High Court Of Gujarat
CIT vs. Kashiram Textile Mills (P) Ltd.
Sections 69, 254(2), 256(2)
Asst. Year 1977-78
D.A. Mehta & Ms. H.N. Devani, JJ.
IT Ref. No. 39 of 1995
25th January, 2006
Counsel Appeared
B.B. Naik, for the Applicant : Manish J. Shah, for the Respondent
JUDGMENT
D.A. Mehta, J. :
The Tribunal, Ahmedabad Bench ‘C’, has referred the following two questions for each of the references under s. 256(2) of the IT Act, 1961 : “RA No. 352/Ahd/1988 :
(1) Whether, the Tribunal is right in law in deleting the addition of Rs. 7,65,960 on account of fictitious purchases of colour and chemicals ?
(2) Whether, the Tribunal is right in law in recalling the earlier order on the same facts ?
RA No. 353/Ahd/1988 :
(1) Whether, the Tribunal is right in law in deleting the addition of Rs. 6,40,960 on account of fictitious purchases of colours and chemicals ?
(2) Whether, the Tribunal is right in law in recalling its earlier order on the same facts ?”
Both these references arise out of the appeal of the assessee and appeal of the Revenue, respectively.
2. The assessment year is 1977-78 and the relevant accounting period is commencing from 1st July, 1975 and ending on 30th June, 1976. The assessee, a private limited company, is carrying on business of bleaching, dyeing, printing and processing of grey cloth purchased from the market, and for this purpose utilised colours and chemicals as raw materials which are procured from the market. The case of the AO was that the purchases shown by the assessee of colours and chemicals were fictitious and hence an addition of Rs. 6,40,960 came to be made. The assessee carried the matter in appeal and succeeded partly. The CIT(A) upheld the addition to the extent of Rs. 1,25,000 while granting relief for the balance amount. Against the order of CIT (A), Revenue preferred an appeal challenging the relief granted by CIT(A), and the assessee preferred appeal challenging partial confirmation of the addition. The Tribunal after hearing both the appeals together passed a consolidated order on 20th Aug., 1987 whereunder the appeal of Revenue was allowed and that of the assessee was dismissed on this count. The assessee thereupon preferred a miscellaneous application bearing No. 78/Ahd/1987 inviting attention of the Tribunal to certain errors committed by the Tribunal. As the said miscellaneous application and the order thereon were not forming part of the paper book, the learned counsel for the applicant-Revenue was directed to produce the same so as to complete the record and enable the Court to appreciate the contentions of the parties. With the consent of the learned counsel appearing for the respective parties miscellaneous application filed by the assessee before the Tribunal, extract of the original order dt. 20th Aug., 1987, order dt. 2nd Dec., 1987 made on miscellaneous application and order dt. 3rd Dec., 1989 rejecting the reference application have been taken on record.
To complete the sequence of events it requires to be noted that while passing the order on 2nd Dec., 1987 in MA No. 78/Ahd/1987 the Tribunal recalled its order dt. 20th Aug., 1987. Thereafter, Tribunal heard the appeals and passed a consolidated order dt. 26th Feb., 1988 dismissing the appeal of the Revenue and partly allowing the appeal of the assessee. It is this order which is under challenge. Heard Mr. B.B. Naik, learned standing counsel for the applicant. In relation to question No. 2 in each of the references the contention was that in light of ratio of apex Court decision in case of CIT vs. Hindustan Zinc Ltd. (2000) 163 CTR (SC) 273 : (2000) 243 ITR 867 (SC), the order of Tribunal amounted to review and unless such powers are statutorily available to an authority, it would not be open to undertake such an exercise. He, therefore, submitted that the entire order was without jurisdiction. The only powers that Tribunal has are in terms of s. 254(2) of the Act. He also pressed into service the decision in the case of CIT vs. Shervani Sugar Syndicate Ltd. (1993) 200 ITR 745 (All) and in the case of Salem Cooperative Central Bank Ltd. vs. CIT (1993) 111 CTR (SC) 394 : (1993) 201 ITR 697 (SC) with a special reference to the observation at page Nos. 700 and 701 of the reports. In sum and substance, the submission was that the so-called order of rectification was not an order of rectification but was an order of review which was not permissible.
