Court affirms exclusion of certain sales, calls for additional assessment of inflated income. Decision set aside for further review.

The Court upheld the Tribunal's decision to exclude specified amounts as sales and fictitious income but emphasized the need for further assessment by the assessing officer to determine the quantum of inflated income for the residual period not covered by the special audit. The Court set aside the impugned decision and remanded the matter for detailed examination.

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Issues Involved:
1. Whether the Income Tax Appellate Tribunal was justified in deleting the sales inflation figure from the assessee's incomeRs.
2. Whether the order directing the assessing officer to exclude specific amounts being the sales and fictitious income from the total income for two block periods is perverseRs.

Analysis:
1. The Tribunal directed the assessing officer to exclude sums shown as fictitious income by the assessee in its account. The Tribunal found these sums to be sales inflation figures. The assessee claimed deductions for these inflated sums in block assessments, which were rejected by the assessing officer. The Tribunal directed the exclusion of these amounts from the total income of the assessee, based on the report of special auditors. The Tribunal restored the issue to the assessing officer for further verification and deduction of the inflated sales amounts. The assessing officer, on remand, rejected part of the deduction claimed by the assessee, stating that the sales inflation figure for a specific period was not considered for deduction. However, the assessing officer ultimately directed the exclusion of the sales inflation sums as per the special auditor's report.

2. The dispute reached the Tribunal for the second time as the assessee challenged the decision in two appeals. The Tribunal observed that the entire sales inflation amounts should be excluded for the block periods, not just based on the special auditor's report. The Tribunal directed the assessing officer to exclude the specified amounts of sales and fictitious income for the block periods. The Revenue sought to overturn the Tribunal's decision, arguing that the assessing officer had followed the Tribunal's direction in the first round. The senior counsel for the assessee contended that the assessing officer did not fully comply with the Tribunal's directions. The Court set aside the impugned decision, emphasizing the need for further scrutiny by the assessing officer to ascertain the quantum of inflated income for the residual period not covered by the special audit.

In conclusion, the Court upheld the Tribunal's direction to exclude the specified amounts as sales and fictitious income but emphasized the need for a detailed examination by the assessing officer for the residual period. The Court set aside the impugned decision and remanded the matter for further assessment.

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