1. By this reference under Section 256(1) of the I.T. Act, 1961, the Income-tax Appellate Tribunal, Indore, has referred the following question of law for the opinion of this court:
' Whether, on the facts and circumstances of the case, the Tribunal was justified in confirming the separate addition of luggage receipts to the total income particularly when proviso to Section 145 applied '
2. The material facts giving rise to this reference as set out in the statement of the case are as follows : The assessee is a registered firm deriving income from plying of passenger buses. The assessment year under reference is 1975-76, of which the relevant accounting year is the financial year ending March 31, 1975. The ITO rejected the trading results disclosed by the assessee and estimated the profits by applying a net profit rate of 20% on Rs. 8,86,000. On appeal by the assessee the Commissioner of Income-tax (Appeals) reduced the estimated receipts to Rs.7,93,206 and applied the net profit rate of 19%. He also added luggage receipts of Rs. 30,192 and worked out the total income at Rs. 1,80,101. On further appeal by the assessee the Appellate Tribunal maintained the order of the Commissioner, of adding the luggage receipts separately, but reduced the net profit rate to 17 1/2%. At the instance of the assessee the Appellate Tribunal has referred the aforesaid question of law for the opinion this court.
3. The grievance of the assessee is that up to the year 1970-71 the luggage receipts were also added in the gross income of the assessee and the net profits were estimated on that basis. However, from the year 1971-72 the ITO separately added the luggage receipts. The assessee hadapplied for a rectification of the assessment for the years 1971-72 and 1972-73 and its application has since been allowed by the AAC. For the years 1973-74 and 1974-75 the Tribunal upheld the order of the ITO but the question whether the Tribunal was justified in adding the luggage receipts separately was referred to this court for its opinion. This court declined to answer the said question on the ground that in these references the Tribunal had recorded a finding that the assessee had not to incur any expenditure for earning the luggage receipts. The learned counsel contended that in the present case the Tribunal has not recorded any such finding and, therefore, the matter may be remitted to the Tribunal for recording a finding on the said question. He further contended that there cannot be any distinction between the luggage receipts and other receipts and, therefore, the taxing authorities ought to have estimated the gross income by adding the luggage receipts to it and thereafter ought to have arrived at the net profits and they were not justified in adding separately the whole of the amount of the luggage receipts in the income of the assessee.
4. Having heard the learned counsel for the parties we have come to the conclusion that the question referred to us has to be answered against the assessee. The Tribunal has not taken into account the luggage receipts while estimating the gross income of the assessee. The net profit has been arrived at ignoring the luggage receipts. In the circumstances the Tribunal did not commit any error in adding the luggage receipts separately to the net income estimated by the Tribunal on the basis of the other receipts of the assessee. While reducing the net profits rate the Tribunal has taken this fact into consideration which is apparent from the following observations of the Tribunal.
' 4, However, there is force in the alternative contention of the assessee that in view of the fact that the percentage of profits was determined in the earlier years on the entire income and that fact probably influenced us while determining the percentage of profits during the year in question. Therefore, some reduction in applying the net profit rate may be shown to it. Moreover, it was contended that there was no basis for assuming that the actual luggage receipts amounted to Rs. 36,000 as the ITO has done. In the past the actual luggage receipts used to be disclosed by the assessee itself and they were added to its estimated profits on the basis of the assessee's declaration. This year the assessee did not disclose the same but the ITO added the same on estimate. It is quite possible that the receipts may be lesser this time because they have always varied. With the means of transport having improved it is quite possible that lesser luggage involving extra payment may now be carried by the passengers. Keeping all these facts in view, we are of the opinionthat some reduction may be shown to the assessee in estimating the profits earned by it during the accounting year, more particularly in view of the fact that the buses are getting old every time and the prices of diesal and other materials including the wages of the employees are rising from day-to-day and there might be some lag between such rise in the prices and the corresponding increase in the fares. Keeping all these circumstances in view, we are of the opinion that the luggage receipts may be separately added as done by the CIT but a net profit rate of 17 1/2% on the remaining receipts be applied......'
5. It does not appear from the order of the Tribunal that the assessee placed on record that any expenses were incurred by it in deriving luggage receipts. In this year the assessee also did not declare the amount of luggage receipts earned by it and the ITO added the sum on estimate. Taking into consideration all these facts the Tribunal reduced the net profit rate to 17 1/2%. In the circumstances there is no scope for the argument that the Tribunal should be directed to record a finding whether any expenses were incurred by the assessee in deriving luggage receipts.
6. The second contention of the learned counsel for the assessee cannot be considered because no such question is referred to us by the Tribunal. It also does not appear from the order of the Tribunal that the contention in this form was urged before the Tribunal. The said contention, therefore, does not arise out of the order of the Tribunal.
7. As luggage receipts were not included in the gross income of the assessee on the basis of which the net profits were determined it cannot be said that the Tribunal was not justified in adding luggage receipts separately.
8. As a result of the discussion aforesaid our answer to the question referred to us is in the affirmative and against the assessee. In the circumstances there shall be no order as to costs of this reference.