COMMISSIONER OF INCOME TAX Vs. DAYARAM VASUDEO

JUDGEMENT

(1.) IN this reference made by the Department, pertaining to the asst. year 1969 -70 of the assessee, the following question is referred under S. 256(1) of the IT Act, 1961, for the opinion of this Court:

(2.) THE assessee is a registered firm which deals in bardan, sutali, etc. The ITO, during the assessment proceedings, found that the sales were not supported by a quantitative tally and no day -to -day quantity stock account was being maintained. Consequently, he did not accept the book results. He also noticed that, from 1st Dec., 1967, to 29th Dec., 1967, no purchases had been made by the assessee, but the sales have been shown at Rs. 40,455. He worked out the cost of the sales of the goods at Rs. 37,947 and presumed that there were sales without stocks to the tune of Rs. 10,287. He was of the view that this amount was introduced by the assessee as its own cash through sales. When he brought this to the notice of the representative of the assessee and asked him to explain, the representative agreed to the addition of Rs. 10,000 and made an endorsement to that effect in the order sheet. The ITO, accordingly, added Rs. 10,000 in the assessment. He also noticed another credit of Rs. 3,177 through sale for the month ending 24th June, 1968. Applying the same reasoning, he added this sum also. Thus, in all, an aggregate amount of Rs. 13,177 was added back during the assessment. The assessee preferred an appeal before the AAC who called for a remand report from the ITO. In the remand report submitted by the ITO he pointed out that the assessee had agreed to the addition of Rs. 10,000 which fact was also confirmed before the AAC by the representative of the assessee who admitted that he had agreed to the addition of Rs. 10,000 in writing. The AAC upheld the addition of Rs. 13,177. On appeal by the assessee to the Tribunal, by its order dt. 5th Aug., 1975, the Tribunal took the view that the assessee, having agreed to the addition of Rs. 10,000, was estopped from raking up that issue before the AAC by filing an appeal and observed: "The AAC would have done well to dismiss the appeal straightaway on this point when he took seisin of the matter for the first time, instead of adopting the circuitous path of calling for a remand report."

(3.) IN this view of the matter, the Tribunal rejected the contention of the assessee regarding the justifiability of the addition of Rs. 10,000. On the merits of the case, the Tribunal found that the assessee had possessed sufficient opening stock in the manufacturing account and in the "kaltan vypar account". It noticed that the "kaltan vypar account" did not reflect the position that the goods were in fact transferred to the manufacturing account. The Tribunal, therefore, took the view that the absence of any entries, coupled with the absence of any evidence in the subsidiary registers maintained by the assessee to indicate that in fact the goods were transferred from "kaltan vypar account" to the manufacturing account, the said fact remained unestablished, and this reasoning having appealed to the AAC, the Tribunal saw no reason to take a different view. The Tribunal, therefore, dismissed the appeal of the assessee.