Kuppuswami, J. -
(1.)THE assessee is doing business in salt at Chinaganjam in Bapatla Taluk. In response to a notice under Section 22(2) of the Income-tax Act, 1922, he filed a return disclosing an income of Rs. 17,347 from business for the assessment year 1948-49. During the course of the assessment, he filed a petition dated November 19, 1951, making a disclosure of secret profit amounting to Rs. 25,000. Thus, the income admitted from business, including the amount subsequently disclosed, came to Rs. 42,347. THE Income-tax Officer, however, did not accept the disclosure as correct and complete. He examined the accounts in detail, and made various additions under specific heads. He observed In his order "detailed scrutiny of the accounts produced and the copies of the assessee's accounts obtained from the books of his customers residing in, the Hyderabad State when cross-checked revealed that the assessee had understated sales, inflated expenses and thereby concealed a large part of his income in the return." For the various reasons given in his order, he held that, the day-book did not reflect the correct position and was hence unreliable. He added a sum of Rs. 3,226 under the head "Manufacturing cost claimed In excess", Rs. 7,714 under the head "Recoveries under cartage not accounted for", Rs. 3,273 under the head "Recoveries under coolies" not accounted for, and sums of Rs. 1,094, Rs. 1,274 and Rs. 254 under the heads "School fund", "Carting cooly" and "Mats", respectively. Dealing with the concealed profits, he added a sum of Rs. 37,200 under the head "Understatement of sales", Rs. 1,747 under the head "Bank account" and Rs. 4,875 under the head "Shortage on rebagging". THEse and other additions together disclosed an income amounting to Rs. 78,687 which he determined as income from business. THE assessee preferred an appeal to the Appellate Assistant Commissioner, Income-tax, "C" Range, Madras. THE Appellate Assistant Commissioner of Income-tax also considered in detail the various additions. He reduced the addition under the head "Excess manufacturing costs" by Rs. 806. He deleted the sum of Rs. 1,094 under the head "Recoveries for school fund" and the sum of Rs. 4,875 under the head "Shortage on re-bagging". In all other respects, he affirmed the additions made by the Income-tax Officer. In the result, he reduced the total income by Rs. 6,675. (Rs. 806 plus Rs, 1,094 plus Rs. 4,875) or in other words, sustained the addition to the extent of Rs. 29,565, in addition to the sum of Rs. 25,000 already disclosed by the assessee. A further appeal was preferred by the assessee to the Income-tax Appellate Tribunal, Hyderabad Bench.
(2.)THE Tribunal held that the officer had given sound reasons for the additions made by him. THEy, however, stated that having regard to the turnover and the business conditions that obtained during the year of account, a further addition of Rs. 20,000 instead of Rs. 29,565, as sustained by the officer, would be adequate in the circumstances of the case. In coming to this conclusion, they also stated that they had come across certain cases where the profit disclosed by the assessee came to 40 to 50 per cent. with net income of about 25 per cent.
In compliance with the requisition of the High Court under Section 66(2) of the Act, the Tribunal has stated the case as follows:
"Whether, on the facts and in the circumstances of the case, the addition of Rs. 20,000 could be sustained ?"
It is argued by Mr. Ramarao, the learned counsel or the assessee, that the addition of Rs. 20,000 by the Tribunal is not the result of the consideration of any evidence, but that the figure was arbitrarily arrived at. He complained that the Tribunal has merely stated that having regard to the turnover and the business conditions that obtained during the year of account, it seemed to them that a further addition of Rs. 20,000 would be adequate in the circumstances of the case and the order does not disclose as to how that figure was arrived at. It is also his complaint that the Tribunal took into account cases where other assessees had disclosed profit of '10 per cent. to 50 per cent. with net income of 25 per cent. without making that material available to the assessee and giving him an opportunity to distinguish his case from cases relied on by the Tribunal.
(3.)WE do not think that Mr. Ramarao is justified in contending that the Tribunal has arrived at the figure of Rs. 20,000 without any consideration of the evidence and has fixed it arbitrarily. The Tribunal has expressly stated that the officer has given sound reasons for the additions made by him. The reference can only be to the Income-tax Officer in so far as the additions made by him and were affirmed by the Appellate Assistant Commissioner. The reference, the Tribunal felt it unnecessary to restate those reasons once again in the order. Though, in our opinion, it would have been more desirable on the part of the Tribunal to give in its own words, briefly it may be, the reasons for their decision, it cannot be said that the Tribunal acted arbitrarily and fixed the figure of Rs. 20,000. WE have gone through the order of the Income-tax Officer and the Appellate Assistant Commissioner. The Income-tax Officer has given detailed reasons for making the additions under each head and in respect of those additions which were upheld by the Appellate Assistant Commissioner, the Appellate Assistant Commissioner also gave his reasons. The Tribunal, as has already been stated, has observed that these reasons were sound. It cannot, therefore, be said that the Tribunal had acted arbitrarily, or that the decision of the Tribunal is vitiated on the ground that it is based on no evidence.
Mr. Ramarao relied upon a decision in Esthuri Aswathiah v. Commissioner of Income-tax, 1967 66 ITR 478 (S.C.). That decision, in our opinion, has no application to the facts of the present case. In that case, the Tribunal felt that the assessee was not able to explain the source of a particular item of income satisfactorily and it was not unlikely that he had some cash in hand from profits and assets received on partition of the joint family of which the assessee was a member, and estimated the income from undisclosed sources relying upon the offer made by the counsel for the assessee that he may be assessed on the amount of Rs. 50,000. The Supreme Court, in those circumstances, agreeing with the High Court, held that the judgment of the Tribunal was without recording any reasons and was, on that account, speculative. It observed that it would be the duty of the Tribunal conformably with the judgment of the High Court, to dispose of the case after hearing the assessee and the Commissioner in the light of the evidence and according to law. In the present case, however, the additions were made under different heads by the Income-tax Officer and the Appellate Assistant Commissioner who gave detailed reasons for such additions and the Tribunal held that those reasons were sound. In these circumstances we cannot say that the addition by the Tribunal was not based on any reasoning and was speculative.