RAMESHCHANDRA AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961, made at the instance of the assessee. The question referred reads thus:

(2.) THE assessment year concerned is the asst. year 1970 71. The assessee derived income by trading in oilseeds and other items. It declared in its return, income based on profits shown in its profit and loss account. It had kept in its books of account separate trading accounts with quantitative details in respect of its business in different commodities. In the course of the assessment proceedings, the ITO came across a discrepancy in the "sarki" account. He found that the assessee had purchased 477 bags of this commodity but its sales and closing stock amounted only to 117 bags. The ITO, by his letter dt. 11th Dec., 1970, called upon the assessee to explain the discrepancy of 360 bags. On 14th Dec., 1970, one Jamnadas Virji, a partner of the assessee, appeared before the ITO in response and submitted the following in writing:

(3.) THE assessee had been asked by the ITO to explain the discrepancy of 360 bags in a particular account in its books of account. In response, its partner appeared before the ITO and expressed in writing the assessee's "inability to reconcile the discrepancies" and he asked that "the amount be added to income". The note of the ITO in the order sheet to that effect was signed by the partner. At no time thereafter was the ITO approached to rectify the assessment on the ground that the partner had been under a mistaken belief of fact or otherwise. In the grounds of appeal originally filed before the AAC, there was not a whisper in regard to the addition of the said amount of Rs. 18,052. It would appear that the additional ground in this behalf was taken at the hearing of the appeal before the AAC, taking advantage of the fact that no one on behalf of the taxing authority was present to represent it. Even at that stage, the additional ground taken did not say that there was any mistaken belief of fact. All that was said was that the addition was "improper, illegal".