(1.) THIS reference has been made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, under Section 256(2) of the Income-tax Act, 1961.
(2.) THE facts in brief are that the assessee is a Hindu undivided family carrying on business of kirana. THE previous year relevant to the assessment year ended on October 21, 1968. THE assessee declared a gross profit of Rs. 17,414 giving a gross profit rate of 2.5 per cent. on the retail sales of kirana goods totalling Rs. 7,34,267. THE Income-tax Officer was of the opinion that looking to the nature of the business, the gross profit was very low and he observed that as accounts are not supported by stock tally, the account version cannot be relied upon. He made a lump sum addition of Rs. 12,000 in the trading account, which brought the gross profit rate to 4% as was in the past. THE Income-tax Officer at the time of completing the assessment was also of the view that there was concealment of income by the assessee. As such, he initiated penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961 (for short " the Act").
(3.) WITH regard to the explanation relating to capital accretion, the Tribunal recorded that both the parties were directed to produce the copies of the letter and of the reply but they failed to produce. So, the Tribunal observed that it is left with the material which is available on record and observed that in the absence of the letter dated July 3, 1973, and reply dated July 13, 1973, it would be difficult to come to the conclusion whether before the Income-tax Officer or the Appellate Assistant Commissioner, the assessee gave no explanation regarding the capital accretion. The Tribunal, then, proceeded to consider the questions as under :