- (1.) The petitioner has filed this petition u/s 256(2) of the Income Tax, 1961, praying for a direction to be issued to the Income Tax Appellate Tribunal, hereinafter referred to as the Tribunal, to state the case and refer the question of law involved in the same.
(2.) The facts of the case, in brief, are that M/s. Hardeep Hosiery Mills Ltd., Ludhiana, assessee respondent. which is a registered firm, carried on business in manufacture, sale and export of hosiery goods and export of sports articles during the year 1965-66. For the accounting year 1965-66 and assessment year 1966-67, the assessee-firm declared a total income of Rs. 1,12,803/-. With regard to business; of hosiery goods, it declared its sales to be of Rs. 10,34,051/-. The value of the exported hosiery goods which were got manufactured at Ludhiana was Rs. 2,91,216/-for which the assessee-firm paid wages to the tune of Rs. 47,430/-. While examining the wages register, the Income Tax Officer noted that the manufacturing was done only upto the end of September, 1965 though payments of wages which actually became payable to the wokers for the work done upto 30th September, 1965, continued till 31st March, 1966. He also noticed that the assessee-firm had made purchases of yarn weighing 1,855.5 kg. in all valuing Rs. 63,679.17 from five different parties namely, M/s. Pearl Woollen Mills, Ludhiana, and four others, between 27th October, 1965 and 27th January, 1966. The Closing stock of yarn was shown at 50 1bs. Valuing at Rs. 450/- only, and since none of the after 30th September, 1965, was of the value of Rs. 9/- per 1b., the closing stock probably was out of purchases made on 25th May, 1965. The Income Tax Officer further noted that the purchases of yarn of the value of Rs. 63,679/- were not accounted for either in the closing stock or in the sales. The assessee-firm explained to the Income-Tax Officer that the aforesaid yarn purchased from the above-stated five parties was in fact received earlier but the bills were received later and, as such, that yarn was used in the process; of manufacturing. This contention was, however, not accepted by the Income Tax Officer. He also noticed that against the consumption of yarn weighing 15,679.96 1bs, the hosiery goods exported weighed 5,921 Kg. and wastage of yarn was of 1,184 Kg. This wastage was considered excessive. Since the purchases of the yarn valuing Rs. 63,679/- remained unaccounted for, the Income Tax Officer made an addition of Rs. 64,000/- to the income of the assessee-firm on the assumption that the hosiery goods made of that yarn, which were sold, remained unaccounted for in the books of account. Thus, he computed the total income of the assessee at Rs. 1,84,500/-. The assessee-firm filed an appeal against the addition of Rs. 64,000/- in their total income before the Appellate Assistant Commissioner of Income Tax who, after considering the facts of case, vide his order dated 2nd March, 1971, sustained an addition of Rs. 50,000/- and thereby gave the assessee-firm a relief of Rs. 14,000/-.
(3.) Both the assessee-firm and the Revenue appealed to the Revenue appealed to the Tribunal against the said order of the Appellate Assistant Commissioner of Income Tax. The Tribunal upheld the order dated 2nd March, 1971, of the said Appellate Assistant Commissioner by accepting the explanation of the assessee firm that at least yarn valuing to the extent of Rs. 14,000/- was utilized for manufacturing the hosiery goods actually exported and gave the assessee-firm benefit of 700 Kg. of yarn valuing at the rate of Rs. 20/- per Kg. which was approximately the difference between the goods purchased upto 30th September, 1965, weighing 5,291 Kg. as reduced by 30th July, 1973.;