COMMISSIONER OF INCOME TAX Vs. BHIMRAJ SUNDERLAL

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the "I. T. Act"), at the instance of the Revenue and the following question of law has been referred by the Tribunal for answer of this court, which reads as under :

(2.) THE brief facts giving rise to this reference are thus : THE assessee manufactures bidies and sells the same. THEre was a search at the business and residential premises of the assessee-firm and its partners on January 23, 1977. THE assessment was completed in this case by the Income-tax Officer under Section 143(3) of the Income-tax Act, on March 2, 1981, making certain additions to the income of the assessee. Three specific additions, viz., an addition of Rs. 3,000 out of advertisement and shop expenses, Rs. 1,000 as unexplained excess cash, and Rs. 15,990 towards inadmissible items and inflated expenses and defects, were challenged before the Commissioner of Income-tax (Appeals) by the assessee. THE first and third additions were adjudicated upon by the Commissioner of Income-tax (Appeals) and the second addition was not adjudicated as counsel for the assessee pleaded before the Commissioner of Income-tax (Appeals) that he had nothing much to say about the disallowance of Rs. 1,010. THE order of the Commissioner of Income-tax (Appeals) is on September 24, 1982. THEreafter, the Commissioner while exercising the power under Section 263 of the Income-tax Act, issued a notice regarding the items of additions which were not considered by the Commissioner of Income-tax (Appeals), i.e., addition of Rs. 1,010, and some other items. THE reason given by the Commissioner of Income-tax (Appeals) while exercising the power under Section 263 was that there was failure on the part of the Income-tax Officer to investigate into the genuineness of the documents produced before him in the form of cash books particularly when the books of account in the form of cash books seized during the course of search showed that there were no opening or closing cash balances. THEn the Commissioner of Income-tax (Appeals) recorded that the order passed by the Income-tax Officer is erroneous and prejudicial to the interests of the Revenue. It was observed that part of the order of the Income-tax Officer which has not merged with the order of the Commissioner of Income-tax (Appeals), can be modified accordingly.

(3.) IN view of the decision of the Special Bench of honourable five judges of this court, the view taken by the Tribunal cannot be held to be a valid view ; therefore, the order of the Tribunal is set aside and the reference is answered in favour of the Revenue and against the assessee.