V.K. Singhal, J. - (1.) IN these two applications for reference under Section 256(2) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), the petitioner has challenged the order of the INcome-tax Appellate Tribunal, Jaipur Bench, Jaipur, dated August 14, 1991. The questions in respect of the assessment year 1983-84 and the assessment year 1984-85 are as under : Assessment year 1983-84 : "1. Whether the Tribunal was justified in upholding the addition of Rs. 50,000 in the assessment year 1983-84 partly on the basis of irrelevant material and on the basis of no material ?
(2.) WHETHER, on the facts and circumstances of the case, the Tribunal was justified in ignoring the past history of the assessee ? Whether, on the facts and circumstances of the case, the Tribunal was justified in holding the view that the provisions of Section 145(2) are applicable in the case of the assessee ?" Assessment year 1984-85 : " 1. Whether the Tribunal was justified in upholding the addition of Rs. 40,000 in the assessment year 1984-85 partly on the basis of irrelevant material and on the basis of no material ? 2. Whether, on the facts and circumstances of the case, the Tribunal was justified in ignoring the past history of the assessee ? 3. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding the view that the provisions of Section 145(2) are applicable in the case of the assessee ?" 2. The brief facts giving rise to the present proceedings are that the assessee is a manufacturer of soap. In the course of assessment proceedings, the Income-tax Officer found that the stock register maintained by the assessee did not reflect the true state of affairs of the articles consumed or produced. It was also found that every day the assessee has shown to have consumed a fixed quantity of articles and the out-turn produced is also fixed and constant. The assessee had declared a gross profit rate of 10.75% as against the gross profit rate of 11.9% in the preceding assessment year. After adjusting certain expenses, it was found that the gross profit rate works out to 9.2% in the assessment year 1983-84 as against 10.48% in the assessment year 1982-83. The assessee was required to show cause as to why the books of account may not be rejected and the provisions of Section 145(2) may not be applied. In the assessment year 1982-83, the results of the assessee were compared with the results declared in the case of M/s. Arjun Soap Factory, Ajmer. The Income-tax Officer has found that the facts of the case for the assessment year 1983-84 were identical to the defects pointed out in the order for the assessment year 1982-83. After recording certain examples, the Income-tax Officer was of the view that the figures of consumption and production have been incorporated on assumption basis and thus the authenticity of the figures shown in the stock register maintained by the assessee was doubted. It was also found that the water content which was 8.3% in the month of April stood reduced to 7.8% during the months of May, June and July and further went down to 7.5% in the month of August and again increased to 8.1% and 8.6% in the month of September and October respectively and further went up to 9% in the month of November. The Income-tax Officer was not satisfied with the variation with regard to the content of water. In respect of silicate soda, it was found that the maximum amount of consumption was either in the month of July, 1982, or March, 1983, but the water content in both the months was completely different. The assessee tried to distinguish the facts of the case of M/s. Arjun Soap Factory, but it was found that there were no distinctive features of the case of the assessee than that of the case of Arjun Soap Factory. The Income-tax Officer, after invoking the provisions of Section 145(2), applied a gross profit rate of 16%. 3. An appeal was preferred before the Commissioner of Income-tax (Appeals), and the said authority, on the basis of the order of the Tribunal passed for the assessment years 1977-78 and 1982-83, deleted the entire addition holding that there is no justification for disturbing the book results. The Income-tax Officer challenged the aforesaid order before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal came to the conclusion that the defects pointed out by the Income-tax Officer in fact were not met by the Commissioner of Income tax (Appeals) before accepting the book results. It was observed that, in the assessment year 1982-83, the provisions of Section 145(2) were applicable but, in that year, the addition was not sustained because there were better results as against the preceding year. The learned Tribunal came to the conclusion that the provisions of Section 145(2), therefore, are applicable for these years as well. Thereafter, it was examined as to what extent the addition should be made and, on the basis of the past history of the assessee's case as well as gross profit shown in the comparable case, the additions came to Rs. 50,000 in the assessment year 1983-84 and Rs. 40,000 in the assessment year 1984-85. An application for reviewing the order of the Tribunal was also submitted in which it was submitted that the Commissioner of Income-tax (Appeals) opined that the facts of the assessee's case are different from the facts of the case of Arjun Soap Factory and though small additions were made in the gross profit rate declared by the assessee and the Tribunal was of the opinion that the adjusted gross profit rate disclosed by the assessee in the earlier year was lesser. The application for rectification was rejected. In the application under Section 256(1) of the Act, it was submitted that the Tribunal has considered irrelevant material and had overlooked the past history of gross profits declared by the assessee. The Tribunal rejected the application and came to the conclusion that the finding recorded by the Tribunal on the subject-matter of all the three proposed questions are essentially findings of fact and such findings do not give rise to any question of law arising from the order of the Tribunal. Mr. Kasliwal, appearing on behalf of the petitioner, has submitted that if a court of facts acts on material which is irrelevant, the finding is vitiated. Reliance was placed on the decision of their Lordships of the Supreme Court in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. This court, while examining the applicability of the proviso to Section 145 of the Act in Nisar Brothers v. CIT [1986] 162 ITR 677 (Raj), held that the question is a pure question of fact and that no question of law arises. The provisions of Section 145 of the Act are as under : 'Section 145. Method of accounting.--(1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be computed in accordance with the method of accounting regularly employed by the assessee : Provided that in any case where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of the Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing Officer may determine : Provided further that where no method of accounting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income of the previous year in which such interest is due to the assessee : Provided also that nothing contained in this sub-section shall preclude an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year, (2) Where the Assessing Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the Assessing Officer may make an assessment in the manner provided in Section 144."
