COMMISSIONER OF INCOME TAX Vs. SALIG RAM NATH

JUDGEMENT

(1.) THE two questions of law referred here are in pursuance of the directions issued to the Tribunal to do so as given in IT Case 36 of 1976 decided on 17th Sept.,1980, reported as CIT vs. Saligram Prem Nath (1984) 148 ITR 302 (P&H). The question referred being in these terms : (1) "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that proviso to s. 145 (1) of the IT Act, 1961, was not attracted ? (2) Whether, on the fact and in circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 7,72,953 in gross profits of the assesses without making a proper investigation of various facts placed by the Revenue before it ?"

(2.) THE relevant facts are best narrated in the words of the Division Bench in Saligram's case (supra) : "The assessee, a registered from, derives income from property, manufacture and the sale of woollen yarn shawls and woollen fabrics etc. The head office of the firm is styled as "Saligram Prem Nath" and one of its branches is styled as "Supreme Woollen Mills". Separate accounts are maintained for the head office and the branch office. For the accounting year ended on 31st March, 1969, relevant to the asst. yr. 1969-70, the assessee declared income of Rs. 3,27,966. An audited copy of the P&L A/c for the period under consideration and balance sheet as on 31st March, 1969, were filed. The ITO found fault with the figures mentioned in the return and for a number of reasons given in has order estimated the sales at rupees seventy lakhs and by applying the gross profit rate of 25 per cent he worked out the total gross profit, which the assessee should have shown, at Rs. 17,50,000. He thus made an addition of Rs. 7,72,953 (Rs. 17,50,000- Rs. 9,77,047). Loss on exports claimed at Rs. 83,766 was disallowed without any discussion in the assessment order. The assessee filed an appeal before the AAC who upheld the addition of Rs. 7,72,953. The assessee filed a second appeal before the Tribunal. It was pleaded on behalf of the assessee that neither the proviso to s. 145(1) nor to s. 145(2) of the IT Act, 1961 (hereinafter referred to as 'the Act'), was applicable to the facts of the case. A number of arguments were raised in support of this contention. It was claimed on behalf of the assessee that the addition made by the ITO and upheld by the AAC could not be sustained in view of the material on the record. On the other hand, it was argued on behalf of the Revenue that the wastage at 14.50 per cent was excessive. In support of his contention, that the shortage in this year was excessive, the learned departmental representative relied upon the following documents :

(3.) THIS evidence was also allowed to be relied upon by the Tribunal on the ground that the assessee had not been given an opportunity to rebut the material contained in these documents. The Tribunal gave a number of reasons and partly accepted the appeal filed on behalf of the assessee........."