CIT Vs. RAIS AHMED AND CO

JUDGEMENT

(1.) Following question of law has been referred for opinion of this court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as 'the Tribunal'), arising out of order passed in ITA No. 391/Asr/1988 in respect of the assessment year 1983-84:

(2.) Briefly the facts are that the respondent-assessee was a registered firm deriving income from business of purchase and sale of cloth on retail basis. For the assessment year 1983-84, return of income was filed on 27-7-1983 declaring income at Rs. 59,570, which was assessed under Section 143(3) of the Income Tax Act, 1961 herein after referred to as 'the Act') on 4-2-1986 at an income of Rs. 87,565. Certain discrepancies were found during the course of assessment with regard to detail of purchase and sale, etc. The assessment order was examined by the Commissioner (herein after referred to as 'the CIT') suo motu under Section 263 of the Act, the order being erroneous and prejudicial to the interest of revenue. During the course of proceedings before the Commissioner under Section 263 of the Act, it was explained by the assessee that part of the purchases was duly recorded in the books of account and part of purchases, which was not recorded was financed through the sale effected outside the books of account. The Commissioner, accordingly, set aside the assessment and referred the case back to the assessing officer for fresh assessment, after affording reasonable opportunity to the assessee. Aggrieved against the order, the assessee preferred an appeal before the Tribunal, who partly allowed the appeal vide order dated 19-4-1990. It is out of this order of the Tribunal, out of which the question of law has been referred to this court for opinion.

(3.) A perusal of the order passed by the Tribunal shows the factual details of each and every transaction of purchases and finance thereof, which were out of books of account, was examined by the Tribunal and a definite finding of fact was recorded to the effect that the source of purchases, which were kept outside the books of account, stood fully explained and no addition on this account was called for. However, this was subject to verification about the compliance of provisions of Section 40A(3) of the Act. With this discussion, the Tribunal set aside the order of Commissioner passed under Section 263 of the Act, however, on account of alleged violation of Section 40A(3) of the Act for cash payments in excess of Rs. 2,500 was concerned, order of Commissioner under Section 263 of the Act was upheld wherein the matter was remanded back to the assessing officer for fresh assessment.