(3.) IN the case of Chhabildas Tribhuvandas Shah v. CIT [1966] 59 ITR 733, the Hon'ble Supreme Court held that the question whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee is a question of fact. From a perusal of the provisions of Section 145(2) of the Act, it is clear that if the Income-tax Officer is not satisfied about the correctness or the completeness of the accounts of the assessee or where no such method has been regularly employed by the assessee, the Income-tax Officer may make an assessment in the manner provided in Section 144 of the Act. Section 144 contains provisions for best judgment assessment. It would be proper to mention here that each year is a separate year and the only thing which has to be seen here is whether there is any material for the finding given by the Tribunal that the accounts are not correct and complete or whether such finding is based on any irrelevant consideration. Learned counsel for the petitioner has submitted that the Tribunal was persuaded to apply the provisions of Section 145(2) of the Act on the basis of the case of Arjun Lal who is also manufacturing laundry soap whereas the facts of the petitioner's case were altogether different and that the additions in the year 1982-83 were deleted and, therefore, there was no justification to sustain the addition to the extent of Rs. 50,000 and 40,000, respectively, for the assessment year, 1983-84 and 1984-85. Where the assessee has maintained books of account in the regular course of his business and the genuineness of the entries in such books is not challenged, then the same can be prima facie considered to be correct in view of the provisions of Section 34 of the Evidence Act. But, where the genuineness and regularity of the books of account is challenged, then the provisions of Section 145(2) of the Act could be invoked. In the present case, the various entries of the stock register were taken into consideration and, on the basis of that, the Income-tax Officer has come to the conclusion that the said register cannot be relied upon. The Tribunal has observed that, even in respect of the assessment year 1982-83, the provisions of Section 145(2) were applicable but the addition in that case was, not made as the trading results were better in the year 1982-83 in comparison to the preceding year. In the assessment years 1983-84 and 1984-85, on the basis of entries in the books of account, a finding has been given that the provisions of Section 145(2) are applicable. It is only for the purpose of the extent of addition that the Tribunal has taken into consideration the history of the previous year and the gross profit rate of comparable cases. It is not the case of the Arjun Soap Factory on the basis of which estimation has been made because, in that case, the gross profit made was 16% which was applied by the Income-tax Officer and additions of Rs. 1,66,035 and Rs. 1,67,949 were made by the Income-tax Officer in the assessment years 1983-84 and 1984-85, respectively, while making the best judgment assessment. Therefore, the submission of Mr. Kasliwal that the order of the Tribunal is based on irrelevant material is not substantiated. The various discrepancies with regard to the maintenance of the stock register, as pointed out by the Income-tax Officer in the assessment order and considered by the Tribunal in its order, have not been challenged to be incorrect and once it is found that the provisions of Section 145(2) are applicable, then the question with regard to the additions to be made for the purpose of best judgment assessment has to be decided by the taxing authorities looking to the facts and circumstances of each case. The submission of Mr. Kasliwal is that the Tribunal was persuaded in its judgment by the facts in the case of Arjun Soap Factory for invoking the provisions of Section 145(2) is not correct. The provisions of Section 145(2) were invoked by the Tribunal on the basis of the various defects in the maintenance of the stock register and not on account of the case of Arjun Soap Factory which has subsequently been referred only for the purpose of estimating the quantum of the addition and even the addition to that extent had not been made. The provisions of Section 145(2) were held applicable for the assessment year 1982-83 but, in that year, the additions were not made since the books of account result declared were better in comparison to the previous year. In the assessment year 1983-84, the results declared were not better and, therefore, on the basis of the defects pointed out, the provisions of Section 145(2) were invoked. Learned counsel for the petitioner has not been able to satisfy us that the order of the Tribunal is based on irrelevant material or that any relevant material has been ignored and, therefore, the finding given by the Tribunal is a finding of fact and no question of law arises from the order of the Tribunal. The reference application is hereby rejected. No order as to costs. ;