R.A.SHARMA, J. - (1.) UNDER S. 256(2) of the IT Act, ITAT, Allahabad Branch, Allahabad has referred the following two questions to this Court for its opinion: "(1) Whether there was any material for the Tribunal to hold that the assessee had made an unexplained investment of Rs. 50,000 outside the account books during the relevant previous years ? (2). Whether the Tribunal was justified in law and on facts in holding that inspections granted on 13th March, 1979, 22nd March, 1979 and 24th March, 1979 were sufficient opportunity to the assessee for examining 247 documents ?"
(2.) ON 13th Aug., 1976 a raid was conducted on the residential premises of the assessee, who is an individual, as a result of which 244 documents were seized. As some of these documents related to transactions relevant to the asst. yr. 1976-77 in question, the ITO after giving an opportunity of being heard to the assessee passed the assessment order, whereby these transactions were totalled at Rs. 4,24,396 and profits were estimated at Rs. 42,440 at the rate of Rs. 10%. To this profit of Rs. 42,440 a sum of Rs. 50,000 was added an unexplained investment in the unexplained business. In this manner a total sum of Rs. 92,000 was assessed as income from unexplained sources. The Assessing Officer also made two additions of Rs. 3,693 and Rs. 4,747 as income from other sources on the basis of seized vouchers. The assessee challenged the assessment order by filing an appeal before the CIT(A) which was dismissed against which the assessee filed a second appeal before the ITAT, which has also been dismissed. Under S. 256(2) of the Act the Appellate Tribunal has referred the aforesaid two questions to this Court. Regarding question No. 1, finding recorded by the Appellate Tribunal is: "So far as the addition of Rs. 50,000 as unexplained capital is concerned, the same was based on the extent of sales, viz. Rs. 4,24,396." For recording its finding, the Appellate Tribunal as not relied upon or referred to any document and addition of Rs. 50,000 as unexplained investment has been made merely on the basis of the sale transactions amounting to Rs. 4,24,396. Even the ITO and the Appellate Commissioner have given the same reason for adding the aforesaid Rs. 50,000 as unexplained investment. As laid down by the Supreme Court in the case of Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC), the ITO is not bound by the technical rules of evidence and pleading and is entitled to act on any material which may not be technically accepted as evidence in a civil court, but he cannot make the assessment on a pure guess without reference to any evidence or material. In this connection it is appropriate to refer the following passage from the aforesaid decision. "As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there that agreement ends; because it is equally clear that in making the assessment under sub-s. (3) of s. 23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under S. (23)3."
(3.) AS mentioned hereinbefore, no evidence or material has been referred to or relied upon for treating the aforesaid sum of Rs. 50,000 as unexplained investment and the only circumstance, which has been referred in this connection is the estimated sale of Rs. 4,24,396. From the estimated sale it cannot necessarily be inferred that the assessee has invested Rs. 50,000 in some unexplained business. It being not a necessary inference is a pure guess an the findings seem to be based on surmises and conjectures without there any evidence or material in support thereof.;