Mohini Kapur, J. - (1.) THIS is an application under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), seeking a direction to the Income-tax Appellate Tribunal to state the case on the points of law raised by the Revenue. The assessee in this case is a textile mill at Pali. The dispute pertains to the assessment year 1976-77. A number of grounds were raised before the Inspecting Assistant Commissioner who disallowed a number of items, but on appeal the Commissioner of Income-tax reversed the decision. The decision of the Commissioner of Income-tax was maintained by the Income-tax Appellate Tribunal. The application for making a reference was dismissed by the Tribunal and hence this application.
(2.) THE dispute relates to deduction of the amount of gratuity. According to the actuarial certificate, the liability of the assessee for gratuity for the year 1976-77 was Rs, 4,77,446. THE assessee further claimed a sum of Rs. 3,06,175 on account of payment of gratuity to the employees who retired during the year under reference. This excess amount was disallowed by the Inspecting Assistant Commissioner as it did not fulfil the conditions prescribed by Section 40A(7)(b) of the Act. Besides this, there are other items such as expenditure for maintenance of building at Jaipur, expenses for entertaining customers, and expenses of staff welfare which includes an item as loss on gaushala, some cash credit entries in suspense account, the difference in the amount of interest charged short by the bank in earlier years, some debit entries by way of provisions which were not in the nature of liability, penal interest paid to the Sales Tax Department etc. It may be stated here that only the first item of gratuity and the last item of trading expenses can be said to be relevant for purposes of this reference application as all others relate to facts. It has been contended by learned counsel for the Revenue that the deductions on account of gratuity can be allowed under Section 40A(7)(b)(ii) of the Act on the basis of an actuarial report and there was no reason for allowing any excess amount It is stated that the Tribunal has not applied its mind to the facts of this case and has adopted the reasoning of the Commissioner of Income-tax without analysing the same. The details of the item "trading expenses" have not been given in the order of the Tribunal or in the reference application and for this we may refer to the orders of the Inspecting Assistant Commissioner and the Commissioner. Actually, there was a fall in the rate of the gross profit as much as by 6.4% amounting to Rs. 81,108. The assessee was asked to give reasons for the abrupt fall in the gross profit rate to which a reply was given that it was due to increase in expenditure on salaries and wages, fuel consumption and stores consumption. The assessee was directed to furnish the details of the percentage of consumption of the different items but, in spite of repeated reminders, he failed to furnish the same, It was held by the Inspecting Assistant Commissioner that the assessee-company had failed to discharge the onus of proof regarding the fall in the gross profit rate to the extent of 6.4% and the conclusion was that the expenses under various heads had been inflated. On appeal, the learned Commissioner took into consideration the change in the gross profit rate for 11 years and various other factors including the maintenance of accounts which have not been rejected and that the Inspecting Assistant Commissioner had not pointed out any single instance of inflation in expenditure. The appeals of the assessee were allowed in part. In appeal, the Tribunal did not discuss the matter, but simply stated that the opinion of the Commissioner was correct and that the Inspecting Assistant Commissioner had been unduly influenced by the action of his predecessor and had not applied his judicial mind in the proper perspective. The reasoning of the Commissioner was adopted. In Addl CIT v. Symonds Distributors (P.) Ltd. [1977] 108 ITR 947 (All), certain deductions were claimed by the assessee on account of payments made to a manufacturing company which was in financial difficulties. It was held that the question of deductions under Section 37 of the Income-tax Act involved the application of the law to the facts found in the setting of a particular case and is a mixed question of fact and law. Learned counsel for the assessee has placed reliance on CIT v. K. Y. Pilliah and Sons [1967] 63 ITR 411, wherein it has been held by the Supreme Court that, when the firm furnished no explanation at all as to why profit at the normal rate was not earned, it was open to the Income-tax Officer to estimate the gross profit at a rate at which profit was earned in similar business by other merchants. It was further held that the Appellate Tribunal is the final fact-finding authority and, normally, it should record its conclusion on every disputed question raised before it, setting out its reasons in support of its conclusion. But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has no other ground to record in support of its conclusion, it does not act illegally or irregularly, merely because it does not repeat the grounds of the Appellate Assistant Commissioner. It has also been contended by learned counsel for the assessee that, specifically, the question about the fall in gross profit rate was not raised before the Tribunal when the application for reference was made. When the application under Section 256(1) was filed, this court should not entertain the application for reference. As against this, learned counsel for the Revenue has contended that points have been raised and, in case the question of law as framed is not appropriate, it can be reframed by this court.
(3.) WE have considered the contentions raised on behalf of both the sides. As far as the question of the excess claim under the head of gratuity is concerned, it certainly requires to be examined as to whether the deductions claimed fall within Section 40A(7)(b) or not. The other question about fall in gross profit rate cannot be looked into in this case because the Inspecting Assistant Commissioner has not rejected the books of account of the assessee and, without making this as a base, it could not be said that the expenditure had been inflated, which is a question of fact and, in view of the finding of the Commissioner which is confirmed by the Tribunal, the same cannot be allowed. The following question of law can alone be said to arise in this case : "1. Whether, on the facts and circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) deleting the disallowance made by the Inspecting Assistant Commissioner on account of gratuity payment amounting to Rs. 3,06,175 ? " The Tribunal is directed to state the facts and circumstances of the case and refer the above question of law for the opinion of this court. ;