objection and proceed to dispose of the appeal on merits.

3. The first objection of the assessee concerns the Ginning expenses which were claimed at Rs. 36.89 per bale but were restricted by the I. T. O. at Rs. 30 per bale. The learned A. A. C. enhanced the same to Rs. 34 per bale. The assessee's contention is that in comparable cases, the expenses have been allowed to the extent of Rs. 40 to Rs. 58 per bale. Therefore, there was no justification to limit the assessee's expenses to Rs. 34 per bale. The D.R's contention on the other hand is that last year, the assessee had claimed expenses at Rs. 28.09 per bale but the same were restricted by the I. T. O. to Rs. 26.09 per bale. Therefore, even keeping in view the possible inflation in the tests, the fixation of the same lay the I.-T.O. at Rs. 30 per bale was fully justified. The learned A. A. C. was little justified in granting a further relief of Rs. 4 per bale. We find that even having regard to the inflation which had crept in during the year under consideration, the expenses claimed were excessive and, therefore, the same were properly curtailed by the officers concerned. Since the Department has not been able to produce before us any case where less than Rs. 34 per bale have been fixed as the operating expenses, we find no justification to interfere with the order of the A. A. C. specially because the comparable cases cited by the assessee are admittedly not parallel. On this issue, therefore, we refuse to interfere with the order of the A. A. C.

4. The second objection of the assessee concerns the disallowance of fledging loss amounting to Rs. 7,

404. This objection has been raised through an additional ground taken up within the period of limitation. It was stated that the I. T. O. treated this sum as speculation loss but the learned A. A. C. held it to be a hedging loss and still directed that the same should be carried forward as a speculation loss for consideration against similar profits or losses in the following years. The Department's case on the other hand is that without doubt all the transactions resulting in this deficit were settled without delivery. Therefore, the same were nothing but speculation transactions within the meaning of that term as defined in the Income‑tax. Act. Therefore, the action of the A. A. C. is fully justified. We agree with the Department's contention that in absence of details and on the facts, as stated, and available on record these transactions partake of the nature of speculation losses as defined in explanation to section 24(1) of the Income‑tax Act. Therefore, by mere inadvertently calling the same as Hedging loss, their nature could not. be changed. The action of the learned A. A. C. being in accordance with facts and law, therefore, calls for no interference.

5. The next objection of the assessee concerns a number of additions made out of P & L account. Those pressed before us related to the repairs account, Lungar account, bad debts and motor car expenses. So far as the repair expenses are concerned the disallowances of Rs. 25,000 were made by the I. T. O. out of a claim of Rs. 1,06,078 as no stock registers and consumption records were available. The learned A. A. C. reduced the same to Rs. 15,000 in view of the past treatment. The assessee contends these to be still excessive, the defects pointed out cannot be denied and therefore, we shall confirm the disallownces retained by the A. A. C.

6. In Lungar expenses account an addition of Rs. 2,000 out of Rs. 16,546 claimed is stated by the assessee to be wrongly confirmed by the learned A. A. C. The main reason is that all these expenses are meant for the beoparies and do not include any personal element. The records do not show any expenses of personal nature included in these expenses, and, therefore, we do not find any justification for this addition which is deleted totally.

7. The I. T. O. disallowed bad debts of Rs. 3,406 on the ground that these were not proved, since no legal action to recover the same was taken. The learned A. A. C. confirmed this treatment. The assessee's contention is that these were petty remissions for which legal proceedings C or any legal action otherwise, would have cost more than the amount of debts to be recovered. We agree that such remissions occur and are incidental to business. Since these are all trade debts, we, see no justification for disallowing the same on the plea that no legal action was taken to recover the same. We accordingly direct that the same should be allowed.

8. In the motor car expenses a sum of Rs. 4,984 was disallowed out of the claim of Rs. 9,969 for personal and non‑business use of the wagon. All that we can do is to direct that the treatment in this regard should be in conformity with the past treatment.

9. We shall now take up the departmental appeal. The first objection concerns an addition of Rs. 9,405 on account of purchases of kapas which were found to be higher by 0.56 paisas per maund from Zamindars in compa rison to these made from commission agents. The learned A. A. C. deleted this as he found that the purchases from Zamindars were verifiable. The D. R. cannot controvert this finding of the A. A. C. and, therefore, we refuse to interfere on this issue.

10. The next objection concerns the Ginning account where an addition of Rs. 3,37,043 was made for low yield of lint which was shown at 0‑11‑15 Chtk. but was fixed by the I.‑T. O. at 0‑12‑44 chtks. The learned A. A. C. deleted this addition as he found that in comparable case G. I. R. No. 853 yield of 0‑11‑15 chtk was accepted by the Department. The Department's contention before us is that in the earlier two years the assessee had itself shown yield exceeding 0‑12‑2 chtk. to 0‑12‑3 chtks that in G.

