1984 (2) TMI 71 - HC - Income Tax

Summary

Issues:
- Valuation of unexplained stock hypothecated with the bank
- Entertaining fresh evidence without giving opportunity to the ITO
- Availability of goods returned by customers for hypothecation

Valuation of unexplained stock hypothecated with the bank:
The case involved the assessment of an assessee's stock position for the assessment year 1970-71. The Income-tax Officer (ITO) estimated the value of unexplained stock hypothecated with the bank at Rs. 1,64,400. The Appellate Assistant Commissioner (AAC) reduced this amount to roughly Rs. 64,400 after considering fresh evidence. Both the Department and the assessee appealed to the Tribunal. The Tribunal further reduced the amount to Rs. 97,400 based on the AAC's order. The Commissioner then filed a petition seeking a reference to the High Court under s. 256(1) of the I.T. Act, which was dismissed. The High Court upheld the Tribunal's decision on the valuation of the unexplained stock, ultimately dismissing the petition.

Entertaining fresh evidence without giving opportunity to the ITO:
The Department contended that the AAC entertained fresh evidence without allowing the ITO to cross-examine witnesses or present rebuttal evidence, violating rule 46A of the I.T. Rules, 1962. However, the High Court found that this point was not raised before the Tribunal and was not part of the grounds of appeal. As the Department did not raise this issue during the proceedings, the High Court held that it could not be considered for reference under s. 256 of the I.T. Act.

Availability of goods returned by customers for hypothecation:
Another issue raised was whether the goods returned by customers to the assessee could be hypothecated with the bank. The Department argued that the assessee failed to demonstrate the right to hypothecate these goods. However, the Tribunal concluded that the customers returned goods worth Rs. 43,457 to the assessee, which he hypothecated with the bank, indicating his authority to do so. The High Court upheld this finding as a question of fact, emphasizing that findings on questions of fact by the Tribunal are binding unless there is no evidence to support them or they are deemed perverse.

In conclusion, the High Court dismissed the petition, ruling in favor of the Tribunal's decisions on the valuation of unexplained stock and the handling of fresh evidence, while also upholding the Tribunal's finding on the availability of goods for hypothecation.