1969 (7) TMI 20 - HC - Income Tax

Addition - Whether the addition by the Tribunal was not based on any reasoning and was speculative - since AAC gave detailed reasons for such additions and Tribunal held that those reasons were sound, additions made were justified

Summary

Issues Involved:
1. Validity of the Tribunal's addition of Rs. 20,000 to the assessee's income.
2. Whether the Tribunal acted arbitrarily in arriving at the figure of Rs. 20,000.
3. The relevance of other cases cited by the Tribunal.
4. Whether the Tribunal's decision was based on sufficient evidence.
5. The High Court's jurisdiction to review the Tribunal's decision.

Issue-wise Detailed Analysis:

1. Validity of the Tribunal's addition of Rs. 20,000 to the assessee's income:
The Tribunal held that the officer had given sound reasons for the additions made by him. They stated that having regard to the turnover and the business conditions that obtained during the year of account, a further addition of Rs. 20,000 instead of Rs. 29,565 would be adequate. The Tribunal's decision was based on the officer's detailed scrutiny of the accounts and various heads of additions such as "Manufacturing cost claimed in excess," "Recoveries under cartage not accounted for," and "Understatement of sales," among others.

2. Whether the Tribunal acted arbitrarily in arriving at the figure of Rs. 20,000:
The court did not agree with the assessee's counsel, Mr. Ramarao, that the Tribunal arrived at the figure of Rs. 20,000 arbitrarily. The Tribunal expressly stated that the officer had given sound reasons for the additions. The Tribunal felt it unnecessary to restate those reasons once again in the order. Although it would have been more desirable for the Tribunal to give its own reasons briefly, it cannot be said that the Tribunal acted arbitrarily.

3. The relevance of other cases cited by the Tribunal:
Mr. Ramarao argued that the Tribunal took into account cases where other assessees had disclosed profit of 40 to 50 percent with net income of 25 percent without making that material available to the assessee. The court found that this argument overlooked the earlier part of the Tribunal's judgment, where it affirmed the reasoning for the additions given by the officer. The Tribunal's reference to other cases was an additional consideration and not the primary basis for its decision.

4. Whether the Tribunal's decision was based on sufficient evidence:
The court found that the Tribunal's decision was based on sufficient evidence. The Income-tax Officer and the Appellate Assistant Commissioner had given detailed reasons for making the additions under each head. The Tribunal observed that these reasons were sound. The court also noted that neither the orders of the Tribunals below nor the statement of the case disclosed that the assessee was not given an opportunity to question the result of any enquiry.

5. The High Court's jurisdiction to review the Tribunal's decision:
The court stated that it could not travel outside the statement of the case prepared by the Tribunal. However, in this case, the statement of the case included references to the orders of the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal. The court concluded that it was entitled to look into these orders to see whether the Tribunal was justified in its conclusion. The court rejected the contention that it should not look into the reasons given by the Income-tax Officer or the Appellate Assistant Commissioner.

Conclusion:
For all the reasons stated above, the court answered the question referred to it in the affirmative, thereby upholding the Tribunal's addition of Rs. 20,000 to the assessee's income. The costs of the reference were to be paid by the assessee to the respondents, with an advocate's fee of Rs. 250.