- (1.) THIS is a reference application under Section 256(1) of the Income-tax Act, 1961, seeking the opinion of this court on the following questions : "1. Whether, the Tribunal was justified in ignoring the material collected by the Commissioner of Income-tax (Appeals) under Section 250(4) of the Act and reversing the finding of the Commissioner of Income-tax (Appeals) based on such material solely on the ground that material so collected by the Commissioner of Income-tax (Appeals) was inadmissible ?
(2.) WHETHER there is any material to hold that higher commission paid on bulk sales amounts to diversion of profit ?" 2. The assessee is a company manufacturing dyes and sale thereof. It also does job work for stantering of cloth. The Assessing Officer found that the assessee had claimed expenses on the discount of Rs. 54,928. The assessee had also paid discount at the rate of eight per cent. to two of its sister concerns as against payment of discount at the rate of three per cent. to others. The Assessing Officer disallowed the discount payment exceeding the rate of three per cent. In appeal before the Income-tax Appellate Tribunal, it was argued that the bills placed at pages 13 to 48 submitted by the sister concerns of the assessee getting higher discount from other concerns for rendering similar services were not placed before the Income-tax Officer. The Commissioner of Income-tax (Appeals) without confronting the documents to the Income-tax Officer read those documents for the benefit of the assessee. The Income-tax Appellate Tribunal excluded those documents from consideration and held that the assessee had paid a discount at the rate of eight per cent. to its sister concerns while it had paid commission at the rate of three per cent. only to the other sister concerns which rendered the same services to the assessee. The Tribunal, therefore, held that there was no justification for paying discount to the two sister concerns by the assessee at the rate of exceeding three per cent. In view of the finding, the Tribunal set aside the order of the Commissioner of Income-tax (Appeals) and restored the order of the Income-tax Officer. Mr. Kothari, appearing for the assessee, submits that the Tribunal has committed the same error which was committed by the Commissioner of Income-tax (Appeals). It is submitted that the assessee was not heard on the question of exclusion of documents placed at pages 13 to 48. Thus, in our opinion, the Tribunal was not justified in ignoring the matter placed before the Commissioner of Income-tax (Appeals) without giving an opportunity of hearing to the assessee. The Tribunal ought to have remitted the matter to the Commissioner of Income-tax (Appeals). Consequently, the reference is accepted and it is decided in favour of the assessee and against the Revenue.;