M.L.JAIN, J. - (1.) This is a reference made by the Income tax Appellate Tribunal, Delhi, Bench 'A' under sub-s. (1) of s. 256 of the IT Act, 1961, (hereinafter referred to as the Act). The reference has arisen in the following circumstances.
(2.) The assessee Vishnu General Stores is firm carrying on business of general merchandise at Kota in Rajasthan. In the asst. yr. 1962-63, the assessee returned its total income at Rs. 23,937. It had shown the gross profit at the rate of 6.3 percent. There being no stock account and the margin of profit being low, the ITO estimated the gross profit at Rs. 16,013 at 9 percent on declared sales. Besides, the ITO also found cash deposits of Rs. 26,600 which were treated by him as an income assessable under s. 68 of the Act. The total income thus, assessed was Rs. 67,469 which included the amount of gross profits and the income from undisclosed sources. The order of the ITO was confirmed by the IAC.
(3.) On appeal Appellate Tribunal, vide its order dated 6th May, 1965, found that the cash deposits to the tune of Rs. 9,500/-. were genuine and therefore, reduced the income from undisclosed sources to Rs. 17,100/-. It also reduced the gross profit from Rs. 16,013 to Rs. 12,000/-. It was contended on behalf of the assessee that there was no scope for making the second addition of Rs. 17,100/-. The Tribunal was of the view that where intangible additions have been made, benefit be given to the assessee as there was scope for introducing the same amount covered by the said intangible addition. Since Rs. 12,000 were added to the trading results, it added only Rs. 5,100 on account of unexplained cash credit, total aggregation being Rs. 17,100/- only.;