VALIVETTI SRIRAMULU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is doing business in salt at Chinaganjam in Bapatla Taluk. In response to a notice under Section 22(2) of the Income-tax Act, 1922, he filed a return disclosing an income of Rs. 17,347 from business for the assessment year 1948-49. During the course of the assessment, he filed a petition dated November 19, 1951, making a disclosure of secret profit amounting to Rs. 25,000. Thus, the income admitted from business, including the amount subsequently disclosed, came to Rs. 42,347. THE Income-tax Officer, however, did not accept the disclosure as correct and complete. He examined the accounts in detail, and made various additions under specific heads. He observed In his order "detailed scrutiny of the accounts produced and the copies of the assessee's accounts obtained from the books of his customers residing in, the Hyderabad State when cross-checked revealed that the assessee had understated sales, inflated expenses and thereby concealed a large part of his income in the return." For the various reasons given in his order, he held that, the day-book did not reflect the correct position and was hence unreliable. He added a sum of Rs. 3,226 under the head "Manufacturing cost claimed In excess", Rs. 7,714 under the head "Recoveries under cartage not accounted for", Rs. 3,273 under the head "Recoveries under coolies" not accounted for, and sums of Rs. 1,094, Rs. 1,274 and Rs. 254 under the heads "School fund", "Carting cooly" and "Mats", respectively. Dealing with the concealed profits, he added a sum of Rs. 37,200 under the head "Understatement of sales", Rs. 1,747 under the head "Bank account" and Rs. 4,875 under the head "Shortage on rebagging". THEse and other additions together disclosed an income amounting to Rs. 78,687 which he determined as income from business. THE assessee preferred an appeal to the Appellate Assistant Commissioner, Income-tax, "C" Range, Madras. THE Appellate Assistant Commissioner of Income-tax also considered in detail the various additions. He reduced the addition under the head "Excess manufacturing costs" by Rs. 806. He deleted the sum of Rs. 1,094 under the head "Recoveries for school fund" and the sum of Rs. 4,875 under the head "Shortage on re-bagging". In all other respects, he affirmed the additions made by the Income-tax Officer. In the result, he reduced the total income by Rs. 6,675. (Rs. 806 plus Rs, 1,094 plus Rs. 4,875) or in other words, sustained the addition to the extent of Rs. 29,565, in addition to the sum of Rs. 25,000 already disclosed by the assessee. A further appeal was preferred by the assessee to the Income-tax Appellate Tribunal, Hyderabad Bench.

(2.) THE Tribunal held that the officer had given sound reasons for the additions made by him. THEy, however, stated that having regard to the turnover and the business conditions that obtained during the year of account, a further addition of Rs. 20,000 instead of Rs. 29,565, as sustained by the officer, would be adequate in the circumstances of the case. In coming to this conclusion, they also stated that they had come across certain cases where the profit disclosed by the assessee came to 40 to 50 per cent. with net income of about 25 per cent.

(3.) WE do not think that Mr. Ramarao is justified in contending that the Tribunal has arrived at the figure of Rs. 20,000 without any consideration of the evidence and has fixed it arbitrarily. The Tribunal has expressly stated that the officer has given sound reasons for the additions made by him. The reference can only be to the Income-tax Officer in so far as the additions made by him and were affirmed by the Appellate Assistant Commissioner. The reference, the Tribunal felt it unnecessary to restate those reasons once again in the order. Though, in our opinion, it would have been more desirable on the part of the Tribunal to give in its own words, briefly it may be, the reasons for their decision, it cannot be said that the Tribunal acted arbitrarily and fixed the figure of Rs. 20,000. WE have gone through the order of the Income-tax Officer and the Appellate Assistant Commissioner. The Income-tax Officer has given detailed reasons for making the additions under each head and in respect of those additions which were upheld by the Appellate Assistant Commissioner, the Appellate Assistant Commissioner also gave his reasons. The Tribunal, as has already been stated, has observed that these reasons were sound. It cannot, therefore, be said that the Tribunal had acted arbitrarily, or that the decision of the Tribunal is vitiated on the ground that it is based on no evidence.