1970 (5) TMI 22 - HC - Income Tax

Rejection of accounts - sufficient material for rejecting the accounts - Whether there was any material, data or evidence before the Tribunal to sustain the addition on estimated basis - held, yes - no question of law arise out of the Tribunal s order - application fails and is dismissed

Summary

Issues Involved:
1. Applicability of the proviso to section 13.
2. Relevance of the judgment in In re R. S. Chiranji Lal Sons.
3. Existence of material, data, or evidence to sustain the addition of Rs. 6,000 in the Srinagar contract.

Issue-wise Detailed Analysis:

1. Applicability of the Proviso to Section 13:

The assessee-company questioned whether the proviso to section 13 of the Income-tax Act applied to their case. The Tribunal had not disclosed any material justifying the addition of Rs. 6,000 to the income from the Srinagar contract. The assessee argued that, as per the Full Bench decision of the Madras High Court in Gunda Subbayya v. Commissioner of Income-tax, the Income-tax Officer must refer to the accounts before him and disclose the material on which he bases his assessment. The Tribunal's order did not meet this requirement, thereby raising a question of law.

However, the court found that the principles laid down in Gunda Subbayya did not apply to the present case. The Tribunal had material before it, including the admission by the assessee's representative that full quantitative details of stores worth Rs. 1,30,000 might not be available. This justified the Tribunal's estimate. The court concluded that there was sufficient material for the Tribunal's decision, aligning with the precedent set by Commissioner of Income-tax v. Maharajadhiraj of Darbhanga.

2. Relevance of the Judgment in In re R. S. Chiranji Lal Sons:

The assessee contended that their case was covered by the Delhi High Court judgment in In re R. S. Chiranji Lal Sons. However, the Tribunal distinguished this case, noting that the addition of Rs. 50,000 in Chiranji Lal Sons was based on a guess regarding material finding its way to the black market. In contrast, the addition in the present case was not based on such a guess but on concrete material, including the assessee's own admission and subsequent profit declarations.

3. Existence of Material, Data, or Evidence to Sustain the Addition of Rs. 6,000 in the Srinagar Contract:

The assessee challenged the Tribunal's addition of Rs. 6,000, arguing that there was no material to support it. They relied on the Supreme Court judgment in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax and the Kerala High Court decision in S. Veeriah Reddiar v. Commissioner of Income-tax, which emphasized the necessity of disclosing the material used for assessments.

The court found that these precedents did not apply to the present case. The Tribunal had material before it, including the lack of quantitative details for stores consumed and the assessee's own profit declarations for subsequent years. This justified the Tribunal's estimate, aligning with the principles in Commissioner of Income-tax v. Maharajadhiraj of Darbhanga.

Conclusion:

The court concluded that there was sufficient material before the Tribunal to justify its estimate of Rs. 6,000. The principles from cited cases did not apply, as the Tribunal's decision was based on concrete material rather than conjecture. The application was dismissed with costs, affirming the Tribunal's decision.