COMMISSIONER OF INCOME-TAX Vs. PEARL WOOLLEN MILLS

JUDGEMENT

(1.) THE Commissioner of Income-tax (Central), Ludhiana (hereinafter referred to as "the Revenue"), has filed this petition under Section 256 (2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for issuance of a mandamus directing the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as "the Tribunal"), to refer the following questions of law to this court for its opinion on the ground that the same arise from the order of the Tribunal dated March 31, 1979, in the case of Messrs. Pearl Woollen Mills, Ludhiana (hereinafter referred to as "the assessee") :

(2.) THE assessee is a registered firm. It derives its income from manufacture and sale of woollen yarn and also manufacture and sale of scooters. It has also income from other different businesses. The previous year for the assessment year 1966-67 ended on October 25, 1965. The assessee declared a loss of Rs. 37,854 but the total income was assessed by the Income-tax Officer vide his assessment order dated March 20, 1971, at Rs. 23,43,260. Rupees 9,36,000 were added on account of unaccounted stock found pledged with the bank but not accounted for in the books of account maintained by the assessee. In appeal, the assessee was granted relief to the extent of Rs. 17,73,424. Certain other directions in connection with the assessment were also issued by the appellate authority. Before the Appellate Assistant Commissioner, the assessee admitted that excess stock to the extent of 36,543 kgs. of the yarn was pledged with the bank. It was, however, pleaded that this stock related to the business done outside the books of account. The appellate authority, after giving due consideration to the assessee's pleadings, held that against the addition of Rs. 9,36,000 only Rs. 1,01,270 was taxable in the year under assessment. Relief of Rs. 8,34,730 was thus granted to the assessee against this item.

(3.) THE assessee filed an application under Section 254 (2) of the Act before the Tribunal for rectification of the order dated March 18, 1976, saying that addition of Rs. 9,36,000 was wrongly confirmed. In the rectification application, the assessee raised as many as six grounds in support of its contention. The Tribunal disposed of all the grounds raised in the rectification application. It was observed that there was no mistake apparent on the record and that the addition of Rs. 9,36,000 as made by the Income-tax Officer was duly confirmed. In doing so, the Tribunal in its order dated July 12, 1977, observed as under :