Ajay Kumar Mittal, J. - (1.) AT the instance of the Revenue, the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short "the Tribunal") vide its order dt. 10th June, 1994 arising out of ITA No. 965/Chd/1988 has referred the following question of law under Section 256(1) of the IT Act, 1961 (for short "the Act") for the asst. yr. 1987 -88 for the opinion of this Court: Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the adoption of the net profit rate of 8 per cent and then allowing deduction of the amount paid by the assessee as freight charges to the truck operators' union from the gross receipts?
(2.) BRIEFLY noticed, the facts are that the assessee was a firm of labour contractors doing loading and unloading work of gunny bags from Mandi to godowns and from the godowns to railway station and vice versa. The assessee received payment of Rs. 25,40,127 from the FCI for the asst. yr. 1983 -84 and made payments on account of freight to the truck operators' union amounting to Rs. 11,45,650 by cheque and Rs. 8,66,130 in cash. The ITO after examining the evidence produced by the assessee rejected the books of account. The AO applied the rate of profit at 8 per cent on gross receipts amounting to Rs. 25,40,127 and estimated the total income from contract work at Rs. 2,03,000 as against the declared income of Rs. 24,895. He also disallowed the expenditures amounting to Rs. 5,05,453 for want of vouchers. Feeling aggrieved by the same, the assessee filed the appeal. The CIT(A) allowed the payments made to the truck operators' union as a deduction but disallowed the other expenditures. The Revenue took the matter in appeal before the Tribunal and the Tribunal vide its order dt. 10th June, 1994 dismissed the appeal holding the net profit rate of 8 per cent on the balance amount of Rs. 5,28,347 to be justified. No one has appeared on behalf of the assessee to oppose the reference made by the Tribunal. On the asking of the Court, Mr. Sanjay Bansal, senior advocate assisted the Court as Amicus Curiae.
(3.) THE issue that arises for determination in this reference is, as to whether the freight charges paid by the assessee to the track operators' union are to be deducted from gross receipts and then net profit rate is to be applied to the gross receipts.;