2001 (3) TMI 1041 - HC - Income Tax

Summary

Issues:
1. Application under section 256(2) of the Income-tax Act, 1961 to refer a question of law arising out of the Tribunal's order.
2. Justification of directing the Assessing Officer to tax the gross profit on unexplained sales instead of the whole unexplained sales.
3. Rejection of the revenue's application for raising the question and referring it to the Court.
4. Contention regarding suppressed sales including undisclosed purchases and application of higher gross profit rate.
5. Additions made in the income of the assessee by the ITO.
6. Dispute over the gross profit rate applied on alleged undisclosed sales.
7. Relevance of assessing authority's reliance on separate account books and gross profit rates in determining suppressed sales.
8. Findings based on appreciation of evidence and lack of legal questions arising from the Tribunal's order.

Analysis:
1. The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, seeking a direction to the Appellate Tribunal to refer a question of law arising from its order related to assessment year 1986-87. The question in contention was whether the Tribunal was justified in directing the Assessing Officer to tax the gross profit on unexplained sales rather than the entire unexplained sales, specifically when a portion of sales was confirmed to be suppressed.

2. The Tribunal rejected the revenue's application to refer the question to the Court, stating that no interference was warranted based on the evidence appreciation, and no referable question of law emerged from the appellate order. The Court heard arguments from both parties, with the applicant contending that suppressed sales should include undisclosed purchases, justifying the application of a higher gross profit rate. However, the Court found no basis for this argument in the Tribunal's order and emphasized that questions of fact not arising from the proceedings cannot be raised.

3. The additions made in the assessee's income by the ITO were examined, with a specific focus on the gross profit on suppressed sales. The Tribunal found that the alleged under-invoicing of sale prices was adequately explained by the assessee, as the lower consideration was accepted by purchasers. This finding was not the subject of the question sought for reference. Additionally, the dispute over the gross profit rate applied on undisclosed sales, and the relevance of historical gross profit rates and account books in determining suppressed sales were discussed.

4. The Court concluded that the findings regarding suppressed sales quantum and the applicable gross profit rate were factual determinations based on evidence appreciation, not giving rise to legal questions. Therefore, the application was rightfully rejected, and no error was found in the Tribunal's order under section 256(2). Consequently, the application was dismissed, with no order as to costs.