COMMISSIONER OF INCOME TAX Vs. PRAKASH KIRANA CO

JUDGEMENT

(1.) The Tribunal, Allahabad, on the direction of this Court has referred the following question of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as 'the Act'), for opinion to this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the doctrine of merger, applied in the assessee's case when Sub-section (1A) of Section 154 of IT Act specifically provides that the doctrine does not apply in the matter not considered and decided in appeal ?"

(2.) The dispute relates to the asst. yr. 1978-79. The respondent/assessee deals in Kirana on wholesale basis. The ITO framed the original assessment order on 19th March, 1985 and in the body of the order he observed three additions to the assessee's total income as below : (i) Investment in the purchases of Zeera as evidenced by seized parcha Nos. 4 and 5 valued at Rs. 17,612. (ii) Investment in 25 bags of Zeera as evidenced by parcha Nos. 6 and 7 discovered during survey of the assessee's own premises and business premises @ 5 per cent-Rs. 22,499. (iii) Gross profit on sales outside the books of account of the assessee as evidenced by the investment in Zeera mentioned above estimated by the ITO at Rs. 2 lakhs, Rs. 10,000. However, while computing the total income of the assessee, the ITO omitted to add Rs. 17,612 specifically directed by him to be added to the assessee's total income vide para 3 of his order.

(3.) It appears that the Sales-tax Department at the time of survey of the assessee's shop recovered certain loose purchas namely, parcha Nos. 4, 5, 6 and 7. On the basis of these parchas and after giving opportunity of hearing to the assessee, the STO rejected the account books of the assessee and made additions of 16 lakhs in the turnover of the dealer. The said order was confirmed by the Asstt. Commr. (J) in appeal filed by the assessee under the Sales-tax Act. However, in further appeal/revision before the Addl. Judge (Revn.), Sales-tax, it was held by the Addl. Judge (Revn.) that parcha Nos. 4, 5, 6 and 7 which were held by the STO as parchas relating to purchases of Zeera were not conclusively proved to have been purchases of the assessee's firm but nonetheless the Addl. Judge (Revn.) did not accept the account books of the assessee in their totality and maintained the enhancement of the turnover by Rs. one lakh, so far as the Kirana, Masala and dry fruits were concerned, enhancement of Rs. 90,000 in the turnover of oil seeds was separately maintained by him. The order of the Addl. Judge (Revision) in due course of time was confirmed by this Court in a revision filed against the aforesaid order.