Chhabildas Tribhuvandas Shah and Others Vs. Commissioner of Income Tax, West Bengal
application on the ground that their conclusions in the order were essentially findings of fact and based on adequate and proper material on record and did not give rise to any question of lawThe assessee applied to the High Court, under section 66(2) of the Indian Income-tax Act, but the High Court, by its order dated October 3, 1961, dismissed the petition. This court, however, granted special leave to appeal and the appeal is now before us for disposal.4. Mr. B. Sen, the learned counsel for the appellant, urges before us that the Appellate Tribunal should have referred the question of law posed before it by the assessee. The question of law was in the following terms:"Whether the order of the Tribunal, that the proviso to section 13 was clearly applicable to the trading results in this case, and restoring the addition made by the Income-tax Officer to the extent of Rs. 70, 510 is an order made without due consideration of the evidence and relevant materials on record and after considering materials which are irrelevant to the enquiry or on materials partly relevant and partly irrelevant and upon conjectures, surmises and suspicions not supported by any evidence on record or partly upon inadmissible material and as such whether the Tribunal was wrong in restoring the addition and the addition should, therefore, be deleted from the assessment."5. He urged that the proviso to section 13 could not be applied in the circumstances of this case. He said that in substance only two grounds had been taken for applying the proviso, namely, (1) that the appellant maintained no stock register, and (2) that the profits of the year were low in comparison with the previous years. He stated that these circumstances can never, as a matter of law, attract the applicability of the proviso. In this connection, he placed reliance on the decision of the Lahore High Court in Pioneer Sports Ltd. v. Commissioner of Income-tax. In that case, the Lahore High Court held that the absence of a stock register and the lowness of the profits disclosed in comparison with the previous years were not adequate reasons for the Income-tax Officer to reject the total profits returned by the company. It observed that the "economic blizzard" which affected trade in the year under review (1930-31) and still prevailed would explain reduction in profits. However, the Lahore High Court in Ganga Ram Balmokand v. Commissioner of Income-tax dissented from this decision on the ground that "it proceeds on a wrong basis when it criticises adversely the reasons of the Income-tax Officer for rejecting the accounts." It observed that "whether the accounts are reliable or not is a question of fact, to be determined solely by the Income-tax Officer, and when he gives reasons for doing so, which are not apparently capricious or injudicial, it is not possible to disturb his finding merely on the ground that the material in support of those reasons is meagre or insufficient." The next case relied on by Mr. Sen is the decision of the Punjab High Court in Pandit Bros. v. Commissioner of Income-tax. The question of law referred to the High Court was "whether any addition may be made to the book version of business profits where no stock account is maintained, on the sole ground that tne net profits disclosed appear to be insufficient in relation to the total turnover." The High Court held that the mere fact that the profits are low is a mere warning to the Income-tax Officer to look into the accounts more carefully and see whether there is material to lead him to the conclusion that there is something false in the accounts. It further held that the fact that there is no stock register only cautions him against the paucity of return made by the assessee. It will be noticed that the Income-tax Officer, in this case, had not noticed any falling of the rate of profits disclosed in comparison with the previous years ; he had only noticed the lowness of profits. In our view this decision has no application to the facts of this case.6. What we have to see is whether the finding of the Appellate Tribunal that the income, profits and gains cannot properly be deduced from the method of accounting employed by the appellant is based on any material. The Appellate Tribunal has given two reasons for its conclusions. The first reason is that the appellant was doing business in the main on wholesaler basis and there should have been no difficulty in tallying quantities in respect of major items of trading account. This certainly is a relevant consideration. In the absence of such a tally, the next reason given is that the fall in the margin is all the more difficult to explain in view of the fact that the appellant also had a quota of imports worth about Rs. 8, 00, 000 which would have given them a handsome margin of profit. This again is a relevant fact and it is well-known that imported goods fetch a very handsome margin of profit. Accordingly, we hold that there is material in support of the impugned finding of the Appellate TribunalWe may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by the Income-tax Officer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case.
