SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following questions of law under s. 256(1) of the IT Act, 1961, to this Court: "(1) Whether there was any material and / or evidence on which the Tribunal could legally justify that the addition made by the ITO of Rs. 2,00,000 is undisclosed income from business ? (2) Whether, in substaining the said addition of Rs,2,00,000 made by the ITO the Tribunal relied upon conjectures, suspicions and surmises and whether such finding of the Tribunal is otherwise unreasonable and perverse ?"
(2.) IN this proceeding the assessment year involved is 1978-79 for which the relevant accounting period is the year ended on 31st Dec., 1977. The facts as narrated by the Tribunal in the Statement of Case are as under: "The assessee is a company which manufactures lime out of limestones. Its factories are located at Satna, Maihar, Jukehi and Katni in the State of Madhya Pradesh. The ITO at the time of assessment proceedings found that in the Schedule B ( Notes forming part of the Accounts for the year ended on 31st Dec., 1977) in item No.7 the following remarks had been given by the auditors: " The value of stocks and stores as shown in these accounts are in accordance with the books maintained by the company, shortage and excesses in respect of the following items estimated on physical verification carried out at the year-end by volumetric measurement have not been adjusted in the books of the company pending further investigations: The ITO examined the question of excess stock as noted by the auditors. The assessee explained that the discrepancy was attributed to volumetric measurement made by stacking coal and . Excess Shortage . Rs. Rs. Unshaked Lime 28,240.24 . Fireclay etc. -- 10,958.63 Limestone 20,586.30 -- Coal (included in stock of stores and spare parts Rs. 8,17,526) 1,43,531,13 . . 1,94,357.67 10,958.63 limestone on uneven surface which resulted in apparently excess quantity on conversion from volume to tonnage. On behalf of the assessee it was also explained that the same auditors in their report for the next year i.e. as on 31st Dec., 1978, did not press the point regarding the stock in question. But the ITO was of the opinion that the report for the subsequent year was concerned only with the said year and not with the earlier year ended on 31st Dec., 1977, during which the excess stock was specifically found out. The ITO rejected the submissions made before him and concluded that the assessee had been carrying on business outside the books of account and added Rs. 2 Lakhs as undisclosed business income. The assessee took up the matter before the CIT(A) and contended that the difference in the stock was duly considered by the directions in the report for the year ended on 31st Dec., 1977, and apprehension was expressed that the excess / shortage could because of volumetric measurement and adjustment would be made after further investigation, if found necessary. The relevant part of the report of the directors dt. 31st May, 1978 was given in the order of the CIT(A) in which it was stated that the stock and stores inspected and physically verified by the officials of the company on the basis of the stock register maintained and that the difference was mainly due to the volumetric measurement which most likely involve human error and that, however, an adjustment would be made after further investigation. The CIT(A) also noted that subsequently the materials were placed on plain and even surface and were again subjected to volumetric measurement which was thereafter converted into tonnage and no discrepancy was found and that this fact was reported by the directors on 9th May, 1979, for the following year ended on 31st Dec., 1978. It was also contended before the CIT(A) that the operation was properly explained to the auditors and that was why in the report for the subsequent year ended on 31st Dec., 1978, no adverse comments were made by the auditors. It was also argued that the auditors were the same persons and were fully aware of the discrepancy of the stock as mentioned by the ITO and if the discrepancy had not been properly explained the auditors would have made appropriate observations on the subject. The CIT(A) noted that the assessee's factories are situated in the hilly regions and it was understandable that the materials were stacked on an uneven surface. He also observed that the past background of the assessee could not be overlooked when it indicated that the books of accounts were never rejected and no business outside the books were detected in the past. Considering the circumstances as noted in the order of the CIT(A) the addition of Rs. 2 Lakhs was deleted." The matter went up on further appeal before the Tribunal. The Tribunal considered the rival submissions and other papers placed before it. The Tribunal observed that the ITO brought out the points and the material facts on record for making the addition relating to excess stock and that after the detention was made the assessee was stated to have erected an even platform for stacking of the stock. The Tribunal found that there was sufficient force in the arguments made on behalf of the Revenue that the stock available at the time when the auditors noted the excess could not have been the same stock on the same quantity of stock at the time of physical measurement which was made at a later date. The Tribunal found that there was no indication that when the stock was measured in an even platform, the auditors were associated and that there was no indication also as to how the volumetric measurement involved human error. The Tribunal took into account the categorical finding made by the auditors in the report as extracted and reproduced in the assessment order. The Tribunal considered that the directors' report and other comments as produced in the order of the CIT(A). The Tribunal was of the opinion that the CIT(A) was not justified in deleting the above addition on the reasons recorded by him in his order. It was of the opinion that the addition was made on adequate materials and findings. Thus the amount deleted was restored and the appeal by the Revenue was allowed." The Tribunal had noted all aspects of the matter. The facts were argued at great length before the Tribunal both on behalf of the Revenue as also the assessee. In particular, the Tribunal took note of the fact that the auditors of the company Price Waterhouse and Co. had made physical verification of the stock and had reported that " the value of stocks and stores as shown in these accounts are in accordance with the books maintained by the company. Shortage and excess in respect of the following items intimated on physical verification carried out at the year-end by volumetric measurement have not been adjusted in the books of the company pending further investigations". Particulars of discrepancy in the stocks were given in detail by the auditors.
(3.) THE case of the assessee is that in the subsequent year the auditors were satisfied about the stocks. THE assessee company had already made an investigation and found that the statement of stocks was in order. This aspect of the matter was taken into consideration by the Tribunal. THE assessee had carried investigation into the stock but according to the company investigation was not done in presence of the representatives of the auditors. In the auditor's report in the subsequent year to which the learned counsel appearing for the assessee had invited our attention it has been recorded that the company had gone into and examined the stock afresh. THE auditors did not state that they had examined the stock afresh and had come to the conclusion that the stock as found by them tallied with the stock recorded the books of the assessee. The Tribunal is the final fact-finding authority. If the Tribunal, has taken all the facts into consideration, the Court will not disturb its decision even though the Court might have come to a different conclusion. The only thing that the Court has to see is that the Tribunal's decision was based on materials. The Court may disturb the finding of fact made by the Tribunal, if it appears to it that the Tribunal had not relied on any relevant material or had relied on irrelevant materials. But that is not the case here. The materials were all placed before the Tribunal both by the assessee as well as by the Revenue. The Tribunal had taken into consideration the materials on record before passing its order. The materials and the case made out by the assessee were examined by the Tribunal. Our attention was drawn to the decision of the Supreme Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC). It was observed by the Supreme Court that "in a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in these documents".;