Judgment :- ARIJIT PASAYAT, C.J. At the instance of the Revenue, following has been referred under s. 256(1) of the IT Act, 1961 (in short 'the Act') for opinion of this Court, by the Tribunal, Cochin Bench "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in deleting the addition of Rs. 4, 98, 110 towards gross profit on account of difference in the closing stock ?" Factual position, as indicated in the statement of case, is as follows : The assessee is a partnership-firm which, inter alia, carried on business in timber logs, teak poles, scantlings, firewood, fish oil, etc. For the asst. yr. 1984-85 corresponding to the previous year ended on 31st March, 1984, the AO added the sum of Rs. 4, 98, 110 to the value of the closing stock and correspondingly to the profit by holding that there was undervaluation. Such conclusion was arrived at on the basis of certain books of account seized during a search conducted under s. 132 of the Act at the business and residential premises of the assessee and its partners on 10th December, 1987. A register was seized from the business premises wherein it was noted by the assessee that it had following stock to timber and poles as on 1st April, 1984 "Timber 850.362 cu. mtrs. Teak poles 621 cu. mtrs. Erankolas 16, 550 cu. mtrs." In its letter dated 19th February, 1987, the assessee indicated to the AO that the register seized from the business premises was not the stock register but it was only the property mark register maintained for the purpose of obtaining transport permits from the Forest Department and that the quantity, as shown in the register, was only an approximate quantity, and all the purchases and sales were not entered in the register. Only timber transported under the transport permits were entered in that register. The AO was of the view that if the stand of the assessee was correct, then the actual stock would have been more than what was reflected in the property mark register. Therefore, the fact that the entire quantity of timber was not entered in the property mark register was not an explanation for reducing the quantity still further, for the purpose of the trading account. Therefore, the fact that the entire quantity of timber was not entered in the property mark register was not an explanation for reducing the quantity still further, for the purpose of the trading account. Taking into account the value, as assessed by the assessee itself, valuation of suppressed stock was arrived at and, accordingly, addition was madeIn the first appeal before the CIT(A), Calicut, the assessee contended that the property mark register was maintained only for the purpose of obtaining transport permits from the Forest Department and it had no other significance and it could not be equated with the stock register. It was negatived by the CIT(A) holding that the forest authorities had verified the stock position on 9th April, 1984, and recorded stock position as was actually existing and, therefore, the ownership of the stock, as revealed in the seized register, could not be doubted or denied In appeal before the Tribunal, the assessee's contention was that the property mark register was only a record showing the maximum quantity of timber allowed for transportation from the forest and the quantity of timber transported thereby. The Tribunal held that the property mark register indicated the transportation of timber logs through forest under permits issued by the Forest Department, but it did not contain the quantity of timber purchased from other sources and transported to the assessee's depot under the permits issued in the names of the suppliers and it did not contain the quantity details of logs taken for sawing or for local sales occasioning transportation of logs outside the forest area. With these observations, the Tribunal concluded that the property mark register could not be considered as a stock register and a comparison of the stock as found in the property mark register with other registers cannot be a foolproof comparison. Accordingly, the Tribunal deleted the addition of Rs. 4, 98, 110. Accepting the assessee's prayer for reference, the Tribunal has made reference as indicated above The learned counsel for the Revenue submitted that the Tribunal has failed to appreciate the materials brought on record and its conclusions are based on surmises and hypothesis. The Revenue's stand was that the forest authorities had verified the stock position on 9th April, 1984 and found that the stock as found in the seized register was available with the assessee. The Revenue's stand was that the forest authorities had verified the stock position on 9th April, 1984 and found that the stock as found in the seized register was available with the assessee. Comparison with other relevant records revealed that there was understatement of stock, and there was suppression. This basic factor was not considered by the TribunalThe learned counsel for the assessee submitted that actually there was no physical verification of stock. He placed reliance