0[ds]In our view this decision has no application to the facts of thisThe Appellate Tribunal has given two reasons for its conclusions. The first reason is that the appellant was doing business in the main on wholesaler basis and there should have been no difficulty in tallying quantities in respect of major items of trading account. This certainly is a relevant consideration. In the absence of such a tally, the next reason given is that the fall in the margin is all the more difficult to explain in view of the fact that the appellant also had a quota of imports worth about Rs. 8, 00, 000 which would have given them a handsome margin of profit. This again is a relevant fact and it isthat imported goods fetch a very handsome margin of profit. Accordingly, we hold that there is material in support of the impugned finding of the Appellate TribunalWe may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by theOfficer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case
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application on the ground that their conclusions in the order were essentially findings of fact and based on adequate and proper material on record and did not give rise to any question of lawThe assessee applied to the High Court, under section 66(2) of the Indian Income-tax Act, but the High Court, by its order dated October 3, 1961, dismissed the petition. This court, however, granted special leave to appeal and the appeal is now before us for disposal.4. Mr. B. Sen, the learned counsel for the appellant, urges before us that the Appellate Tribunal should have referred the question of law posed before it by the assessee. The question of law was in the following terms:"Whether the order of the Tribunal, that the proviso to section 13 was clearly applicable to the trading results in this case, and restoring the addition made by the Income-tax Officer to the extent of Rs. 70, 510 is an order made without due consideration of the evidence and relevant materials on record and after considering materials which are irrelevant to the enquiry or on materials partly relevant and partly irrelevant and upon conjectures, surmises and suspicions not supported by any evidence on record or partly upon inadmissible material and as such whether the Tribunal was wrong in restoring the addition and the addition should, therefore, be deleted from the assessment."5. He urged that the proviso to section 13 could not be applied in the circumstances of this case. He said that in substance only two grounds had been taken for applying the proviso, namely, (1) that the appellant maintained no stock register, and (2) that the profits of the year were low in comparison with the previous years. He stated that these circumstances can never, as a matter of law, attract the applicability of the proviso. In this connection, he placed reliance on the decision of the Lahore High Court in Pioneer Sports Ltd. v. Commissioner of Income-tax. In that case, the Lahore High Court held that the absence of a stock register and the lowness of the profits disclosed in comparison with the previous years were not adequate reasons for the Income-tax Officer to reject the total profits returned by the company. It observed that the "economic blizzard" which affected trade in the year under review (1930-31) and still prevailed would explain reduction in profits. However, the Lahore High Court in Ganga Ram Balmokand v. Commissioner of Income-tax dissented from this decision on the ground that "it proceeds on a wrong basis when it criticises adversely the reasons of the Income-tax Officer for rejecting the accounts." It observed that "whether the accounts are reliable or not is a question of fact, to be determined solely by the Income-tax Officer, and when he gives reasons for doing so, which are not apparently capricious or injudicial, it is not possible to disturb his finding merely on the ground that the material in support of those reasons is meagre or insufficient." The next case relied on by Mr. Sen is the decision of the Punjab High Court in Pandit Bros. v. Commissioner of Income-tax. The question of law referred to the High Court was "whether any addition may be made to the book version of business profits where no stock account is maintained, on the sole ground that tne net profits disclosed appear to be insufficient in relation to the total turnover." The High Court held that the mere fact that the profits are low is a mere warning to the Income-tax Officer to look into the accounts more carefully and see whether there is material to lead him to the conclusion that there is something false in the accounts. It further held that the fact that there is no stock register only cautions him against the paucity of return made by the assessee. It will be noticed that the Income-tax Officer, in this case, had not noticed any falling of the rate of profits disclosed in comparison with the previous years ; he had only noticed the lowness of profits. In our view this decision has no application to the facts of this case.6. What we have to see is whether the finding of the Appellate Tribunal that the income, profits and gains cannot properly be deduced from the method of accounting employed by the appellant is based on any material. The Appellate Tribunal has given two reasons for its conclusions. The first reason is that the appellant was doing business in the main on wholesaler basis and there should have been no difficulty in tallying quantities in respect of major items of trading account. This certainly is a relevant consideration. In the absence of such a tally, the next reason given is that the fall in the margin is all the more difficult to explain in view of the fact that the appellant also had a quota of imports worth about Rs. 8, 00, 000 which would have given them a handsome margin of profit. This again is a relevant fact and it is well-known that imported goods fetch a very handsome margin of profit. Accordingly, we hold that there is material in support of the impugned finding of the Appellate TribunalWe may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by the Income-tax Officer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case.

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In our view this decision has no application to the facts of thisThe Appellate Tribunal has given two reasons for its conclusions. The first reason is that the appellant was doing business in the main on wholesaler basis and there should have been no difficulty in tallying quantities in respect of major items of trading account. This certainly is a relevant consideration. In the absence of such a tally, the next reason given is that the fall in the margin is all the more difficult to explain in view of the fact that the appellant also had a quota of imports worth about Rs. 8, 00, 000 which would have given them a handsome margin of profit. This again is a relevant fact and it isthat imported goods fetch a very handsome margin of profit. Accordingly, we hold that there is material in support of the impugned finding of the Appellate TribunalWe may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by theOfficer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case
