Jain Soap Mills vs Commissioner of Income Tax

Seth, J.—By this application u/s 256(2) of the income tax Act, 1961 (''the Act'') the petitioner prays that the Tribunal be directed to draw up a statement of case and refer the following questions of law for the opinion of this Court:

Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in sustaining the addition of Rs. 32,633 without any base either legal or factual?

Whether, the Tribunal is right in sustaining an addition of Rs. 32,633 to the trading results and its decision is vitiated, based on inadmissible evidence, no evidence and on conjectures and surmises?

Whether, the Tribunal''s findings in estimating an addition of Rs. 32,633 to the trading result is vitiated in law relying on an opinion of senior chemist (soap technologist) given in a different case which opinion was held to be inadmissible by the Tribunal in that case?

The assessee-firm derives income from the business of manufacture and sale of washing soap. For the assessment year 1978-79, the ITO, by his order dated 18-7-1981, applied the provisions of section 145(2) of the Act, and, added a sum of Rs. 2,75,000 to the trading results.

Being aggrieved by this order, the assessee preferred an appeal to the Commissioner (Appeals). By his order dated 22-4-1982, the Commissioner (Appeals) held that the provisions of section 145(2) were applicable but granted the assessee a relief of Rs. 64,305. This was based on the estimates of sales of Rs. 52 lakhs and a gross profit of 10 per cent.

The assessee thereafter moved an application u/s 154 of the Act. The Commissioner (Appeals) noticed that there was a mistake on the record and the gross profit had been taken as Rs. 3,09,305 instead of Rs. 4,87,367 as given by the assessee. Consequently, by his order dated 27-6-1982 he kept the estimate of sales at Rs. 52 lakhs and the gross profit at Rs. 5,20,000. He deducted there from a sum of Rs. 4,87,367 which was the gross profit arrived at by the assessee and came to the figure of Rs. 32,633. As such, he held that the assessee was entitled to relief of Rs. 2,42,367, that is Rs. 2,75,000 minus Rs. 32,633.

Thereafter both the revenue and the assessee preferred appeals to the Tribunal. Though the Tribunal noticed that the ITO had based his conclusion on ''theoretical exercises'' as the assessee was maintaining regular books of account, there were ''errors in the maintenance of books regarding raw material expenses''. It felt that these errors were ''not so serious'' to warrant a huge addition as made by the ITO. But the errors related to "entering into the account books wrongly the quantities purchased and non-maintenance of vouchers for certain expenses...." Consequently, in the facts and circumstances of the case, the Tribunal held that the addition of Rs. 32,633 would meet the ends of justice.

The assessee then moved an application u/s 256(1) which was rejected by the Tribunal. It noticed that after rectification by the Commissioner (Appeals) as against the addition of Rs. 2,75,000 made by the ITO, only an addition of Rs. 32,633 had been maintained. This would indicate that the Tribunal upheld the reasoning of the Commissioner (Appeals) for maintaining the said addition. Consequently, the finding of the Tribunal is a finding of fact.

It is, therefore, apparent that the addition of Rs. 32,633 to the trading results is a finding of fact based on the estimate of sales which is also a question of fact and no question of law arises from the order of the Tribunal.

The application is rejected. However, in the circumstances of the case, we make no order as to costs.