- (1.) THE assessee, a registered firm, derives income from property, manufacture and sale of woollen yarn, shawls and woollen fabrics, etc. The head office of the firm is styled as "m/s. Saligram Prem Nath" and one of its branches is styled as " Supreme Woollen Mills ". Separate accounts are maintained for the head office and the branch office. For the accounting year ended March 31, 1969, relevant to the assessment year 1969-70, the assessee declared income of Rs. 3,27,966. An audited copy of the profit and loss account for the period under consideration and balance-sheet as on March 31, 1969, were filed. The ITO found fault with the figures mentioned in the return and for a number of reasons given in his order estimated the sales at rupees seventy lakhs and by applying the gross profit rate of 25% he worked out the total gross profit, which the assessee should have shown, at Rs. 17,50,000. He thus made an addition of Rs. 7,72,953 (Rs. 17,50,000--Rs. 9,77,047 ). Loss on exports claimed at Rs. 83,766 was disallowed without any discussion in the assessment order. The assessee filed an appeal before the AAC who upheld the addition of Rs. 7,72,953. The assessee filed a second appeal before the Tribunal. It was pleaded on behalf of the assessee that neither the proviso to Section 145 (1) nor to Section 145 (2) of the I. T. Act, 1961 (hereinafter referred to as "the Act"), was applicable to the facts of the case. A number of arguments were raised in support of this contention. It was claimed on behalf of the assessee that the addition made by the ITO and upheld by the AAC could not be sustained in view of the material on the record. On the other hand, it was argued on behalf of the Revenue that the wastage at 14'50% was excessive. In support of his contention, that the shortage in this year was excessive, the learned departmental representative relied upon the following documents: " (i) Letter dated March 23, 1972, from the Assistant Director, Ministry of Commerce, Bombay, addressed to the Commissioner of Income-tax, New Delhi. (ii) Letter dated August 25, 1969, from M/s. G. M. Worstted Spinning Mills, Faridabad, addressed to M/s. Bharat Hosiery Manufacturers Association, Ludhiana. (iii) Letter No. 14298, dated August 22, 1969, from M/s, Oriental Carpet Manufacturers (India) Pvt. Ltd. to the President, Hosiery Industry Federation, Ludhiana. (iv) Letter dated May 22, 1969, from Oriental Carpet Manufacturers (India) Pvt. Ltd. to the President, Cottage Hosiery Manufacturers Union, Ludhiana, and President, Ludhiana Hosiery Small Scale Union, Ludhiana. (v) A statement showing wastage in the cases of (a) Nagpal Woollen Mills, Bombay, (b) Panipat Woollen and General Mills Co. Ltd. , Kharar, (c) Mohan Woollen Mills, Amritsar, (d) Swastika Knitting and Spinning Mills, Ludhiana, and (e) Adarsh Spinning Mills, Ludhiana. "
(2.) THE Tribunal did not permit the Revenue to rely on these documents as according to the Tribunal no opportunity was allowed to the assessee to ,rebut the material contained in these documents. Similarly, it was pleaded on behalf of the Revenue that imported wool tops and yarn spun out of such wool tops were being sold at premium and, therefore, it should be held that the assessee also charged premium on sale of imported wool tops and yarn prepared out of such tops. With a view to support this contention, the Revenue sought to rely on the following documents: " (i) A voluntary disclosure petition dated March 29, 1971, under Section 271 (4a) of M/s. York Hosiery Mills, Ludhiana, admitting that they had earned extra profit on sale of imported wool tops. (ii) List showing the value of yarn sold by the assessee calculated on the basis of rates published in D. S. Kumaria's daily reports. According to this statement on sales of 40,522. 189 kg. of yarn, the assessee could have earned extra profit of Rs. 3,83,089. On the balance 9,745 kg. (total sales 50,267 kg.--40,522 kg.), similarly, the assessee could have charged about Rs. 1 lakh. The assessee could thus charge extra profit of Rs. 4,83,089 only in yarn. The profit in wool tops and fibre would be extra. (iii) A list of rates for different counts of yarn published by D. S. Kumaria on nine different dates in the months of April, May, July, August, September, October, November and December, 1968. (iv) A statement of D. S. Kumaria recorded on February 19, 1970, by the Appellate Assistant Commissioner in the case of M/s. Fatehchand and Sons, Ludhiana. "
(3.) THIS evidence was also not allowed to be relied upon by the Tribunal on the ground that the assessee had not been given an opportunity to rebut the material contained in these documents. The Tribunal gave a number of reasons and partly accepted the appeal filed on behalf of the assessee. The Revenue approached the Tribunal with the prayer that the following questions, which according to the Revenue, are questions of law be referred to this court for its opinion, which application has been dismissed by the Tribunal: " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that neither proviso to Section 145 (1) nor Section 145 (2) is applicable ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income-tax Officer had erred in adding Rs. 4,23,038 to the income of the assessee after rejecting his account version ?";