Commissioner of Income Tax vs Registan (P.) Ltd.

Rajesh Balia, J.—Heard the learned counsel for the revenue. No one has appeared for the respondent in spite of service. The application u/s 256(2) of the income tax Act, 1961 (''the Act'') relates to the assessment year 1977-78. The assessee has filed return, in the first instance showing gross profit of Rs. 13,82,833 which disclosed gross profit rate of 15.20 per cent of its total turnover. This was far below as compared to preceding year''s gross profit rate.

For the assessment year 1976-77, the assessee has shown gross profit rate of 32.4 per cent on gross profit of Rs. 34,88,368. On being required to show cause for steep fall in the gross profit rate, the assessee has filed revised return for the assessment year 1977-78 showing the return of Rs. 17,03,942 showing gross profit rate of 20 per cent.

Simultaneously, the assessee has also filed return for 1976-77 disclosing the profits of the previous assessment year at the gross profit rate of 23.86 per cent. The assessee has also stated that from 31-12-1979 the firm was not in existence and it has been dissolved and thereafter a company has been formed.

It is also pertinent to notice here that when the assessee has filed revised return for 1976-77 along with revised return for 1977-78, the assessment for the year 1976-77 has already been completed.

The Assessing Officer completed the assessment for 1977-78 on the basis of gross profit declared by the assessee as per his revised return. The order was affirmed by the IAC. However, on second appeal before the Tribunal, the Tribunal has accepted and held that since the Assessing Officer has not accepted the revised return for 1976-77, the Assessing Officer was not justified in accepting profit returned as per revised gross profit of the year 1977-78 and revised the gross profit to the amount of the original return.

In the aforesaid circumstance, the revenue filed the application u/s 256(1) before the Tribunal for stating the case and referring the following questions suggested by the revenue to this Court:

Whether the Tribunal was within its competence to hold that the Assessing Officer could have added the sum of Rs. 3,21,109 in the assessment year 1977-78 only if the department had accepted the revised trading- cum -profit and loss account in the assessment year 1976-77?

If the answer to the above question is in the affirmative, whether the IAC (Asst.) could have revised the assessment for the assessment year 1976-77 on the basis of revised trading- cum -profit and loss account filed by the assessee after completion of the assessment of the assessment year 1976-77?

Whether the Tribunal was right in deleting the addition of Rs. 3,21,109 from the assessee''s total income for the assessment year 1977-78, particularly when the assessee had itself increased its income by Rs. 3,21,109 in the revised trading- cum -profit and loss account filed by it for the assessment year 1977-78?

Whether, on the facts and in the circumstances of the case, the Tribunal''s order deleting the addition of Rs. 3,21,109 is not perverse?

The Tribunal has rejected the application by reasoning that acceptance or non-acceptance of explanation furnished by the assessee does not give rise to questions of law.

Having heard the learned counsel for the revenue, we are of the opinion that the Tribunal has erred in rejecting the application u/s 256(1) because, in our opinion, the question No. 4 referred to above does arise out of the Tribunal''s order. The other suggested questions are only different aspects of the same question.

Accordingly, we allow this application and the Tribunal is directed to state the case and refer the question No. 4 as stated above to this Court for its decision. There shall be no order as to costs.