- (1.) THE Revenue has moved an application under S. 256(2) with the request that the following two questions of law arise out of the order of the Tribunal dt. 29th Sept., 1980, and, therefore, the Tribunal be directed to refer the same : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the AAC deleting the addition of Rs. 1,79,059 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the finding of the AAC in deleting the addition of Rs. 13,075 made on account of interest paid ?"
(2.) THE brief facts of the case are that the assessee is a manufacturer of yarn and made purchases of acrylic fibre cotton and waste for a sum of Rs. 1,79,058 from Haresh Traders of Bombay. The assessment under S. 143(1)(a) was framed by the ITO on 30th March, 1974. Subsequently, an information was received by the ADI. (Int.), Bombay, by letter dt. 2nd Jan., 1977, that Haresh Traders was not a genuine concern. An affidavit of Shri Kashi Nath Mahadev Khardo was also forwarded by the ITO, Central Circle, Bombay, to the assessing authority of the assessee from which it was evident that Haresh Traders simply issued the bills and no actual business was carried on by the concern. The reassessment proceedings were initiated and the ITO recorded a finding that the purchase transaction was not genuine and the purchases were entered with a view to reduce the profit of the trader. But an addition to Rs. 1,79,058 was made on this account. A further addition of Rs. 13,075 was made by the ITO on the ground that the payment aggregating to Rs. 82,000 allegedly made to Haresh Traders was not for the purpose of business and the assessee charged interest on the loans having been raised thereon. The proportionate amount of interest of Rs. 13,075 was disallowed by the ITO. Against the reassessment order, an appeal was preferred and the appeal was accepted by the CIT (A.). The order of the CIT(A.) was confirmed by the Tribunal. Without going into the merits of the case at this stage, I find that in view of the observations made by the apex Court in the case of Phool Chand Bajrang Lal vs. ITO (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456, a question of law does arise from the order of the Tribunal.
(3.) ACCORDINGLY , the Tribunal is directed to refer the two questions of law. The reference is allowed. *****;