LAWS(P&H)-2004-9-110

COMMISSIONER OF INCOME TAX Vs. VARIETY HOSIERY MILLS

Decided On September 14, 2004
COMMISSIONER OF INCOME TAX Appellant
V/S
Variety Hosiery Mills Respondents

JUDGEMENT

(1.) IN pursuance of the direction of this Court in IT Case No. 48 of 1987 in CIT vs. Variety Hosiery Mills, the Tribunal, relating to asst. yr. 1978 -79, for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the CIT(A) allowing inclusion of anticipated profits for assessment on release orders and import licences in the absence of actual sale of goods or any other recognised system of accounting -

(2.) FOR the asst. yr. 1976 -77, the assessee had shown profit of Rs. 75,000 in greasy wool account. There was no sale of greasy wool in that year but the profit had been shown on estimate basis. The ITO held that in the absence of any sales of wool, no income on the basis of anticipated profits could be assessed. He, therefore, excluded the said amount from the total income of the assessee for the asst. yr. 1976 -77. There was no sale in this account even for the asst. yr. 1977 - 78. However, for the asst. yr. 1978 -79, which is under consideration, there was sale of wool amounting to Rs. 4,88,348 on which a sum of Rs. 88,516 was shown as profit. Since the assessee had shown profit of Rs. 75,000 in asst. yr. 1976 - 77 on estimate basis, it returned the balance amount of Rs. 13,516 only in its return filed for the asst. yr. 1978 -79.

(3.) FOR the asst. yr. 1976 -77, the matter was carried in appeal before the AAC who reversed the order of the ITO and directed the inclusion of profits of Rs. 75,000 in the greasy wool account in the income of the assessee for that year. On further appeal by the Revenue, the Tribunal upheld the finding of the AAC holding that the assessee was following the method of showing estimated profits regularly right from the asst. yr. 1971 -72 onwards. Against the order of the Tribunal, the Revenue sought a reference under s. 256(1) of the IT Act, 1961 (for short, the Act), on this issue which to the assessee, the order of the Tribunal rejecting the reference application has been accepted by the Revenue as no further petition under s. 256(2) of the Act was filed. This assertion has been supported by an affidavit of Mr. Madan Gopal Gupta, partner of the assessee -firm. In view of the above position, it is clear that, out of the total profit of Rs. 88,516 on sale of greasy wool in assessment year under consideration, a sum of Rs. 75,000 already stands assessed in asst. yr. 1976 -77 and the said assessment has since become final. In the backdrop of this factual position, no fault can be found with the finding of the Tribunal that it is only the balance amount of Rs. 13,516 which could be assessed during the asst. yr. 1978 -79. Otherwise, it would result in taxing the same income twice, which is not permissible under law. In this view of the matter, the question is answered in the affirmative i.e., in favour of the assessee and against the Revenue.