on a document, i.e., a statement purported to have been made by a forest official. A factual finding has been recorded by the Tribunal, correctness of which cannot be decided in a reference. We do not take the document referred to above into consideration because there is no reference to it by way of the forums and not even in the statement of case drawn up by the Tribunal. This appears to be a document produced for the first time before this Court There was no dispute that the forest authorities had verified the stock and found that different quantities were actually existing. This was the accepted position before the authorities. As noted above, a different stand is taken for the first time before this Court. What was the quantity actually purchased or sold was not the question that was adjudicated by the AO who had noticed unexplained discrepancies in stock. This is evident from the following observations of the AO "The assessee has stated that all the purchases and sales were not entered in the register. Only the timber transported under transport permit is entered in the register. If all the timber were entered in the register, then the actual stock would have been more than what was reflected in the 'property mark register'. Therefore, the fact that all the timber was not entered in the property mark register in not an explanation for reducing the quantity still further for the purpose of trading account. The forest authorities have verified the stocks on 9th April, 1984 and found them to be existing. Whatever may be the nature of the register, the assessee has a stock as on 9th April, 1984 which was personally verified by the Government authorities. As per the assessee's own valuation of closing stock, the value of 5, 000 teak poles amounted to Rs. 2, 69, 585 and, hence, the additional quantity of 121 poles could be valued at Rs. As per the assessee's own valuation of closing stock, the value of 5, 000 teak poles amounted to Rs. 2, 69, 585 and, hence, the additional quantity of 121 poles could be valued at Rs. 65, 240. Similarly, the additional quantity of 8, 190 erankoles could be valued at Rs. 2, 047. The value of 490.138 cu mtrs. of timber is taken by the assessee as Rs. 5, 86, 198.96. Hence, the additional quantity of timber of 360.224 should work out to Rs. 4, 30, 823. In these circumstances, the closing stock value has to be increased by Rs. 4, 98, 110 and correspondingly the profit."The CIT(A) considered the matter by noticing as follows "The appellant had stated before the ITO that all the purchases and sales were not entered in this register which was called a property mark register maintained for the purpose of obtaining transport permit from the Forest Department. The explanation was that at the close of every financial year, we have to apply for the required transport permit for the estimated quantity of timber to be transported during the year. The quantity shown in the register is only an approximate quantity. All the purchases and sales are not entered in the property mark register. As per the property mark register seized under s. 132, there were 621 teak poles, 16, 500 erankoles, 150.362 cu. mts. of timber. The Forest Authorities verified the stock as on 9th April, 1984, and found that these stocks were actually existing. As per the assessee's own valuation of closing stock, value of 500 teak poles amounted to Rs. 2, 69, 585. Hence, the additional quantity of 121 poles entered in the seized register has been correctly valued at Rs. 65, 240, the additional quantity of 8, 190 erankoles has been valued at Rs. 2, 407 and the value of additional quantity of timber of 360.224 cu. mts. has been correctly determined at Rs. 4, 30, 823. The ownership of the property mark register found from the assessee's premises has not been denied. In fact this is a quantity stock register maintained by the assessee in the course of its business. On the facts and circumstances of the case, the ITO has correctly concluded that there was undervaluation of closing stock of timber to the extent of Rs. In fact this is a quantity stock register maintained by the assessee in the course of its business. On the facts and circumstances of the case, the ITO has correctly concluded that there was undervaluation of closing stock of timber to the extent of Rs. 4, 98, 110." The question that should have been adjudicated by the Tribunal is whether there was any variation in the physical stock. The forest authorities certified about the physical existence of the particular quantity of materials. On verification of the records produced by the assessee, the Revenue authorities found that there were discrepancies. This aspect has not been considered by the Tribunal in its proper perspective. On the contrary, it has taken into consideration irrelevant materials, thereby giving rise to a question of law. In the background of what we have stated above, we answer the question, referred to for opinion, in the negative, in favour of the Revenue and against the assesseeReference answered in the negative.