2002 PLP 1375 (PTD)

The dispute relates to the assessment year 1987‑

88. The assessee is a registered firm dealing in arecanuts and other allied agricultural produces like pepper, rubber seeds, copra, etc. Its main business is in arecanuts sent on consignment basis outside Kerala. For the accounting year ended on March 31, 1987, relevant to the assessment year 1987‑88, the assessee filed its return on December 4, 1987, admitting a total income of Rs. 1,03,

644. From the accounts it was revealed that total sale of arecanuts effected during the period was for a sale value of Rs.44,02,

378. Consignment sales were accounted for by the assessee from year to year on the basis of receipt of sale pattials from the consignees. The Assessing Officer did not accept the method adopted by the assessee and was of the view that the assessee's consignment sales should be enhanced in the following manners. Name of consignee Quantity Gross amount of sales as per sale pattials Expenses to be allowed there‑ from Kerala Supari Centre Ibrahim & Bros. 6692‑24‑200 200‑20‑000 1,28,09,834 2,28,084 6,05,875 29,543 The assessee's claim before the Assessing Officer was that sale pattials in respect of the above sales were received in the subsequent years and consistent with the method adopted by it from year to year, sales were accounted in the accounting years corresponding to the assessment years 1988‑89 and 1989‑90, respectively, in respect of the assessee's consignees. The sales were included in the trading account and on that basis the gross profit was arrived at Rs. 54,82,00I by the Assessing Officer. This resulted in addition of Rs. 30,40,601 to the income disclosed by the assessee. In appeal the Commissioner of Income‑tax (Appeals) (in short "the CIT(A)"), confirmed the addition. In second appeal, the Tribunal held that considering the method of accounting consistently followed and taking into account the factual position 50 per cent. of the sales was to be considered for the concerned assessment year. Accordingly, direction was given to take into account the correct figure. Both the Revenue and the assessee assailed the conclusion and filed applications under section 2560) of the Act which were rejected. Thereafter, this Court was moved under section 256(2) of the Act and the directions were given as afore stated. Learned counsel for the Revenue submitted that the concept of income due was lost sight of by the Tribunal. It was, according to him, inconceivable that the sale pattials were not received for such a long time as contended by the assessee, particularly in view of the fact that some of the partners were common to the assessee and the consignee Learned counsel for the sssessee submitted that the undisputed position being that the method of accounting as adopted for the previous period was being followed, there was no scope for making any addition. As and when the sale pattials were received, they were duly reflected in the accounts and income returns were filed. It is to be noted that the system of accounting followed by the assessee was not strictly the mercantile system or cash system. It was a mixed system. Though it is trite law that profits of a particular year have to be determined in that year and if the accounts are not reliable, resort can be made to section 145(2) of the Act, yet it would depend upon the factual position. The Tribunal analyzed the materials on record at length. It directed the filing of the original sale pattials for verification and also noticed the dates on which the said pattials were received. This aspect has been analyzed by the Tribunal in its judgment in paragraphs 23 and

24. After having analysed the factual position and taking note of the peculiar features existing, more particularly the details contained in the sale pattials, it was found appropriate to direct that 50 per cent. of the sale price can be allowed for the delayed receipt of sale pattials from the consignees and the balance shall be taken for the purpose of computing the income. It noted that the sale pattials contained various information s about date of arrival of goods, mode of transportation with reference to lorry number, date of sale, bill number, quantity in bags, net weight, rate at which the sales were made and the total price. Packing charges and incidental charges were added to the sale amounts in order to arrive at the total sale amount. As against such sales noted in the sale pattials, details of the expenditure incurred under different heads like commission, brokerage, labour charges, insurance, godown charges, etc., were indicated. Pattials also contained the details of remittances by hundi, T.T. or cash with relevant particulars. All these go to show that some time was necessary for preparation of the sale pattials to be furnished to the principal, i.e., the assessee. The Tribunal recorded a finding on facts that reasonable margin of time was necessary for the pattials to reach the assessee. That being the conclusion, the margin of 50 per cent. attributable to the time gap was fixed. The conclusions are essentially on facts and cannot be said to be perverse or based on surmises or conjectures. The peculiar features of the business transactions were noticed by the Tribunal to arrive at its conclusions. In our considered opinion, the conclusions being essentially of fact, no question of law arises out of the order of the Tribunal. Accordingly, we declined to answer the questions referred. The references are disposed of accordingly. M.B.A./687/FC Order accordingly.