1982 (10) TMI 19 - HC - Income Tax

Summary

Issues:
Separate addition of luggage receipts to total income under section 145 of the Income Tax Act, 1961.

Detailed Analysis:

The judgment pertains to a reference under section 256(1) of the Income Tax Act, 1961, where the Income-tax Appellate Tribunal referred the question of law to the High Court regarding the justification of confirming the separate addition of luggage receipts to the total income, especially when the proviso to section 145 applied. The case involved a registered firm deriving income from passenger buses for the assessment year 1975-76. The Income Tax Officer (ITO) estimated profits at a net profit rate of 20%, which was later reduced by the Commissioner of Income-tax (Appeals) to 19%, including adding luggage receipts. The Appellate Tribunal maintained the addition of luggage receipts separately but reduced the net profit rate to 17 1/2%. The main contention was whether the Tribunal was justified in adding luggage receipts separately to the total income.

The grievance of the assessee was that previously, luggage receipts were included in gross income, and net profits were estimated based on that. However, from a certain year, the ITO started separately adding luggage receipts. The assessee had rectified assessments for previous years, but for the current year, argued that there should not be a distinction between luggage receipts and other receipts. The assessee contended that the taxing authorities should have estimated gross income by adding luggage receipts and then calculated net profits, instead of adding luggage receipts separately.

The High Court, after hearing arguments from both parties, concluded that the Tribunal did not commit an error in adding luggage receipts separately to the net income estimated based on other receipts. The Tribunal had not considered luggage receipts while estimating gross income, and the net profit was calculated without including them. The Tribunal's decision to separately add luggage receipts was justified, as evidenced by the Tribunal's observations regarding the reduction in net profit rate due to various factors affecting the business. The Court noted that the assessee did not declare the amount of luggage receipts earned, and the ITO added it based on estimation. Therefore, there was no need for the Tribunal to record a finding on whether expenses were incurred in deriving luggage receipts.

The Court also addressed the contention that was not raised before the Tribunal and stated that as luggage receipts were not initially included in gross income for profit determination, the Tribunal was justified in adding them separately. Consequently, the Court answered the referred question in the affirmative, ruling against the assessee, and decided that there would be no order as to costs for the reference.