- (1.) THE Income Tax Appellate Tribunal, Delhi, has referred the following question of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act) for opinion to this court : 'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in directing the assessing officer to ascertain the net profit rate disclosed by the assessee for the assessment year 1987 -88 and apply the said net profit on Rs. 22 lakhs and make the addition ?'
(2.) THE present reference relates to the assessment year 1987 -88. Briefly stated the facts giving rise to the present reference are as follows: The respondent -assessee has been assessed to income -tax in the status of a registered firm. Its previous year ended on 31 -3 -1987. It derives income from manufacture and sale of Briquettes. For the assessment year in question, it had filed its return of income on 7 -3 -1989 declaring an income of Rs. 26,915. The assessment was completed under section 144 of the Act and an addition of Rs. 1,66,42,027 was made towards suppression in sales, Rs. 2,81,170 towards extra profit by observing as follows: 'In this case survey by the Sales -tax department was conducted on 6 -11 -1986. Copy of the report is placed on file. Copy of assessment made by the Sales -tax department has also been obtained in which the assessee's sales have been estimated at Rs. 35,00,000 which has been reduced in appeal at Rs. 27,00,000. The Sales -tax department has not accepted the order of Dy. Commissioner (Judicial), Sales -tax and has filed a second appeal before the higher authorities. During the year, the assessee has shown total sales at Rs. 18,57,973. Hence, the balance sales which has not been accounted for as per trading account, i.e., Rs. 16,42,027 (35,00,000 - 18,57,973) is added as income of the assessee. During the year, the assessee has shown sales at Rs. 18,57,973 on which gross profit of Rs. 1,03,830 has been shown which gives GP rate of 5.5 per cent as against sales of Rs. 9,07,017 and gross profit of Rs. 99,230 which gave GP rate of 10.9 per cent of the last year. Since the sales are estimated at Rs. 35,00,000 by the Sales -tax department, the same figure is adopted here and a GP rate of 11 per cent is applied in this case in absence of any books of account and details. The gross profit comes at Rs. 1,03,830 shown by the assessee, extra profit comes at Rs. 2,81,170 which is added in the income of the assessee as extra profit.'
(3.) THE respondent, feeling aggrieved, preferred an appeal before the Commissioner (Appeals). While partly allowing the appeal, the Commissioner (Appeals) directed the assessing officer to adopt the figure of Rs. 27 lakhs being estimated by the Sales -tax Authorities for the purpose of income -tax assessment also. He further directed the assessing officer to adopt the gross profit rate of 10 per cent. The respondent as also the revenue preferred separate appeals before the Tribunal. The Tribunal has allowed the appeal filed by the respondent whereas it has dismissed the appeal filed by the revenue. The Tribunal has reduced the sales turnover to Rs. 22 lakhs as per decision of the Sales -tax Tribunal. It had further remanded the matter to the assessing officer to find out the GP rate for the assessment year 1987 -88 and ascertain the net profit rate disclosed by the respondent for the assessment year in question and apply the same to Rs. 22 lakhs and make corresponding addition.;