Case: Parsram Parumal Vs. Commissioner of Income Tax, West Bengal

The appellant is a dealer in gold and silver and other commodities and has his head office at Calcutta. In the year of account Samvat year 2002 and 2003 ( 4, 1945, to October 23, 1946) corresponding to the assessment yearhe also carried on business at branch offices at Bombay, Karachi and other places. In the year of account, out of 1, 80, 997 sovereigns purchased by the appellant in his Bombay branch, 1, 66, 188 pieces were despatched to Karachi, 14, 309 pieces were sold locally in Bombay and 500 pieces were despatched to Calcutta. Thes, I.T. cum. E.P.T.), District Calcutta, by his order dated December 20, 1951, assessed the appellants total income derived from transactions in sovereigns at Rs. 56, 901, It was the appellants case that 1, 66, 188 pieces of sovereigns were despatched by him at cost price to his Karachi office, and were not sold and that by the sale of 14, 309 pieces in Bombay, he had earned a profit of Rs. 6,The appellant produced before theOfficer the journal of the Bombay branch showing the record relating to despatch of 1, 66, 188 sovereigns to the Karachi branch, and the commission and the transport charges etc. incurred in that behalf. The appellant also produced before theOfficer his " Noondh " showing the record of the transactions as entered in the books. In the view of theOfficer, the " gross profit of Rs. 6, 462 shown on the total sales of the value of Rs. 1, 13, 80, 331 at the rate of .06% was very low." He observedNo cash memos are available either for purchases or sales. Assessee was asked to give the addresses of certain parties from whom sales, and purchases were made but he expressed his inability to do so. It is however observed that mostly sales have been made to Karachi office and the margin of profit is likely to be much less."TheOfficer estimated the profits on the total sales of sovereigns at the rate of 0.5% at Rs. 56, 901 and after deducting therefrom Rs. 6, 492 returned by the appellant as his profit, he added on the sovereign account Rs. 50, 409 as income in the transactions in sovereigns in the Bombay branch. In an appeal against, the order passed by theOfficer, the Appellate Assistant Commissioner, Calcutta, confirmed that order observing" It is stated by the appellants representative that theOfficer wrongly rejected the profit in this account because out of the total number of sovereigns purchased, viz., 1, 80, 997 pieces, 1, 66, 188 pieces were sent to Karachi on commission and 500 were sent to Calcutta office at cost price and the balance, viz., 14, 309, were sold tobullion merchants of Bombay. It is also stated that the cash memos and vouchers for these purchases and sales transactions were not available because it was not the practice of maintaining them in Bombay. It is, however, noticed by me from the accounts books that the assessee did not record in the books of accounts the addresses of the parties with whom transactions were made and so they do not admit of any verification. The sales were also found to be mostly, in cash. In view of this fact and also, the fact that the rate of gross profit is very low, I consider that theOfficer was justified in not accepting the trading result shown. As regards the number of pieces stated to have been transacted, in the absence of supporting evidence regarding the number of sovereigns actually transacted upon, I do not think it is possible for me to accept the contention that the low margin of profit was fully explained by the above facts alone. TheOfficers estimate of .5% as the rate of gross profit in the cases seems to be quite reasonable and he has given due consideration to the fact that the assessee had made considerable sales to Karachi office."Against this order, an appeal was preferred to theAppellate Tribunal. The Tribunal rejected the contention raised by the appellant observing in paragraph 8 of the judgment that " for the reasons given by the Appellate Assistant Commissioner with regard to the sovereign account in the Bombay branch, we find no reasons to interfere in his decision." The appellant then applied to the Tribunal to refer certain questions arising out of the order to the High Court at Calcutta. Question No. 2 suggested by the appellant as arising out of the order of the Tribunal was as follows" Whether in the facts and circumstances of the case the Tribunal should not have held that the turnover both in Calcutta and branches on which the flat rate is to be applied should be arrived at after deducting therefrom the sum of Rs. 1, 47, 98, 413 admittedly found by theOfficer to have been transferred to Karachi from Calcutta and the various branches ? "The Tribunal rejected the application. The appellant then applied to the High Court at Calcutta that the Tribunal be directed to submit a statement of the case on three questions. The question material to the sovereign account was framed as follows" Whether there was any material to hold that the Bombay branch of your petitioner sold 1, 66, 188 pieces of sovereign to the Karachi branch at market rates.? "The High Court summarily rejected the application

Reasoning: The order passed by theOfficer does not refer to any evidence in support of the assertion made by him that the Bombay branch of the appellant sold sovereigns to the Karachi branch. The Appellate Assistant Commissioner did not reject the plea raised by the appellant that the sovereigns purchased by the Bombay branch were sent to the Karachi branch on commission. The criticism of the Appellate Assistant Commissioner about the unsatisfactory character of the evidence has a bearing on the local sales and not on the despatches to Karachi. The Tribunal merely accepted the conclusion of the Appellate Assistant Commissioner ; it gave no independent reasons in support of its order. Theauthorities did not find that on a comparison of the rates at which the sovereigns are debited in the Bombay branch and the rates at which they were credited in the Karachi branch, any profit was earned by the Bombay branch. The commission account is not incorporated in the printed paper book, but it is not even suggested that the commission was in the nature of profit and not service charges as submitted by counsel for the appellant. In our view, a question of law arises from the judgment of the Tribunal which confirmed the order of the Appellate Assistant Commissioner. We accordingly direct that the Tribunal do draw up and submit a statement of the case on the following question which arises from the order of theWhether there was any material to hold that the Bombay branch of the assessee sold 1, 66, 188 pieces of sovereigns to the Karachi branche are in this appeal not concerned with the correctness of the rate applied by theOfficer on the local sales of sovereigns in the Bombay market. We are only concerned with the question whether there was any material to hold that the Bombay branch of the appellant had sold 1, 66, 188 pieces of sovereigns to the Karachi branch