Inflation of wages and salary claims sustained on record evidence; no separate opportunity required for every adverse inference under section 23(3).

Revenue authorities may infer inflation of wages and salaries where comparative figures show a marked increase, supporting records are not produced, and acquittance rolls contain irregularities such as acknowledgments by persons other than the payees or missing acknowledgments. The explanation offered by the assessee was not accepted, and the addition was sustained as a finding of fact. The commentary also notes that section 23(3) was not breached merely because every adverse reason was not separately put to the assessee, so long as the material relied on was already part of the record and the assessee had an opportunity to meet it. The disallowance was therefore upheld.

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Issues: (i) Whether there was material before the Tribunal to support the finding that the assessee's wages and salaries were inflated and that Rs. 50,000 was liable to be added back; (ii) Whether the addition was invalid for want of opportunity to explain the defects noticed in the acquittance rolls under section 23(3).

Issue (i): Whether there was material before the Tribunal to support the finding that the assessee's wages and salaries were inflated and that Rs. 50,000 was liable to be added back.

Analysis: The assessment authorities and the Tribunal had before them comparative figures showing a marked increase in wages, the failure to furnish department-wise salary statements from earlier years, and irregularities in the acquittance rolls, including acknowledgments by persons other than the payees and cases with no acknowledgment at all. The explanations offered by the assessee were considered but not accepted as sufficient to displace the inference drawn from the record. The existence and sufficiency of material for such an inference did not convert the issue from one of fact into one of law.

Conclusion: The finding of inflation of wages was supported by material on record, and the addition of Rs. 50,000 was upheld against the assessee.

Issue (ii): Whether the addition was invalid for want of opportunity to explain the defects noticed in the acquittance rolls under section 23(3).

Analysis: The assessee had been asked for supporting comparative statements and produced only limited material. The authorities considered the explanations actually furnished, and section 23(3) did not require a separate opportunity for every reason ultimately relied upon by the Income-tax Officer. The defects in the wage records were part of the material already before the authorities, and the assessee could not complain that it had been denied an opportunity to meet them.

Conclusion: No breach of section 23(3) was established, and the objection failed against the assessee.

Final Conclusion: The reference questions were rightly answered against the assessee, and the appellate challenge to the disallowance failed.

Ratio Decidendi: Where the revenue authorities have material on record from which inflation of expenditure may reasonably be inferred, and the assessee's explanations are not accepted, the finding remains one of fact; section 23(3) is not violated merely because every possible reason for the adverse inference was not separately put to the assessee.

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