When it was pointed out to the counsel that the said order viz., order dt. 2nd Dec., 1987 had attained finality and was not under challenge, he submitted that it was open to the applicant to agitate the said issue because the impugned order dt. 26th Feb., 1988 would be part and parcel of the rectification proceedings. In other words, order dt. 2nd Dec., 1987 was merely an interim order and had merged in the present order. In relation to question No. 1 in both the references, it was submitted that the Tribunal had committed an error in appreciating the evidence. That the first order in point of time whereby the appeal of Revenue had been allowed and the assessee’s appeal dismissed on this ground ought to be treated to be the only subsisting order. Insofar as question No. 1 is concerned, the Tribunal has taken note of the fact that Revenue has not disputed the details of the closing stock. Therefore, the Tribunal has found, that in the facts and circumstances of the case, the existence of the raw materials purchased cannot be doubted, and if that is the situation, there could be no case for disputing the purchases. The Tribunal has further recorded that there was no material on record to conclude that in addition to the alleged fictitious purchases there were also some other purchases for the same material under different invoices which could be reflected in the closing stock. It is further recorded by the Tribunal that to the contrary, from the details submitted, even if such a doubt existed regarding existence of some purchases over and above the alleged fictitious purchases, the doubt on this aspect was also removed. For this purpose, the Tribunal has by way of illustration analyzed the account of one of the items, appearing as Annex. ‘6’ in the paper book filed before the Tribunal and come to the irresistible conclusion that quantity remaining in the closing stock is only out of the purchases effected by the assessee. It is in light of the aforesaid findings that the Tribunal has held that no addition was warranted on account of alleged fictitious purchases.
10. Similarly, in relation to the rate of purchases, the Tribunal has recorded that in absence of any material to show that the purchase price shown in the invoices was inflated it was not possible to sustain the addition on the said ground. The Tribunal has further recorded that there was no evidence to show that a part of the amount paid to the suppliers had come back to the assessee and therefore also there was no case for any addition in respect of such purchases. It has further been found by the Tribunal that purchases as such are deductible while computing profits and hence even if some higher purchase price had been paid that would be no ground for making or sustaining any addition, in absence of any evidence to show what was the prevailing market price.
11. Thus, on reading the impugned order of Tribunal as a whole, it is apparent that it is solely based on an appreciation of evidence and records finding of fact in the light of the evidence which was led before the Tribunal. In the circumstances, there is no reason to take any other view of the matter. Question No. 1 in each of the references therefore requires to be answered in the affirmative i.e., in favour of the assessee and against the Revenue.
12. The position in law is well settled. Merely because the High Court has called for a reference under s. 256(2) of the Act it is not necessary for the High Court to decide an issue or a question which does not arise out of the impugned order of Tribunal. As the facts reveal the order dt. 26th Feb., 1988 does not record any finding of recalling the earlier order. That order is made in MA No. 78/Ahd/1987 on 2nd Dec., 1987. In fact, the order dt. 26th Feb., 1988 records in para No. 1 thus :”In these appeals earlier the order was passed on 20th Aug., 1987 but the same was recalled for the reasons recorded in our order dt. 2nd Dec., 1987 in MA No. 78/Ahd/1987 filed by the assessee. The appeals were again heard on 13th Jan., 1988.”
13. The record thus reveals that Tribunal made three orders : First order dt. 20th Aug., 1987 in the appeals filed by the assessee and the Revenue; second order dt. 2nd Dec., 1987 in miscellaneous application filed by the assessee; and third order dt. 26th Feb., 1988 again in the Departmental appeal and the assessee’s appeal. Therefore, if Revenue was aggrieved it was by the order dt. 2nd Dec., 1987 made in MA No. 78/Ahd/1987, because that was the order whereby the Tribunal had recalled its earlier order dt. 20th Aug., 1987. The effect is : First order dt. 20th Aug., 1987 did not survive as vide second order dt. 2nd Dec., 1987 the order dt. 20th Aug., 1987 had been recalled and the appeals restored to file. Thus, the only order by which the appeals came to be disposed of is the third order dt. 26th Feb., 1988.
14. In light of the aforesaid facts it is not possible to accept the contention that the said order dt. 2nd Dec., 1987 is part and parcel of order dt. 26th Feb., 1988, as both the orders have been made in separate proceedings, i.e., in miscellaneous application and in appeals. Revenue having not challenged the said order viz., order dt. 2nd Dec., 1987 question No. 2 in each of the references does not arise out of Tribunal’s impugned order dt. 26th Feb., 1988 and accordingly question No. 2 is left unanswered. As the said question has not been answered by this Court it is not necessary to deal with the contentions raised on behalf of the applicant on merits of the said controversy.
15. The reference stands disposed of accordingly i.e., question No. 1 is answered as aforesaid and question No. 2 in each of the references is left unanswered in light of the facts and circumstances of the case.
16. The reference stands disposed of accordingly. There shall be no order as to costs.
[Citation : 284 ITR 61]
