1973 (1) TMI 21 - HC - Income Tax

Summary

Issues:
1. Calculation of gross turnover and profit rates for an individual assessee in the years 1965-66 and 1964-65 under the Income-tax Act, 1961.
2. Dispute over the increase in gross profit rates by the Appellate Tribunal without sufficient evidence.
3. Request for reference to the High Court regarding the Tribunal's decision on gross profit rates.
4. Interpretation of the legal principles governing the determination of questions of law arising from Tribunal orders.

Analysis:
The judgment pertains to two applications under section 256(2) of the Income-tax Act, 1961, made by an individual confectioner for the assessment years 1965-66 and 1964-65. The assessee's gross turnover and profit rates were in dispute, with varying estimates by the Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal. The Tribunal bifurcated the turnover into confectionery manufactured and sold by the assessee and that purchased and sold, applying different profit rates to each category to arrive at an average profit percentage for taxation purposes.

The assessee sought a reference to the High Court on four questions related to the Tribunal's decision on gross profit rates. However, the Tribunal declined to refer the questions, citing no increase in tax liability for the assessee in the relevant years. The issue before the High Court was whether a question of law arose from the Tribunal's decision to increase the profit rates without sufficient evidence on record. The assessee argued that the increase to 20% from 15% or 17.5% was unjustified and amounted to a question of law.

The High Court analyzed the legal principles governing the determination of questions of law arising from Tribunal orders. It emphasized that a pure question of law, such as the construction of statutes or documents, can be referred to the court. However, a finding based on facts, even if inferred, does not alter its character as a question of fact. The Court concluded that the Tribunal's decision to increase the profit rates to 20% was not arbitrary or capricious, as there was evidence supporting the decision. The Court held that no question of law arose from the Tribunal's order, as the increase in profit rates did not lead to an enhancement of tax liability for the assessee.

Ultimately, the High Court dismissed the applications, stating that no question of law arose from the Tribunal's decision, and the applications were dismissed with costs.