The ITAT's refusal to refer questions of law to the High Court will not be interfered with if the findings of the ITAT are based on material on record and the assessee has failed to show that the findings are vitiated on any good ground.

Headnote:
INCOME TAX ACT, 1961 - SECTION 256(2) - REFERENCE TO HIGH COURT - ADDITION OF INCOME FROM UNRECORDED CASH SALES AND UNDISCLOSED SOURCES - TRIBUNAL'S REFUSAL TO REFER QUESTIONS OF LAW - VALIDITY.
Fact of the Case:

The assessee, a firm dealing in sugar, foodgrains, and agricultural commodities, filed an application under section 256(2) of the Income-tax Act, 1961, seeking direction to the Income-tax Appellate Tribunal (ITAT) to refer certain questions of law for the opinion of the High Court. The ITAT had upheld additions made to the assessee's income by the Income-tax Officer (ITO), including Rs. 5,000 as unrecorded cash sales and Rs. 27,000 as income from undisclosed sources.
Finding of the Court:

The High Court held that the ITAT's refusal to refer the questions of law was not incorrect. It found that the addition of Rs. 5,000 as unrecorded cash sales was based on material on record, including an admission made by the assessee before the Commercial Taxes Officer. The High Court also found that the addition of Rs. 27,000 as income from undisclosed sources was based on evidence and that the assessee had failed to explain the discrepancies in regard to the G.C. sheets.
Issues: 1. Whether the ITAT erred in refusing to refer the questions of law to the High Court. 2. Whether the addition of Rs. 5,000 as unrecorded cash sales was valid. 3. Whether the addition of Rs. 27,000 as income from undisclosed sources was valid.
Ratio Decidendi: 1. The High Court held that the ITAT's refusal to refer the questions of law was not incorrect because the additions made by the ITO were based on material on record and the assessee had failed to show that the findings were vitiated on any good ground. 2. The High Court found that the addition of Rs. 5,000 as unrecorded cash sales was valid because it was based on an admission made by the assessee before the Commercial Taxes Officer. 3. The High Court found that the addition of Rs. 27,000 as income from undisclosed sources was valid because the assessee had failed to explain the discrepancies in regard to the G.C. sheets.
Final Decision: The High Court dismissed the assessee's application for a reference under section 256(2) of the Income-tax Act, 1961.

JUDGMENT

1. - This is an application under section 256(2) of the Income-tax Act, 1961 (for short " the Act "), filed by the assessee for direction to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur ("the Tribunal" herein), to state the case and refer the following questions of law for the opinion of this court:

"1. Whether there was any material with the Income-tax Appellate Tribunal to uphold an addition of Rs. 5,000 as income from 'other sources' being unrecorded cash sales ?

2. Whether, on the facts and in the circumstances of the case, there was legal and admissible evidence to support the finding of the Income-tax Appellate Tribunal contained in its order dated December, 1976, upholding the addition of Rs. 5,000 as income from undisclosed sources ?

3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified to sustain an addition of Rs. 27,000 as income from undisclosed sources ?

4. Whether the order of the Income-tax Appellate Tribunal is not vitiated on account of non-consideration of the material evidence and on consideration of the totally irrelevant and conjectural material ?

5. Whether, on the facts and in the circumstances of the case, could it be legally held that the burden to prove that M/s. Iron & Steel Association had with it the required quantity of G.C. sheets which had been certified as pledged with the bank in the account of the assessee, was on the assessee and (on) the failure to do so by M/s. Iron & Steel Association would an addition of Rs. 27,000 as the income of the assessee (be justified) ?

6. If the answer to the above question is in the affirmative, whether there was any material with the Income-tax Appellate Tribunal to uphold the addition of Rs. 27,000 being the value of Rs. 150 bundles of G.C. sheets and against the shortage of 105 bundles of G.C. sheets ?"

2. The assessee is a firm consisting of four partners. It deals in sugar, foodgrains and agricultural commodities. The assessee has also income from property. The assessment year in question is 1970-71. The assessee filed its return for the assessment year 1970-71 on April 10, 1972, declaring an income at Rs. 25,295. The Income-tax Officer by his order dated March 13, 1973, completed the assessment on a total income of Rs. 2,11,630, making, inter alia, the following additions to the returned income:

		Rs.
"1.	Trading additions	67,970
2	Income from (other) sources:
(a)	Unrecorded cash (sales) difference	5,000
(b)	The value of the difference in the stock of sugar as per the books of the assessee and as per the record of the bank	84,800
(c)	The value of the difference in the stock of G.C. sheets as recorded in the books of the assessee and are found recorded in the books of the bank	27,000
3	The addition in the truck A/c	3,888
4	Addition due to sales tax penalty	2,,388."

3. The assessee went in appeal and the Appellate. Assistant Commissioner gave relief to the assessee amounting in all to Rs. 1,14,212. He, however, sustained the following additions:

		Value Rs.
"1.	Trading account additions	38,558
2.	Addition in the truck A/c	3,388
3.	Addition due to unrecorded cash (sales)	5,000
4.	Difference in the value of the stock of G.C sheets as above	27,000
5.	Disallowance on account of sales tax penalty	2,367"

4. Dissatisfied, the assessee went in further appeal to the Tribunal. The Tribunal partly allowed the appeal by its order dated December 6, 1976. It, however, confirmed the additions of Rs. 5,000 and Rs. 27,000 and the aforesaid two items of additions are the subject-matter of the present reference application. An application under section 256(1) of the Act was filed by the assessee for referring the questions of law arising out of the order dated December 6, 1976. The Tribunal rejected the reference application by its order dated January 9, 1978. The assessee has f

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1985 Supreme(Raj) 459

RAJASTHAN HIGH COURTDwarka Prasad, S.K.Mal Lodha, JJ.Jai Chand Kanji & Co. - AppellantVersusCommissioner of Income Tax - RespondentD.B. Income Tax Case No. 62 of 1978.Decided On : 6-05-1985

The ITAT's refusal to refer questions of law to the High Court will not be interfered with if the findings of the ITAT are based on material on record and the assessee has failed to show that the findings are vitiated on any good ground.

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RAJASTHAN HIGH COURT
Dwarka Prasad, S.K.Mal Lodha, JJ.
Jai Chand Kanji & Co. - Appellant
Versus
Commissioner of Income Tax - Respondent
D.B. Income Tax Case No. 62 of 1978.
Decided On : 6-05-1985