1968 (10) TMI 7

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..... and he estimated the gross profits at 28 per cent. of that turnover. The Appellate Assistant Commissioner did not disturb the estimation of the turnover made by the Income-tax Officer but he was of the opinion that there was excessive estimation of the gross profits. He, therefore, reduced the addition made by the Income-tax Officer to the net income by Rs. 4,000. The estimation of the gross profits made by the Appellate Assistant Commissioner amounted to 24 per cent. of the turnover. But, in the appeal preferred by the Income-tax Officer to the Appellate Tribunal, the order of the Appellate Assistant Commissioner was reversed and that of the Income-tax Officer was restored. The Tribunal was of the view that the Appellate Assistant Commis .....

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..... d. In such circumstances, I estimate the sales at Rs. 1,16,000 and adopt a gross profit of 28 per cent. as done in other cases." This part of the order demonstrates that he merely adopted a working rule on which he depended in the case of other assessees. While this is so, the Appellate Assistant Commissioner depended upon the theory that an increase in the turnover results in a diminution in the gross profits. The estimates for the earlier periods constituted a new basis on which the Appellate Tribunal founded its order. Other things being equal, profits estimated during an earlier period may, in a proper case, guide the estimation of the profits of a subsequent year. But the earlier estimates can have relevance only if the conditions i .....

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..... dence such as the trading conditions in similar trade or on the reconstruction of the account books of the assessee on the basis selected by the Income-tax Officer which was different from the one adopted by the assessee." Dutta J., expressing the same view, observed : " In the case before us the profit disclosed by the assessee and accepted by the department in the return for the assessment year 1952-53 was made the basis of the computation of profit for the subsequent three years. But the profit of a previous year is quite irrelevant for the purpose of computing the profit of a subsequent year in the absence of materials which may enable the assessing authority to compare the market conditions of the two years. There is no such material .....

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