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Judgment
G.S. SHMHVI, J.
In order to decide whether the question of law of which reference has been sought by the Revenue under s. 256(2) of the IT Act, 1961, arises for consideration by this Court, it is necessary to take cognizance of some facts.
For the asst. yr. 1988-89, the assessee filed its return on 30th Aug., 1988, declaring an income of Rs. 36,980. A survey was conducted at the business premises of the assessee on 1st Nov., 1988, under s. 133A of the Act. During the course of survey, it was noticed that sales recorded in the three bill books were not shown in the regular books of account. Shri Vijay Kumar, manager of the firm, expressed his inability to explain why sales recorded in the three bill books have not been entered in the books of account. Smt. Paramjit Kaur, partner of the assessee-firm admitted that the sales noted in the bill books were not recorded in the books of accounts. Thereafter, the AO called upon the respondents to produce the books of accounts, who, in turn, conveyed to the petitioner that the same had been lost in transit while they were being brought by the manager in rickshaw. The AO did not accept the version of the assessee and concluded that the story set up by the assessee was concocted sales (sic) at Rs. 4,12,030. He, however, did not determine sales on the basis of the entries made in the three bill books but on the basis of expenses incurred by the assessee in the manufacture of goods. The AO held that the assessee had deliberately withheld the books and as such the sales shown at Rs. 12,42,761 could not be held as correct one. He also noticed that the assessee had shown sales at Rs. 15,60,400 and gross profit at Rs. 2,34,065 in the preceding assessment year. He further noticed that the assessee had shown higher fabrication charges as well as dyeing and finishing charges. Accordingly, he worked out the sales at Rs. 27,02,681 on the basis of the increased fabrication charges and at Rs. 35,19,420 on the basis of increase shown by the assessee in dyeing and finishing charges. He worked out the average of the aforesaid sales at Rs. 31,11,058 and the profits at Rs. 4,66,607. Accordingly, an addition of Rs. 2,80,393 was made.
In the appeal filed by the assessee a notice for enhancement was issued to the assessee and by holding that the estimated sales were worth Rs. 30 lakhs, the CIT(A) made an addition of Rs. 17,57,230. In the second appeal filed by the assessee the Tribunal confirmed the addition made by the AO at Rs. 2,80,393 but deleted the enhanced addition made by the CIT(A).
The application filed by the Revenue under s. 256(1) of the Act has been dismissed by the Tribunal.
We have heard Shri B.S. Gupta, learned counsel for the Revenue, and Shri A.K. Mittal, learned counsel for the assessee, and have perused the order passed by the Tribunal. While dealing with the argument advanced on behalf of the assessee regarding the enhancement, the Tribunal has recorded the following finding :
"Ground No. 3 relates to the addition of Rs. 1,65,761 on account of variation in the accounts of certain parties. The AO obtained copies of the assessee''s account, as available in the books of certain parties. The assessee had shown the balance in respect of some parties and these were compared with the balance shown in the assessee''s account, as existing in the books of account of other parties. The AO at page 6 of the assessment order, gave details of those parties and noticed that there were variations in figures. In case of seven creditors, total amount of Rs. 1,21,101 was arrived at on the basis of variation in two accounts. Similarly, in the case of two other creditors, total variation was worked out at Rs. 10,098. In case of certain debtors, variations were worked out aggregating to Rs. 95,732. Total amount representing variations was Rs. 2,26,931. Since the assessee could not satisfactorily explain as to how the variations appeared in the two accounts, addition was made. The assessee''s plea, however, was that in the case of M/s Naurata Mech. Works, certain machines was to be supplied to the assessee and it had already paid a sum of Rs. 72,000, through bank, to the said Naurata Mech. Works. The assessee had raised loan from the bank and order for machine was placed. Since the machine was not supplied, the assessee had to receive the money back from M/s Naurata Mech. Works. The assessee, thereafter, made a surrender of Rs. 72,000, by making a credit entry in the P&L a/c. Certain other variations were also explained but, in the absence of books of alc the AO declined to agree and proceeded to make the addition of Rs. 2,26,931, on account of variation imbalances".
A bare perusal of the extracted portion of the order of the Tribunal shows that it had not at all gone into the correctness of the enhanced additions made by the CIT(A).- Therefore, the question sought to be raised by the Revenue deserves to be adjudicated by this Court.
According, we direct the Tribunal, Chandigarh Bench, to draw up a statement of case and refer the following question of law to the High Court :
Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in deleting addition of Rs. 17,57,239 enhanced by the learned CIT(A)?"
The Tribunal is also directed to remit the record of the case to this Court.
OPEN