S.S.SODHI, J. - (1.) THE two questions of law referred here are in pursuance of the directions issued to the Tribunal to do so as given in IT Case 36 of 1976 decided on 17th Sept.,1980, reported as CIT vs. Saligram Prem Nath (1984) 148 ITR 302 (P&H). The question referred being in these terms : (1) "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that proviso to s. 145 (1) of the IT Act, 1961, was not attracted ? (2) Whether, on the fact and in circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 7,72,953 in gross profits of the assesses without making a proper investigation of various facts placed by the Revenue before it ?"
(2.) THE relevant facts are best narrated in the words of the Division Bench in Saligram's case (supra) : "The assessee, a registered from, derives income from property, manufacture and the sale of woollen yarn shawls and woollen fabrics etc. The head office of the firm is styled as "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 on 31st March, 1969, relevant to the asst. yr. 1969-70, the assessee declared income of Rs. 3,27,966. An audited copy of the P&L A/c for the period under consideration and balance sheet as on 31st March, 1969, were filed. The ITO found fault with the figures mentioned in the return and for a number of reasons given in has order estimated the sales at rupees seventy lakhs and by applying the gross profit rate of 25 per cent 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 s. 145(1) nor to s. 145(2) of the IT 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 per cent 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 dt. 23 March, 1972, from the Assistant Director, ministry of Commerce, Bombay, addressed to the CIT, New Delhi. (ii) Letter dt. 25th Aug.,1969, from Oriental Carpet Manufacturers (India) (P) Ltd. to the President, Hosiery Industry Federation, Ludhiana. (iii) Letter No. 14298, dt. 22nd Aug.,1969, from Oriental Carpet manufacturers (India) (P) Ltd., to the President, Hosiery, lndustry Feberation, Ludhiana. (iv) Letter dt. 22nd May, 1969, from Oriental Carpet manufacturers (India) (P) 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." 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 assesses 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 dt. 29th March, 1971, under s. 271(4A) of 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 dalliance 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 polished by D. S. K. umaria 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 19th Feb.,1970 by the AAC in the case of Fatehchand and Sons, Ludhiana."
(3.) THIS evidence was also 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.........";