1984 (7) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Discrepancy in the stock account of rice and paddy.
2. Investment in undeclared stock.
3. Habitual transactions outside the books.
4. Reasonableness of additional investment estimation.
5. Availability of funds from previous years' additions.
6. Tribunal's findings on investment and additions.
7. Legal principles regarding findings of fact and their perversity.

Detailed Analysis:

1. Discrepancy in the Stock Account of Rice and Paddy:
The Income-tax Officer (ITO) discovered discrepancies in the stock account during the assessment year 1961-62. The opening stock and production of rice up to March 1960 were recorded as 5,041 maunds, while total sales were 5,267 maunds, showing an excess of 226 maunds. This discrepancy indicated transactions outside the books and unaccounted purchases.

2. Investment in Undeclared Stock:
The ITO concluded that the assessee had not disclosed the purchase of 4,500 maunds of paddy, corroborated by unaccounted sales of 226 maunds of rice. The investment in undeclared paddy was estimated at Rs. 66,420, and further investment after March was calculated, totaling Rs. 90,000. An additional profit of Rs. 10,000 was also estimated in the rice milling account.

3. Habitual Transactions Outside the Books:
The Appellate Assistant Commissioner (AAC) confirmed the ITO's findings, noting that the assessee habitually conducted business outside the books of account. The AAC upheld the estimate of Rs. 90,000 for unaccounted investment and the additional profit of Rs. 10,000.

4. Reasonableness of Additional Investment Estimation:
On further appeal, the Tribunal accepted the discrepancy in stocks but questioned the reasonableness of the additional Rs. 90,000 investment estimation. The Tribunal found that the transactions outside the books amounted to Rs. 66,420, and previous years' additions should have been considered available for investment in the current year.

5. Availability of Funds from Previous Years' Additions:
The Tribunal noted that additions totaling over Rs. 90,000 had been made in the preceding two years, indicating that funds were available for the current year's investment. The Tribunal concluded that the additional investment in March was covered by these previous additions, leading to the deletion of the Rs. 90,000 addition.

6. Tribunal's Findings on Investment and Additions:
The Tribunal's findings were based on the material on record, and it held that the additional investment estimate over Rs. 66,420 was unsupported by evidence. The Tribunal also considered that the assessee had funds from previous years' additions, amounting to Rs. 92,000, which were available for investment.

7. Legal Principles Regarding Findings of Fact and Their Perversity:
The High Court emphasized that findings of fact by the Tribunal can only be interfered with if they are perverse, based on no evidence, or contradictory to the evidence. The Court found that the Tribunal's conclusions were based on the material on record and did not involve conjectures or surmises. The Court referenced several cases, including CIT v. Jain and Anantharam Veerasinghaiah & Co. v. CIT, to support its decision that the Tribunal's findings were not perverse.

Conclusion:
The High Court answered the referred question in the negative, holding that the Tribunal's conclusion was not perverse and was based on material evidence. The question was resolved in favor of the assessee and against the Revenue, with no order as to costs.