PRAKASH CHAND MEHTA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee and the following two questions of law have been referred by ,the Tribunal for answer by this court :

(2.) THE assessee is an individual and carries on business of purchase and sale of silver ornaments in the name of Anil Kumar Sheetal Kumar Nahata. A search was held by the Income-tax Department on the residential and business premises of the assessee from December 13, 1983, to December 17, 1983. During the search, silver ornaments and utensils were seized and were found to be in excess of the Stock as per books. After investigation in the assessment proceedings, silver ornaments amounting to 125.44 kgs. were held by the Income-tax Officer to remain unexplained and he made an addition of Rs. 3,49,225 representing the value of this property describing the addition to be made under Section 69A of the Income-tax Act, 1961. THE assessee explained the said silver to have been purchased from one Rashid and Company of Jabalpur, THE aforesaid explanation of the assessee was not accepted. THE reason was that at the time of search, this silver was not found recorded in any books of account. THE assessee in his examination under Section 132(4) of the Act did not offer any explanation about the source of acquisition and on an enquiry, Mohd. Rashid, the alleged proprietor, was found to be a man of very humble means and the assessee did not produce him for examination.

(3.) WE have considered the submissions of counsel, and we do not agree with the contention raised by learned counsel for the simple reason that the scope of Section 254 of the Act is very limited and it is only the apparent error which can be rectified, but here the arguments of learned counsel for the assessee relates to merits that the Tribunal did not consider the affidavit filed by Mohd. Rashid and only the statement recorded by the Income-tax Officer of Mohd. Rashid was considered. Therefore, it is in breach of principles of natural justice. True, if statement of any person has been recorded without producing him in the witness box, the authority should not act upon that statement without affording the assessee an opportunity to cross-examine the witness. But that is a matter not for rectification. It is a matter relating to the merits of the case as to whether the Tribunal has gone wrong in not considering the affidavit of Mohd. Rashid and has acted upon the statement of Mohd. Rashid which was recorded by the Income-tax Officer, without being permitted to cross-examine by the assessee. This is not a matter in which an apparent error is involved ; but is a matter more of merit and cannot be rectified within the scope of rectification. In the ease of T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC), their Lordships observed (headnote):