BHAGABATI PRASAD BANERJEE, J. - (1.) THE Tribunal has forwarded the following question of law to this Court under S. 256(1) of the IT Act, 1961 ("the Act") : "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the deletion of the other source addition of Rs. 1,01,649, constituting the unexplained cost of material and manufacturing cost of goods supplied by the assessee to the defence Department ?"
(2.) THE assessment year involved is 1973-74 for which the relevant accounting year ended on 31st March, 1973. At the very outset, the learned advocate appearing on behalf of the assessee pointed out that the assessee had died long ago and the assessee's counsel informed the IT authorities about his death and no substitution has been made. For the reasons given below, we do not think that this case should be adjourned for the purpose of making substitution. During the assessment proceedings, the ITO noticed that the assessee received a cheque on 11th Jan., 1973 for Rs. 1,13,603 from the Controller of Defence Accounts (Navy) which was credited in the account of Omer & Co. with the Bank of India on 12th Feb., 1973. This amount was received by the assessee against supplies made to Naval Armament Department. The ITO treated the entire sum received from the Controller of the Defence Accounts (Navy) being the amount of investment in the goods as "income from other sources". The assessee went up in appeal before the CIT(A) and the CIT(A) held as follows : "I have considered the arguments of both the ITO and the appellant and also the contents of the assessment order. It was admitted by the appellant that he had no knowledge about the source of the delivery of the raw materials and of the goods except that the goods were to be delivered by A.G. Muller and Co. It was submitted that the goods might have been manufactured in India, under the aegis of A.G. Muller and Co. The appellant had no other knowledge about the issue. It was, however, submitted that no payments were made in foreign exchange. It was further submitted that the terms of payment were, vide invoice dt. 2nd Aug., 1977, letters dt. 7th Sept., 1976 and 15th April, 1977. Considering all these circumstances, I am of the opinion that, having chosen to reject the trading results of the appellant, apply the proviso to S. 145(1) and estimate the difference of net profit which was sought to be added and which was actually added, the ITO did not have any further jurisdiction to add an additional sum by way of concealed income in the shape of monies invested in raw materials. In the circumstances, I am of the opinion that the addition of Rs. 1,01,649 was not warranted. This addition is, therefore, directed to be deleted."
(3.) AGAINST the said order of the CIT(A), the Department filed an appeal before the Tribunal. The Tribunal did not interfere with the order of the appellate authority. Both the CIT(A) and the Tribunal held that the entire amount invested for the raw materials could not be added as income inasmuch as for the purpose of earning this income, the assessee had made certain expenditure. The learned advocate appearing on behalf of the Revenue relied on the provisions of S. 69 of the Act, 1961 and submitted that this unexplained investment should be added as income of the assessee. We are not inclined to accept this submission inasmuch as S. 69 has no manner of application on the facts and circumstances of this case but S. 69 has application in the case of unexplained investment made by the assessee which are not recorded in the books of account. The assessee supplied the goods after incurring certain cost and after manufacturing the goods and the amount that was received from the Defence Department could not represent the net income but it was the sum received including the profit and expenditure. In this reference, the finding made by the Tribunal had not been challenged and no question of perversity has been raised and, as such, the findings made by the Tribunal in this behalf could not be interfered with by the High Court in a reference and we do not find anything wrong in the order of the Tribunal in this regard. Accordingly, the question of law in this reference is answered in the affirmative and in favour of the assessee. There will be no order as to costs.;