COMMISSIONER OF INCOME TAX Vs. EASTERN COMMERCIAL ENTERPRISES

JUDGEMENT

(1.) In this reference under Section 256(2) of the Income-tax Act, 1961, the following questions of law have been referred by the Appellate Tribunal for our opinion :

(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not confirming the gross profit rate of 30 per cent. as determined by the Assessing Officer ?"

(3.) In the appeal by the assessee, the Commissioner of Income-tax (Appeals), however, reduced the gross profit rate from 30 per cent. to 10 per cent. The said order of the Commissioner of Income-tax (Appeals) was challenged both by the assessee and the Revenue in second appeals before the Tribunal. The Tribunal on hearing the parties came to the conclusion that the Income-tax Officer was not right in accepting the oral statement of Shri Sukla when the documents produced by the assessee in evidence of the purchases proved the genuineness of the same. The Tribunal also referred to the affidavit dated February 16, 1988, affirmed by Shri Sukla where he testified that his sales of lubricant oils to the assessee were correct and genuine and payments for such sales were received by account payee cheques. The Tribunal took the view that the Income-tax Officer erred in preferring oral evidence to documentary evidence to rely upon for the purpose of making the addition. The Tribunal further held that by reason only of the fact that one person from whom the assessee claims to have effected purchases had deposed that the transactions were not genuine, the Officer could not in fairness disbelieve all the purchases and make an arbitrary addition on estimates at a gross profit as high as 30 per cent. as against 5.2 per cent. disclosed by the assessee. The Tribunal also compared the assessment for the earlier years and the relative gross profit rates which are as under : <FRM>JUDGEMENT_103_ITR210_1994Html1.htm</FRM>