- (1.) THE present income -tax appeal filed under Section 260A of the Income -tax Act, 1961 (hereinafter referred to as 'the Act'), has been admitted on the following substantial questions of law framed in the memo of appeal: 1. Whether, on the facts and circumstances of the case, was the Income -tax Appellate Tribunal legally justified in holding that both Section 145(1) proviso and Section 145(2) of the Income -tax Act, 1961, are not applicable in the case and whether the findings of the Income -tax Appellate Tribunal in deleting the additions of Rs. 37,68,113, Rs. 5,73,832, Rs. 15,99,123 and Rs. 10,225 are sustainable in the eyes of law? 2. Whether the Income -tax Appellate Tribunal, on the facts and circumstances of the case, is legally correct in holding that the applicability of 22 per cent, on the entire turnover disclosed by the assessee was not justified when admittedly the assessee's books of account are not reliable nor complete and the net profit could not be correctly and accurately deduced therefrom? 3. Whether, on the facts and circumstances of the case, the Income -tax Appellate Tribunal was legally correct in deleting the addition of Rs. 5,73,832 on account of commission on indirect export sales and whether there was basis for such deletion? Whether the deletion of Rs. 15,99,153 by the Income -tax Appellate Tribunal which was added by the Assessing Officer, on account of suppression in the domestic sales and unaccounted local sales was legally justified? 4. Whether the Income -tax Appellate Tribunal was legally justified, on fact and in law, in upholding the deletion of Rs. 96,663 made by the Commissioner of Income -tax (Appeals) relating to excise although it related to the earlier years?
(2.) THE appeal relates to the assessment year 1988 -89. Briefly stated the facts giving rise to the present appeal are as follows:
(3.) THE appellant -company is engaged in the business of manufacturing of drop forged hand tools. Such business is being carried on by the assessee from 1974. The assessee furnished return declaring income of Rs. 18,95,410 on July 27, 1988. The return of income was accompanied with the audited statement of accounts, audit report under Section 32AB, tax audit report under Section 44AB, audit report in Form No. 10CCA under Section 80HHC(4). The assessee declared gross profit of Rs. 94,65,317 on total turnover of Rs. 3,07,64,116 giving a gross profit rate of 30.77 per cent, as against gross profit of Rs. 69,74,736 on total turnover of Rs. 2,61,05,355 showing gross profit rate of 26.72 per cent, in the preceding year.;