Law:

Section:

(a) Income-tax Act (XI of 1922) --- S. 66(1) read with S. 13, proviso-Question neither "raised" before Appellate Tribunal nor "arising" out of its order-Held, cannot be raised for first time before High Court. (b) Income-tax Act (XI of 1922)-- S. 66(1)-Reference to High Court-When can question be said to "arise". JUDGMENT MUHAMMAD AMIN Burr, J.-This is a reference application at the instance of assessee who is a manufacture of art silk cloth. 2. The brief facts of this case are that for the assessment year 1971-72 the assessee declared a loss of Rs. 1,17,679. In the course of assessment under section 23(3) of the Income-tax Act the Income-tax Officer found that the assessce bad consumed 21,188 Lbs. Yarn while production of cloth was 20,040 Lbs. which disclosed the wastage of 5.41 % as against 5.24 % shown in the preceding year. The Officer further found that no day to day production record had been maintained. Describing the claimed wastage of 5.41 % as excessive he allowed it at only 2 % and disallowed the balance of 3.41 as "excessive unexplained wastage" and thus added Rs. 21,860, to the returned income of the assessee. 2. On appeal before the Income-tax Appellate Tribunal the action of the learned Income-tax Officer was questioned on the ground that he had not disclosed any basis for the wastage allowed by him. 3. Before the Appellate Tribunal the following grounds were taken: (i) that the order of the learned Income-tax Officer in making ,an addition of Rs. 21,860, to the cloth account on account of shortage is unjustified, improper, wrong and arbitrary. (ii) that the wastage is proper compared to the earlier year's wastage. Besides it is in order in view of the items manufactured this year. A perusal of the order of the Income-tax Appellate Tribunal also shows that the assessee did not dispute the rejection of accounts nor did he dispute the fact that no day to day record of production and wastage was maintained. The Tribunal disposing of the appeal observed that the assessee had questioned the addition of Rs. 21,860, on the ground that the Income-tax Officer -had not disclosed any basis for the wastage allowed by him and on that score the addition should…

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