R.N. Misra, J.
1. Under the direction of this court on an application of the assessee under Section 256(2) of the Income-tax Act, 1961, the Appellate Tribunal has stated a case and referred the following question for opinion of the court:
'Whether, in the facts and circumstances of the case, without rejecting the accounts, the Appellate Tribunal was justified in sustaining disallowance of the expenditure of Rs. 30,000 on coal account and directing addition of that amount to the assessee's income for the year ?'
2. The year of assessment is 1968-69. Assessee is a company engaged in the manufacture of various ceramic articles including pipes. Assessee showed a net loss of Rs. 83,935 in the profit and loss account. In computing the loss, the assessee claimed deduction of Rs. 1,05,429 on the head of expenses for consumption of coal in the manufacturing process. The Income-tax Officer was of the view that the claim was excessive on the basis of past records and, therefore, deleted a sum of Rs. 45,000 out of the same. The Appellate Assistant Commissioner upheld the disallowance. When the matter came to be argued before the Tribunal the Tribunal had the advantage of a report of the Appellate Assistant Commissioner on the result of investigation made by him in regard to the assessment years 1962-63 to 1966-67. Undoubtedly, the past record as referred to by the Income-tax Officer and the Appellate Assistant Commissioner while dealing with the assessment of this year has been altered by the findings of the Appellate Assistant Commissioner pursuant to the direction in second appeal. Before the Tribunal, however, the result of the investigation was noticed. The Tribunal has indicated in paragraph 3 of its appellate order :
'It is pointed out by the learned counsel for the assessee with reference to the copy of revised order of the Appellate Assistant Commissioner that in the assessment years 1963-64 to 1966-67, the Appellate Assistant Commissioner had deleted completely the additions made on account of excessive coal consumption accepting the consumption ratio ranging from 57.8% to 67.7% against the number of pipes produced. It is urged that having regard to past acceptance of consumption ratio by the Appellate Assistant Commissioner based on detailed examination of the accounts maintained by the assessee and evidence produced in support thereof, the ratio of coal consumption for the two years under appeal, at 61.7% for the assessment years 1967-68 and 70.4% for the assessment year 1968-69, could not be considered to be unreasonable expenses.'
3. After referring to the matter from this point, the Tribunal, ultimately, upheld the addition of Rs. 30,000.
4. Mr. Pasayat for the assessee has placed a statement in respect of the assessment years 1963-64 to 1969-70 in regard to consumption of coal, its ratio and the claim raised by the assessee and as accepted by the department. As it appears, for the years 1963-64 up to 1967-68 the percentage was between 57.8 and 67.7. With the addition sustained by the Tribunal the percentage admitted in this year works out to 50%. It may not be out of place to indicate that for the next immediate succeeding year the revenue has accepted the percentage to be little more than 70.
5. On the basis of these figures and the findings recorded by the departmental authorities, Mr. Pasayat contends that without rhyme or reason the Tribunal should not have confined the disallowance to a sum of Rs. 30,000 thereby admitting the percentage of 50 only as against the past record. There is force in the contention of the assessee.
6. Admittedly, the aspect with which we are dealing is one of fact. In the reference application there would be no scope for taking a different view from what has been adopted in second appeal. But, as the reasons have not been given and the reference to the record reflects a different position, we are inclined to hold that the Tribunal was not justified in sustaining disallowance of expenditure of a sum of Rs. 30,000 on the head of coal expenses. On the other hand, it would be reasonable to adopt the past record and fix the average ratio somewhere between 60% and 65% on the finding of the Appellate Assistant Commissioner on the basis of the certificate furnished by the Indian Ceramic Society that expenses should range between 50% and 60% of the production. After the records are produced before the Tribunal it is open to the Tribunal to quantify the amount on such basis.
7. Our answer to the question, therefore, is that the Appellate Tribunal was not justified in sustaining disallowance to the extent of Rs, 30,000 in the facts and circumstances of the case.
8. We make no order as to costs.
N.K. Das, J.