Commissioner of Income Tax vs Ganga Prasad Bachchulal

G.G. Sohani, J.—This order will also govern the disposal of Miscellaneous Civil Case No. 5 of 1979.

These are applications u/s 256(2) of the income tax Act, 1961 (''the Act''). The material facts giving rise to these applications briefly are as follows: The asses-see is a HUF and carries on business in cotton. The relevant assessment year is 1969-70 for which the assessee filed a return declaring a net loss of Rs. 10 lakhs. During the course of assessment proceedings, the assessee did not produce its books of account in spite of notices u/s 142(1) of the Act. The ITO, therefore, framed the assessment u/s 144 of the Act, on a total income of Rs. 23,80,512. On appeal, the matter was remanded to the ITO for further investigation. After investigation, the ITO sent his report to the AAC. The AAC examined the matter and held that the entire shortage of stocks worth Rs. 22,30,000 found by the banks with whom the assessee had a cash credit loan account, could not be added as income from undisclosed sources, since the assessee was enjoying overdraft facilities from the banks and at least 70 to 75 per cent of the value of the goods was covered by the loans advanced by the banks. In this view of the matter, the AAC held that only a sum of Rs. 6 lakhs could be estimated as the amount invested by the assessee in the purchase of the goods out of its own funds. The AAC partly allowed the appeal. Aggrieved by the order passed by the AAC, the department as well as the assessee preferred appeals before the Tribunal. The Tribunal partly allowed the appeal filed by the assessee to Rs. 5 lakhs (sic), and dismissed the appeal filed by the department. Aggrieved by the order passed by the Tribunal, the department submitted applications for making references to this Court. But those applications were rejected, and hence, the department has filed the present applications.

Learned counsel for the department contended that there was no material or evidence before the AAC or the Tribunal for holding that at least 70 to 75 per cent of the value of the goods was covered by the loans advanced by the banks and, hence, the finding arrived at in this behalf was based on no evidence. Having heard learned counsel for the parties, the following question of law does arise, in our opinion, out of the order passed by the Tribunal : Whether, on the facts and in the circumstances of the case, there was any material or evidence before the Tribunal to uphold the finding of the Appellate Assistant Commissioner that at least 70 to 75 per cent of the value of the goods pledged by the assessee with the banks was covered by the loans advanced by the banks?

The applications are, accordingly, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this Court for its opinion. In the circumstances of the case, parties shall bear their own costs of these applications.