1. ' SAEEDUZZAMAN SIDDIQUI, J.--The Department has referred the following three questions directly to the Court for decision under Section 66 (2) of the Income Tax Act: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that subsection (2) of Section 42 of the Income Tax Act was not applicable in this case?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that sub-section (1) of Section 42 of the Income Tax Act was applicable.
(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs,7, 50,000?"
2. ' The case relates to assessm ent year 1972-73. The Income Tax Officer, Companies Circle V issued a consolidated notice to assessee/respondent under Section 23 (3) of the Income Tax Act 1922 for the assessm ent years 1971-72, 1972-73 and 1973-74 calling upon them to show cause why provisions of Section 42 (2) of Income Tax Act should not be applied to their case. The case of the department is that the respondent/assessee has purchased raw material from its parent company which is a non-resident company at a price which was higher than the normal international price of the same. The Income Tax Officer accordingly found that during assessment year 1972-73, the assessee made less than the ordinary profits on account of payment of higher price of raw material and added a sum of Rs,7,50,000 to the income for the above year under Section 42 (2) of Income Tax Act. The assessee/respondent challenged the order of Income Tax Officer before Appellate Assistant Commissioner who by his order dated 2-2-1976 agreeing with the order of his predecessor passed in the case of assessee/respondent deleted the addition of Rs, 7,50,000. The view taken by the Appellate Assistant Commissioner was that Section 42 (2) of the Act did not apply to the case of the assessee respondent. The department went in appeal before the Tribunal against the order of the Assistant Appellate Commissioner but the Tribunal also reached the conclusion that Section 42 (2) of the Income Tax Act was not applicable to case of the respondent. The Income Tax Tribunal found that no new material was available for the assessment year 1972-73 before the Income Tax Officer for making an order under Section 42 (2) of the Income Tax Act. It was admitted before the Tribunal by the department's representative that for the preceding assessm ent year 1971-72 same material was relied by the Income Tax Officer which was made the basis for the assessm ent year 1972-73 and that the addition made in the assessment year 1971-72 on the basis of this material were deleted by the Appellate Assistant Commissioner which was upheld by the Income Tax Tribunal. The Tribunal accordingly maintained the deletion of Rs,7.50,000 made by the Appellate Assistant Commissioner for the assessment year 1972-73 on the ground that no new material was available before the Income Tax Officer for assessment year 1972-73 and that the material relating to preceding year 1971-72 could not form the basis of assessm ent for the subsequent assessment year 1972-73. The above finding of the Tribunal that no new material was available before the Income Tax Officer to apply Section 42 (2) of Income Tax Act to the case of respondent/assessee for the assessment year 1972-73, is not challenged by the department in this reference. We accordingly enquired from Mr. Shaikh Haider, the learned counsel for the department that how the above noted questions arise in this reference, in view of the findings of the Income Tax Tribunal that there was no material available before the Income Tax Officer for making an assessm ent under Section 42 (2) of the Income Tax Act. The learned counsel was unable to satisfy us that the above noted three questions properly arise in the case. We accordingly hold that in view of the undisputed finding of Income Tax Tribunal that there was no new material A available before the Income Tax Officer to apply Section 42 (2) of Income Tax Act to the case of respondent/assessee the above noted questions referred to us for decision do not arise in the case. The reference is accordingly rejected but there will be no order as to costs. .