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1953 Supreme(Pat) 51
PATNA HIGH COURT
V.Ramaswami and B.P.Jamuar JJ.
Hanutram Chandanmul
Versus
Commissioner Of Income Tax
Miscellaneous Judicial Case No. 264 of 1952 ;
Decided On : MARCH 20, 1953
The members of the Tribunal must formulate the point of difference between them before they make reference to the President of the Tribunal.
Headnote:
INCOME TAX - Reference to President of Tribunal - Difference of opinion between members of Tribunal - Point of difference not formulated - Reference incompetent - President has no jurisdiction to hear reference - Assessment cannot be completed in accordance with direction of President.
Fact of the Case:
The assessee's books of account were rejected by the Income-tax Officer, who estimated the total sales of bullion and profit. The assessee appealed to the Appellate Assistant Commissioner and then to the Income-tax Appellate Tribunal. The Judicial Member of the Tribunal upheld the Income-tax Officer's decision, while the Accountant Member proposed a lower addition to the income. The case was referred to the President of the Tribunal, who directed that a lower amount be added to the assessee's income.
Finding of the Court:
The court held that the reference to the President of the Tribunal was incompetent because the members of the Tribunal had not formulated the point of difference between them. The court also held that the President had no jurisdiction to hear the reference and that the assessment could not be completed in accordance with the direction of the President.
Issues: 1. Whether the order of the President of the Tribunal is in accordance with law? 2. Whether the assessment can be legally completed in accordance with the direction contained in the order of the President of the Tribunal?
Ratio Decidendi: 1. Section 5A(7) of the Indian Income-tax Act requires that if the members of the Tribunal are equally divided, they shall state the point on which they differ and the case shall be referred to the President of the Tribunal for hearing on such point by one or more of the other members of the Tribunal. 2. In the present case, the members of the Tribunal did not formulate the point of difference between them, and therefore the reference to the President of the Tribunal was incompetent. 3. The President had no jurisdiction to hear the reference and the assessment could not be completed in accordance with the direction of the President.
Final Decision: The reference to the President of the Tribunal was incompetent and the case must now go back to the Income-tax Appellate Tribunal for being dealt with and disposed of in accordance with law.
1. The assessee is a firm Hanutram Chandanmal of Kishunganj. The books of account for the year ending Chait Sudi 8,2004 Samvat disclosed sales of silver to the extent of Rs 2,04, 545 and the gold to the extent of Rs 2,34,344. The account books disclosed a gross profit of Rs. 9,710. The Income-tax Officer, however, rejected the books of account and estimated the total sales of bullion at Rs. 4,50,000 and profit at 5 per cent. In result, the Income Tax officer added a sum of Rs. 12,800 to the income as disclosed by the books of account. The assessee took an appeal to the Appellate Assistant Commissioner but the appeal was dismissed. A further appeal was taken to the Income-tax Appellate Tribunal. The, Judicial Member was of opinion that the Income-tax officer was right in applying the proviso to Sec.13, but the Accountant Member stated as follows:
"I am inclined to the view that in the circumstances of the case, the books should not have been rejected as has been done by the Income-tax authorities, but on the other hand should have formed the basis of the assessment with such adjustments as may be found necessary for any I shortage claimed which may appear to be in excess of the usual percentages in the trade. The stock records, viz., the daily stock register as well as the melting records, disclosed, as observed above only small discrepancies which have to be in the nature of things, arithmetical in character. The book of original entry, the kachi Rokar contains all the materials available for a proper quantitative tally. The final shortage ascertained on the basis of the inventory after due allowance for a reasonable normal shortage requires to be adjusted in the assessment. In facts of the case, such additions do not appear to be of such considerable proportion as to require any accurate working. The shortage of 5 tolas of gold and 100 tolas of silver as revealed in the final inventory cannot amount to more than Rs. 700/-. Counting in other possible minor discrepancies from day to day, I am of opinion that an overall addition of say Rs. 2,800 on this account will more than adequately cover the requirements of the case, instead of Rs. 12,800 as at present in the assessment, so that a modification of the assessment to the extent of Rs. 10,000 is necessary."
As there was difference of opinion the case was referred to the President of the Income-tax Appellate Tribunal under Sec. 5A(7), Indian Income-tax Act. The order of reference was in the following, terms
"As there is a difference of opinion between us on the only contention in this appeal, we hereby refer the appeal to the President under Sec. 5A(7), Income-tax Act."
The President heard the appeal and formed the opinion that the Income-tax Officer was right in taking recourse to the provision of Sec.13, Income-tax Act. The President, however, directed that in order to compute the profits of the assessee a rate of 3 per cent, should be applied to the sales of silver amounting to Rs. 2,04,545 and the rate of 5 per cent, to the sales of gold amounting to Rs. 2,34,344. According to this direction the amount to be added to the assessees income as disclosed by the books was Rs. 8,143.
2. At the instance of the assessee the Income-tax Appellate Tribunal has formulated the following questions of law for the opinion of the High Court; (1) whether the order of the President of the Tribunal is in accordance with law? and (2) whether the assessment can be legally completed in accordance with the direction contained in the order of the President of the Tribunal?
3. As regards the first question, it was pointed out by Mr. R.J. Bahadur who presented the case of the assessee that the two members of the Tribunal who heard the appeal in the first instance did not formulate the point or points on which they differed. The order of reference merely states that
"there was a difference of opinion between the two members of the Tribunal on the only contention in the appeal."
The point on whi
