Sikri, J. - (1.) This is an appeal by special leave granted by this court on November 5, 1962, and arises in the following circumstance. The appellant filed a return showing an income of Rs. 78,350 for the assessment year 1954-55. The Income-tax Officer in this assessment order dated February 26, 1958, did not accept the trading accounts and added Rs. 75,000. He came to the conclusion that the profits disclosed in comparison with the earlier year were to low and there were no day- to-day stock details for the purpose of verification. Another factor which he took into consideration was the ridiculously small withdrawals for personal expenditure in the partners accounts. Shri R. S. Sanghvi had only withdrawn Rs. 6,900 and shri C. T. shah had only withdrawn Rs. 6,300.
(2.) The assessee appealed to the Appellate Assistant Commissioner, who by his order dated October 16, 1958, accepted the appeal and deleted the addition of Rs. 75,000 but as the closing stock of Eveready torches was under-valued to the tune of Rs. 4,490, he only allowed a reduction of Rs. 70,510. He accepted the contention urged on behalf of the assessee that in view of the fact that the assessee had to deal in hundreds items of goods of various sizes and varieties, it would mean a very heavy task to keep a stock account. He came to the conclusion that "if the sales made on commission basis are excluded on the balance sales the average profit margin would go up to about 5 1/2 per cent. which cannot be said to be unreasonable or inordinately low." He further stated that the Income-tax Officer had not been able to cite any case whether the profit margin disclosed was higher than that raveled by the books of the assessee. He could find out no defect in the accounts as such or any suppression of sales. He further remarked that the purchases were vouched, the sales were vouched and the parties involved in these transactions were identifiable.
(3.) The Income-tax Officer, appealed against the above decision to the Income-tax Appellate Tribunal, which restored the addition made by the Income-tax Officer, less the above sum of Rs. 4,490.;