PRAMATH KUMAR BHUYAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT assessee's instance, this Court on an application under S. 256(2) of the IT Act of 1961 (hereinafter referred to as the Act) directed the Cuttack Bench of the Tribunal to state a case and refer the following question for the Courts opinion.

(2.) ASSESSEE is an individual and derives income from fabrication and supply of iron goods to Government. He carries on repair work. The relevant assessment year is 1974 -75 corresponding to the previous year ending on 31st March, 1974. During the year, assessee supplied goods worth Rs. 4,65,578 to Governments Departments. Complete accounts were not maintained and assessee returned estimated profit of 15 per cent on the total sale. From the gross profits, a deduction of Rs. 48,00 was claimed by way of expenses and the balance was offered as net income for taxation. The ITO recomputed the income by deducting sales -tax of Rs. 17,842 from the gross turnover of Rs. 4,65,578 and to the remainder applied profit of 15 per cent. He thus recomputed the profit at Rs. 67,168 and out of it, allowed Rs. 35,168 as expenses and estimated the net income at Rs. 52,000.

(3.) ASSESSEE appealed to the Tribunal and contended that in earlier years, net profit within the range of 5 per cent to 6 1/2 per cent was being accepted and computation of it at 11 per cent for the year under consideration was high. It was also maintained that sales -tax of Rs. 17,843 should have been allowed as a deductible expenditure from the gross profits and there was no justification to deduct it initially from the turnover and then proceed to apply 15 per cent basis for determining the gross profits. The Tribunal dealt with the matter at length and disposed of the appeal against the assessee by saying :