TMI Blog2003 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... t. - - - - - Dated:- 17-7-2003 - Judge(s) : G. S. SINGHVI., K. S. GAREWAL. JUDGMENT The judgment of the court was delivered by G.S. SINGHVI J.-In this appeal filed under section 260A of the Income-tax Act, 1961 (for short, "the Act"), the assessee has prayed for determination of the following question of law: "Whether under the facts and circumstances of the case the Tribunal was justified in concurring with the application of the provisions of section 145(2) of the Income-tax Act and estimating the income at a gross profit at 27 per cent. of the turnover resulting into the enhancement of the income maintained by the learned Commissioner of Income-tax (Appeals) at Rs. 1,50,000 by an amount resulting into the total income at Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disclose the basis on which he had estimated his income at Rs. 35,000. He was also asked to furnish the statement indicating the total turnover, gross profit, gross expenses and net profit of the business and indicate the basis on which the said amount was computed. In his reply dated November 9, 1994, the assessee stated that the income of Rs. 35,000 was given out on estimate basis because the books of account were not available. After considering the replies filed by the assessee, the Assessing Officer passed the assessment order dated March 29, 1996. He held that the seized books of account are not correct and complete by observing that the assessee had not indicated cash balance as on April 1, 1993, even though the subsequent entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate as to why G.P. rate of 55 per cent. on the gross sales may not be applied as shown by M/s. Om Parkash and Co., Lottery Stockist of Ludhiana." The Commissioner of Income-tax (Appeals), Patiala (for short, "the CIT (Appeals)") allowed the appeal of the assessee and granted him relief to the extent of Rs. 9,98,000 by assigning the following reasons: "3.3 The matter was discussed at length and to ascertain the income, he was asked to furnish the details of sales and commission realised. He furnished such details for two days only, i.e., for October 20, 1993, and October 21,1993, and it was seen that the G.P. rate worked out at .05 per cent. only during these days. However, this statement of two days may not represent the entire year's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y illegality by assessing his income on estimate basis by taking into account the material available with him. The Tribunal then observed that the gross profit rate of M/s. Om Parkash and Company, which was the sole selling agent and stockist of lottery tickets in Ludhiana could not be made the basis for fixing the gross profit rate of the assessee. However, by making a reference to the case of M/s. R.P. Lottery, on which reliance was placed by the assessee, the Tribunal directed the Assessing Officer to work out the income of the assessee by applying the gross profit rate of .27 per cent. excluding the estimated expenses of Rs. 5,00,250. This is clearly borne out from the following extracts of paragraph 5 of the Tribunal's order: "The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer and the Tribunal committed a serious error by invoking section 145 of the Act for assessing the income of the assessee on estimate basis by taking into consideration gross profit at .27 per cent. of the return ignoring the fact that the assessee had regularly filed the returns and maintained the books of account, etc. Learned counsel submitted that the observation made by the Tribunal in the first part of paragraph 5 that the assessee had not challenged the rejection of books of account is based on a factually incorrect premise because the appellant had, in fact, challenged the decision of the Assessing Officer on all grounds. Dr. N.L. Sharda, learned counsel for the Revenue, supported the order of the Tribunal and argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncomplete. Therefore, no illegality can be said to have been committed by the Assessing Officer when he invoked section 145(2) of the Act and assessed the income of the assessee on estimate basis. The Assessing Officer had taken into account the gross profit rate of the lottery stockist of Ludhiana-M/s. Om Parkash and Company, and discarded the gross profit rate worked out in the case of M/s. R.P. Lottery, Ludhiana. However, the Tribunal did not rely on the gross profit rates determined in the case of M/s. Om Parkash and Company and accepted the gross profit rate determined in the case of M/s. R.P. Lottery excluding the incentive of Rs. 7,35,451. The Tribunal held that if the incentives are taken into account, the gross profit rate would go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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