Income-Tax

----Reference---Estimation of income by Tribunal on the basis of evidence on record---Tribunal holding that ITO not justified in applying certain net profit rate and disallowing expenses claimed---No question of law arises---Income Tax Act, 1961, S.256(2).

Held, dismissing the application for reference, that the Tribunal while allowing the appeal, appreciated the evidence available on record in the case of the assessee and after appreciation of the evidence on record the Tribunal held that the Income-tax Authorities were not justified to apply the net profit rate of 6 per cent and 10 per cent and were, also, not justified in disallowing the expenses claimed by the assessee. The order had been passed by the Tribunal on the basis of appreciation of the evidence available on record. The findings recorded by the Tribunal were purely findings of fact which were based on proper appreciation of the material available on record and the evidence produced by the assesses. No question of law arose from the order of the Tribunal.

Sandeep Bhandawat for Appellant.

Dinesh Mehta for Respondent.

JUDGMENT

B.R. ARORA, J.---The assessee-firm, S.M. Bhatia Associates, Chittorgarh, for the assessment year 1988-89, showed the gross Income of Rs.1,19,460, against which it claimed expenses like the salary to the supervisor, conveyance expenses, stationery charges, overtime payments made to the supervisory staff, depreciation, etc., and declared the net income at Rs.69,525. No books of account were maintained by the assessee.

The case of the assessee was that it received a fixed income by way of commission at four per cent from J. K. Cement Company. The Income tax Officer applied the net profit rate of six per cent on receipts from the work of supply of labourers and on other receipts he applied the net profit rate at 10 percent and in the cases of Khera Brothers and Saurastra Engineers Industries he applied the net profit rate at 12 percent. The Income-tax Officer also disallowed the expenses claimed, by the assessee. The assessee, aggrieved with the order passed by the assessing authority, filed an appeal before the Commissioner of Income-tax (Appeals), Jodhpur, which was partly allowed and the net profit rate of 12 per cent in the cases of Khera Brothers and Saurastra Engineers was reduced to 10 percent.

The assessee, aggrieved by order passed by the Commissioner of income-tax (Appeals) Jodhpur, preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. The Tribunal allowed the appeal filed by the assessee. While allowing the appeal, the tribunal held that from the record produced by the assessee, the case of the assessee stands fully proved. The Tribunal further observed that the figure of receipts have not been disputed by the income-tax authorities, which suggests that the receipts were not understated. It also stands established from the evidence produced that the company was paying the commission to the assessee at four per cent on the actual payments of the wages made by it to the labourers and the attendance register and the wages schedule also support the assessee's version. The Tribunal was, therefore, of the view that the income-tax authorities were not justified to apply the net profit rate of silt percent and 10 per cent to the two types of receipts. The Tribunal was also of the view that the income-tax authorities were not justified in disallowing the expenses claimed by the assessee and the Tribunal, therefore, held that the claim for expenses was justified and, therefore, directed the assessing authority to allow the same to the assessee.

Dissatisfied with the order, dated April 30, 1993, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, the Revenue moved an application under section 256(1) of the Income Tax Act, 1961 to refer the questions of law mentioned in the application for the opinion of the High Court. The Tribunal dismissed the application and refused to refer the questions of law for the opinion of this Court on the ground that the findings recorded by the Tribunal are purely findings of fact and no referable question of law arises. The Revenue has filed tile present application under section 256(2) of the Act with the prayer that the Tribunal may be directed to state the case and to refer the following question of law for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in accepting the income of the assessee from contract work and in allowing the claim of expenses?"

We have perused the order, dated April 30, 1993, passed by the Tribunal as well as the order, dated April 6, 1994, passed by it. The Tribunal while allowing the appeal, appreciated the evidence available on record in .the case of the assessee and after appreciation of the evidence on record the Tribunal held that the income-tax authorities were not justified to apply the net profit rate of six per cent and 10 per cent and were also not justified in disallowing the expenses claimed by the assessee. The order has been passed by the Tribunal on the basis of the appreciation of the evidence available on record. The findings recorded by the Tribunal are purely findings of fact, which are based on proper appreciation of the material available on record and the evidence produced by the assessee. As no question of law -does arise out of the orders passed by the Tribunal, therefore, the Tribunal was justified in declining to refer the questions for the opinion of this Court. The question raised by the Revenue is purely a question of fact. The application filed under section 256(2) of the Income-tax Act by the Revenue has, therefore, no merit.

In the result, the application under section 256(2) of the Income-tax Act filed by the Revenue is, therefore, dismissed as no referable question of law arises in the present case.

M.B.A./4029/FCApplication dismissed.