Inter-branch despatches need supporting evidence before being treated as sales for income-tax assessment.

Inter-branch despatches cannot be treated as sales without supporting material evidence. The income-tax authorities assessed sovereign transactions in the Bombay branch as sales to the Karachi branch and computed profit on that basis, but the record did not disclose evidence of a sale. The appellate authority accepted the assessee's case that the sovereigns were sent on commission, and the Tribunal adopted that view without independent reasoning. On those facts, the Court held that there was no material to support a finding that 1,66,188 sovereigns were sold to the Karachi branch, and the question of law arose from the absence of evidentiary support.

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Issues: Whether there was any material to hold that the Bombay branch sold 1,66,188 pieces of sovereigns to the Karachi branch.

Analysis: The income-tax authorities proceeded on the footing that the despatches from Bombay to Karachi were sales, although the record did not disclose evidence supporting a sale to the Karachi branch. The assessment treated all sovereign transactions in the Bombay branch as sale transactions and computed profit on that basis. The appellate authority did not reject the assessee's case that the sovereigns were sent to the Karachi branch on commission, and the Tribunal merely adopted that conclusion without independent reasoning. On these facts, the existence of material to support a finding of sale gave rise to a question of law.

Conclusion: There was no material to hold that the Bombay branch sold 1,66,188 pieces of sovereigns to the Karachi branch.

Final Conclusion: The assessee succeeded on the sovereign-transaction issue, and the Tribunal was directed to state a case on the formulated question.

Ratio Decidendi: A finding that inter-branch despatches constituted sales cannot stand where it is reached without supporting material evidence and without independent reasoning.

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