Y.R. Meena, J. - (1.) EARLIER, in the application under Section 250(2) of the Income-tax Act, 1961, the assessee required the Income-tax Appellate Tribunal to draw up the statement of case for the assessment year 1971-72 and to refer the questions of law to this court. On the request of the assessee, the Tribunal was directed to refer the following questions of law to this court : "1. Whether, on the facts and in the circumstances of the case, there was material on record to justify the enhancing of the estimate sales of the assessee to Rs. 9,10,000 and in applying gross profit rate of 21 per cent. ?
(2.) WHETHER, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in sustaining the addition of Rs. 20,714 as the income of the assessee from undisclosed sources or the said amount should have been added to the trading account of the assessee or telescoped with the trading account of the assessee keeping in view the facts that intangible additions have been made ?" 2. In the return for the assessment year 1971-72, the assessee has disclosed total sales of Rs. 8,66,179 and has shown a gross profit of Rs. 1,37,235, The gross profit rate shown by the assessee was 16.35 per cent. which was accepted by the Income-tax Officer, but thereafter, the order of the Income-tax Officer was cancelled by the Commissioner under Section 263 of the Income-tax Act, 1961, and the Commissioner directed him to make a fresh assessment after taking into consideration the provisions of Section 273(c) of the Income-tax Act. In the fresh assessment, the Income-tax Officer found that the assessee-firm's opening and closing stocks are not verifiable as inventories of opening and closing stocks have not been filed on the ground that they have not been prepared. Even the complete list of purchases of cut stones partywise has not been supplied on the ground that it is not possible to give the names of the parties from whom finished goods have been locally purchased as their number is very large. When the closing stock was not verifiable, he attracted the provisions of Section 145(1) of the Income-tax Act and issued notice to the assessee to show as to why gross profit rate should not be taken as 25 per cent. which was supplied (sic) in this case at the time of original assessment. The assessee has filed the details of exports and local sales on the basis of which he tried to justify the gross profit rate at 16.5 per cent. The relevant details are as under : JUDGEMENT_712_ITR214_1995Html1.htm From these figures, the Income-tax Officer found that this year the export sales have gone up three times than in the previous year. It is also found that in the preceding year of 1970-71, though the profit was estimated at 25 per cent., but that was reduced to 20 per cent. Before the Income-tax Officer, it was also argued that because there was competition in the exports in the year under consideration, the profit margin was very low on exports sales. It was also argued that out of the total export sales of Rs. 7,33,599, sale of Rs. 6,10,207 was made on sale basis and not on consignment basis and on the sale basis, the profit is also comparatively low, and the money is not immediately realised on consignment sale. Even no separate accounts for local and export sales have been maintained. It was also found in the assessment year 1969-70 that the assessee himself has shown a gross profit rate at 19.3 per cent. and finally it was accepted at 20 per cent. and for 1970-71, the rate of 18.5 per cent. has been accepted finally. Learned counsel for the assessee, Mr. Jain, has submitted that even though there is no dispute that the proviso to Section 145 is attracted, but even then no arbitrary gross profit rate can be applied by the assessing authority and when there is no material to estimate the gross profit rate at 25 per cent., no addition can be made. It is true that no arbitrary rate of gross profit can be applied, but in such circumstances what can be the rate, that has to be seen from the material on record. The facts are not in dispute that in 1969-70, the gross profit rate was applied at 19.5 per cent. which was finally accepted at 20 per cent. and in 1970-71 it was 18 per cent. This year the gross profit rate has been estimated at 25 per cent. and the facts are also not in dispute that this year the export sales are three times and that has gone up from Rs. 2,04,942 in the year 1970-71 to Rs. 7,33,599 in the assessment year under consideration. It is obvious that he earned more profits on export sales than the local sales. In view of these facts available on record, the estimate of the gross profit rate at 25 per cent. in the year under consideration cannot be said to be perverse. No interference is called for in the gross profit rate. The Tribunal has reduced the sales to Rs. 9,10,000. In the facts and circumstances of the case, no interference is called for regarding the sales estimated by the Tribunal. The second question referred by the Tribunal regarding the addition of Rs. 20,714 on account of bogus sales shown on arhat basis to 13 parties. The assessee has shown the sale of goods on arhat basis to 13 parties amounting to Rs. 29,168. He was asked to prove the genuineness of the sales. He produced two parties. Thus, the amount was reduced from Rs. 23,581 to Rs. 20,714. Learned counsel for the assessee submits that even assuming that the sales to 11 parties are not genuine and it is taken to be the sale shown from undisclosed sources, but on that basis no further addition can be made while the addition has already been made to the tune of Rs. 53,855 on the basis of enhancement in the sale proceeds and enhancement of the gross profit rate. He placed reliance on the decision in the case of CIT v. Tyaryamal Balchand [1987] 165 ITR 453 (Raj), wherein at page 458, after referring to the case of CIT v. Jawanmal Gemaji Gandhi [1985] 151 ITR 353 (Bom), the court observed as under : "It was held that secret profits or undisclosed income of an assessee earned in an earlier assessment year can constitute a fund, though concealed, from which the assessee may draw subsequently. In the instant case, the assessee acquired the gold during the latter half of the assessment year and it could be that the undisclosed income earned in that very year constituted a fund from which the asset was acquired. " Considering the view taken by this court in the case of Tyaryamal Balchand [1987] 165 ITR 453, we find no justification for the addition of Rs. 20,714 on account of sales on arhat basis from undisclosed sources as the addition has already been made by enhancing the gross sales and gross profit.
(3.) CONSEQUENTLY, we answer question No. 1 in favour of the Department and against the assessee while we answer question No. 2 in favour of the assessee and against the Department. No order as to costs.;