COMMISSIONER OF INCOME TAX Vs. HASMUKHLAL BAGADIA

JUDGEMENT

(1.) THE applicant (Commissioner of Income-tax, Bhopal) has filed this application under Section 256(2) of the Income-tax Act, 1961 (for short "the Act"), seeking direction to the Tribunal to state the case and refer the undernoted questions arising out of the order dated July 16, 1993, passed in I.T.A. No. 618/Ind. of 1992, for the assessment year 1987-88 after rejection of the application, presented under Section 256(1) of the Act, registered as R.A. No. 192/Ind. of 1993 on May 27, 1994 :

(2.) BRIEFLY stated, the facts of the case are that the assessee filed a petition before the Settlement Commission, Bombay, for the assessment years 1982-83 to 1988-89. The case was, however, heard during the pendency of this petition. A search of the business premises of the assessee was conducted by the sales tax authorities. Thereafter, search of the business and residential premises of the assessee was also conducted by the income-tax authorities. A large number of books and documents relating to sale and purchase of gold and silver ornaments were found and seized. After a detailed scrutiny of these documents, the Assessing Officer adopted the figure of sale and purchase as determined by the sales tax authorities for assessment purposes. On the basis of sales determined at Rs. 11,82,039, the Assessing Officer estimated additional gross profit at Rs. 1,13,602 by applying a gross profit at 25 per cent. The sales tax authorities determined the unrecorded purchases at Rs. 5,50,635 and the Assessing Officer on.that basis estimated the investment made in the unrecorded purchases at Rs. 5,50,635. He, therefore, added the same to the income of the assessee as unexplained investment. In appeal, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to enhance the gross profit from Rs. 1,13,602 to Rs. 1,29,140 and also confirmed the addition of Rs. 5,50,635, towards the investment in unrecorded purchases. The Tribunal, however, deleted these additions and held that the Assessing Officer solely depended upon the determination made by the sales tax authorities. According to the Tribunal, the assessment order passed by the sales tax authorities may be useful for investigation but is not liable to be adopted as the basis for determination of the gross profit in the trading account. Aggrieved by the order of the Tribunal, the Department filed the application under Section 256(1) of the Act. That application was rejected. The applicant thereafter filed this application under Section 256(2) of the Act proposing the aforesaid two questions for direction.

(3.) COUNSEL for the non applicant, on the other hand, submitted that question No. (2) also is based on appreciation of facts and is thus not a referable question of law.