1. R. Nos. 1519 and 1148 declared yields were 0‑12‑6 chtk. and 0‑12‑4 chtk. respectively. Therefore, the I.‑T. O. was justified in fixing the lint in this case at 0‑12‑4 chtk. It is stated that the learned A. A. C. had committed an error by relying on one case, namely, G. I. R. No. 853 completely ignoring the assessee's own history and a number of other cases relied upon by the Department. The learned counsel for the respondent assessee on the other hand contends that the cases relied upon by the Department are cases where the cotton ginning is comparatively of smaller quantities. It is at the same time asserted that the bulk of the cotton ginned by the assessee was of a second and third pick and, therefore, the yield was bound to be .low. We find that the assessee is not in a position to establish that bulk of the cotton ginned was of an inferior quality. This was sought to be proved with the help of the dates of the purchases but, in our opinion, this is not a conclusive proof of the low quality of cotton purchased. Moreover, we find that the quantum of cotton ginned f6r the earlier years was almost the same as for this year and the purchases were also made in identical manner and on identical dates. Therefore, the assessee had to explain reasons for the low yield of cotton for this year even in its own case before it could claim a comparison with the other case. In our opinion, the quantum of kapas ginned would have no bearing on the yield of cotton. Therefore, in the absence of any satisfactory explanation for the yield of cotton we do n A find any justification for the A. A. C's. deletion of this addition made by the I: T. O. We shall accordingly restore the order of the I.‑T. O. on this issue and vacate that of the A. A. C.

11. The next departmental objection concerns the operating costs which were enhanced by the A. A. C. We have already dealt with this issue in the assessee‑appellant's case and for the reasons recorded therein we see no justification for interfering with the order of the A. A. C. here.

12. The next departmental objection again concerns the cotton‑seed sale account where a sum of Rs. 5,000 was added for unverifiable sales. The learned A. A. C. deleted the same as he found that all the purchases were verifiable.

13. The next objection of the document concerns the crushing account where the yield of oil was found at 0‑4‑12 chtk that of oil‑cakes at 0‑33‑3 chtk. and the refuse and shortages were claimed at 0‑2‑1 chtks. The I.‑T. O. fixed the yield of oil at 0‑4‑15 chtks. that of oil‑cakes at 0‑33‑9 chtk. while he reduced the refuse and the shortages claimed to 0‑1‑8 chtk. In the result, for the low yield of oil a sum of Rs. 2,60,907 was added while for the low yield of oil‑cake a sum of Rs. 87,509 was added back. When the matter went to the. A. A. C. he deleted these additions as he observed that a daily check was exercised by the Excise Department and that the yield disclosed last year in respect of oil at 0‑4‑12 4/5 chtk. was accepted by the Department itself. The Department's case on the other hand is that in a comparable case, namely, G. I. R. No. 765 the yield of oil was shown at 0‑5‑a‑8 chtk. for this very year and, therefore, the A. A. C. was little justified in interfer ing with the yields fixed by the L.T. O. The respondent's case on the other hand is that in the comparable case relied upon by the Department delintered cotton‑seed was used and lower quality of cotton‑seed was crushed. Therefore, better results were shown. It was vehemently contended that case was not is any manner comparable with that of the respondent. We agree with the respondent's contentions that the yield of oil having been accepted at 0‑4‑12 chtk. for the earlier year there was no justification for enhancing the same for this year and in consequence the yields of oil cakes etc. needed no disturbance. The order of the A. A. C., therefore, calls for no interference, specially because the case now relied upon, does not appear to be parallel.

14. The next Departmental objection concerns the crushing expenses which was claimed at Rs 1.93 per maund, but were fixed by the I.‑T. O. at Rs. 1.50 per maund. The learned A. A. C. deleted this addition. The Department is aggrieved against this but the respondent contends that even last year these expenses at Rs. 1.49 were accepted and, therefore, in restrict ing the same at the same figure for this year the I.‑T. O. had completely lost sight of the inflation in prices of 'various items used in the process. We agree with the assessee's contention and as the Department has not produced any parallel case before us to establish the unreasonableness of the assessee's claim, we refuse to interfere with the order of the A. A. C on this issue as well.

15. The next departmental objection concerns oil‑cake sales. I‑T. O. has observed by citing a number of unverifiable sales where sales were made at much lower rates than these prevailing in the market. To cover up these omission he made an addition of Rs. 8,000 which was deleted by the learned A. A. C. as he found that the sales were made at the market rates and he also observed that no instances of unverifiable sales were given. The D. R. contends these observations of the learned A. A. C. to be incorrect, in fact. He brought to our notice the instances cited by the I.‑T. O. and on scrutiny thereof, we find the learned A. A. C, had com mitted an error in arriving at this decision on this issue. We would accordingly vacate his order and restore that of the I.‑T. O.

16. The next departmental objection concerns the machinery repairs account where the A. A. C. had directed certain deletions. This issue had already been dealt with by us in the assessee's appeal and for the reasons recorded therein, no interference with the order of the learned A. A. C. is called for.

17. The last objection of the Department concerns the charity disallowed, but the learned A. A. C. vacated the order of the I.‑T. O. for considering the admissibility of rebates on the charities claimed. Obviously the Department has not suffered in any manner by these finding of the A. A. C. and therefore, we do not find any reason to interfere with his order on this issue.

18. Both the appeals are disposed of in the manner indicated above. Order accordingly.