Punjab-Haryana High Court
Commissioner Of Income-Tax vs Saligram Prem Nath on 22 February, 1989
Equivalent citations: [1989]179ITR239(P&H)
JUDGMENT S.S. Sodhi, J.
1. The two questions of law referred here are in pursuance of the directions issued to the Tribunal to do so as given in Income-tax Case No. 36 of 1976, decided on September 17, 1980, reported as CIT v. Saligram Premnath [1984] 148 ITR 302, the questions referred being in these terms :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the proviso to Section 145(1) of the Income-tax Act, 1961, was not attracted ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 7,72,953 in the gross profits of the assessee without making a proper investigation of various facts placed by the Revenue before it ?"
2. The relevant facts are best narrated in the words of the Division Bench in Saligram's case [1984] 148 ITR 302 (P & H) :
"The assessee, a registered firm, derives income from property, manufacture and sale of woollen yarn, shawls and woollen fabrics, etc. The head office of the firm is styled as 'Messrs. Saligram Prem Nath' and one of its branches is styled as 'Supreme Woollen Mills'. Separate accounts are maintained for the head office and the branch office. For the accounting year ended March 31, 1969, relevant to the assessment year 1969-70, the assessee declared an income of Rs. 3,27,966. An audited copy of the profit and loss account for the period under consideration and balance-sheet as on March 31, 1969, were filed. The Income-tax Officer found fault with the figures mentioned in the return and for a number of reasons given in his order estimated the sales at rupees seventy lakhs and by applying the gross profit rate of 25%, he worked out the total gross profit, which the assessee should have shown, at Rs. 17,50,000. He thus made an addition of Rs. 7,72,953 (Rs. 17,50,000--Rs. 9,77,047). Loss on exports claimed at Rs. 83,766 was disallowed without any discussion in the assessment order. The assessee filed an appeal before the Appellate Assistant Commissioner who upheld the addition of Rs. 7,72,953. The assessee filed a second appeal before the Tribunal. It was pleaded on behalf of the assessee that neither the proviso to Section 145(1) nor to Section 145(2) of the Income-tax Act, 1961, (hereinafter referred to as 'the Act'), was applicable to the facts of the case. A number of arguments were raised in support of this contention. It was claimed on behalf of the assessee that the addition made by the Income-tax Officer and upheld by the Appellate Assistant Commissioner could not be sustained in view of the material on the record. On the other hand, it was argued on behalf of the Revenue that the wastage at 14.50% was excessive. In support of his contention that the shortage in this year was excessive, learned departmental representative relied upon the following documents ;
'(i) Letter dated March 23, 1972, from the Assistant Director, Ministry of Commerce, Bombay, addressed to the Commissioner of Income-tax, New Delhi.
(ii) Letter dated August 25, 1969, from Messrs. G. M. Worsted Spinning Mills, Faridabad, addressed to Messrs. Bharat Hosiery Manufacturers Association, Ludhiana.
(iii) Letter No. 14298, dated August 22, 1969, from Messrs. Oriental Carpet Manufacturers (India) Pvt. Ltd. to the President, Hosiery Industry Federation, Ludhiana.
(iv) Letter dated May 22, 1969, from Oriental Carpet Manufacturers (India) Pvt. Ltd. to the President, Cottage Hosiery Manufacturers Union, Ludhiana, and the President, Ludhiana Hosiery Small Scale Union, Ludhiana.
(v) A statement showing wastage in the cases of (a) Nepal Woollen Mills, Bombay, (b) Panipat Woollen and General Mills Co. Ltd., Kharar, (c) .Mohan Woollen Mills, Amritsar, (d) Swastika Knitting and Spinning Mills, Ludhiana, and (e) Adarsh Spinning Mills, Ludhiana.' The Tribunal did not permit the Revenue to rely on these documents as, according to the Tribunal, no opportunity was allowed to the assessee to rebut the material contained in these documents. Similarly, it was pleaded on behalf of the Revenue that imported wool tops and yarn spun out of such wool tops were being sold at a premium and, therefore, it should be held that the assessee also charged premium on sale of imported wool tops and yarn prepared out of such tops. With a view to support this contention, the Revenue sought to rely on the following documents :
'(i) A voluntary disclosure petition dated March 29, 1971, under Section 271(4A) of Messrs. York Hosiery Mills, Ludhiana, admitting that they had earned extra profit on sale of imported wool tops.
(ii) List showing the value of yarn sold by the assessee calculated on the basis of rates published in D. S. Kumaria's daily reports. According to this statement, on sales of 40,522.189 kg. of yarn, the assessee could have earned extra profit of Rs. 3,83,089. On the balance 9,745 kg. (total sales 50,267 kg.--40,522 kg.), similarly, the assessee could have charged about Rs. 1 lakh. The assessee could thus, charge extra profit of Rs. 4,83,089 only in yarn. The profit in wool tops and fibre would be extra.
(in) A list of rates for different counts of yarn published by D. S. Kumaria on nine different dates in the months of April, May, July, August, September, October, November and December, 1968.
(iv) A statement of D. S. Kumaria recorded on February 19, 1970, by the Appellate Assistant Commissioner in the case of Messrs. Fatehchand and Sons, Ludhiana.
This evidence was also not allowed to be relied upon by the Tribunal on the ground that the assessee had not been given an opportunity to rebut the material contained in these documents. The Tribunal gave a number of reasons and partly accepted the appeal filed on behalf of the assessee ..."
3. A reference to the record would show that both the Income-tax Officer and the Appellate Assistant Commissioner relied upon the documents referred to earlier with a view to sustain their order, though no opportunity had been granted to the assessee to rebut them. When the matter came up before the Tribunal, it was not only open to the Tribunal, but, on the facts of this case, the Tribunal was bound to give an opportunity to the assessee to rebut this material by giving the assessee an opportunity to do so either before it or by remand of the case to the authorities below. The approach of the Tribunal to simply brush aside this material, on the ground that the assessee had not been given an opportunity to be heard, with regard to the documents in question, was clearly unwarranted. There can be no manner of doubt that a Tribunal is vested with the requisite authority and jurisdiction to admit additional evidence and material in order to do substantial justice between the parties.
4. Such thus being the situation, question No. (2) must be answered in the negative, in favour of the Revenue and against the assessee with a direction to the Tribunal to decide the matter afresh by taking into account the material placed on record by the Revenue after affording an opportunity to the assessee to rebut it, if necessary, by adducing additional evidence. It may be clarified here that it would be open to the Tribunal either to deal with the matter itself or to remand the case for this purpose to the Income-tax Officer. In view of this direction, question No. (1) is returned unanswered leaving the matter therein to be determined afresh.
5. The reference is disposed of accordingly. There will, however, be no order as to costs.