Calcutta High Court
Commissioner Of Income-Tax vs S.M. Omer on 9 January, 1990
Equivalent citations: [1993]201ITR608(CAL)
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
JUDGMENT Bhagabati Prasad Banerjee, J.
1. The Tribunal has forwarded the following question of law to this court under Section 256 of the Income-tax Act, 1961 ("the Act") :
" Whether , on the facts and in the circumstances of the case, the Tribunal is justified in upholding the deletion of the other source, addition of Rs. 1,01,649, constituting the unexplained cost of material and manufacturing cost of goods supplied by the assessee to the Defence Department ?"
2. The assessment year involved is 1973-74 for which the relevant accounting year ended on March 31, 1973. At the very outset, the learned advocate appearing on behalf of the assessee pointed out that the assessee had died long ago and the legal representative of the assessee informed the income-tax authorities about his death and no substitution has been made. For the reasons given below, we do not think that this case should be adjourned for the purpose of making substitution.
3. During the assessment proceedings, the Income-tax Officer noticed that the assessee received a cheque on January 11, 1973, for Rs. 1,13,603 from the Controller of Defence Accounts ( Navy ) which was credited in the account of Omer and Co. with the Bank of India on February 12, 1973. This amount was received by the assessee against supplies made to Naval Armament Department. The Income-tax Officer treated the entire sum received from the Controller of Defence Accounts (Navy) being the amount of investment in the goods as "income from other sources". The assessee went up in appeal before the Commissioner (Appeals) and the Commissioner (Appeals) held as follows :
" I have considered the arguments of both the Income-tax Officer and the appellant and also the contents of the assessment order. It was admitted by the appellant that he had no knowledge about the source of the delivery of the raw materials and of the goods except that the goods were to be delivered by A. G. Muller and Co. It was submitted that the goods might have been manufactured in India, under the aegis of A. G. Muller and Co. The appellant had no other knowledge about the issue. It was, however, submitted that no payments were made in foreign exchange. It was further submitted that the terms of payment were, vide invoice dated August 2, 1977, letters dated September 7, 1976 and April 15, 1977. Considering all these circumstances, I am of the opinion that, having chosen to reject the trading results of the appellant, apply the proviso to Section 145 and estimate the difference of net profit which was sought to be added and which was actually added, the Income-tax Officer did not have any further jurisdiction to add an additional sum by way of concealed income in the shape of monies invested in raw materials. In the circumstances, I am of the opinion that the addition of Rs. 1,01,649 was not warranted. This addition is, therefore, directed to be deleted."
4. Against the said order of the Commissioner (Appeals), the Department filed an appeal before the Tribunal. The Tribunal did not interfere with the order of the appellate authority. Both the Commissioner (Appeals) and the Tribunal held that the entire amount invested for the raw materials could not be added as income inasmuch as, for the purpose of earning this income, the assessee had made certain expenditure. The learned advocate appearing on behalf of the Revenue relied on the provisions of Section 69 of the Act and submitted that this unexplained investment should be added as income of the assessee. We are not inclined to accept this submission inasmuch as Section 69 has no manner of application on the facts and circumstances of the case but Section 69 has application in the case of unexplained investment made by the assessee which are not recorded in the books of account. The assessee supplied the goods after incurring certain cost and after manufacturing the goods and the amount that was received from the Defence Department could not represent the net income but it was the sum received including the profit and expenditure. In this reference, the finding made by the Tribunal has not been challenged and no question of perversity has been raised and, as such, the findings made by the Tribunal in this behalf could not be interfered with by the High Court in a reference and we do not find anything wrong in the order of the Tribunal in this regard. Accordingly, the question of law in this reference is answered in the affirmative and in favour of the assessee. There will be no order as to costs.
Suhas Chandra Sen, J.
5. I agree.