COMMISSIONER OF INCOME TAX Vs. KASHIRAM AGRAWALLA

JUDGEMENT

(1.) IN a reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), the INcome-tax Appellate Tribunal, Patna Bench 'A', Patna, has referred the following questions of law for the opinion of this court:

(2.) I may take the facts from the statement of the case. The assessment year involved is 1958-59. The method of accounting followed by the assessee is admittedly the mercantile system. The assessee is a dealer in foodgrains, sugar and other goods. The ITO found that in the original assessment in this case, the turnover had been disclosed at Rs. 3,67,560. Later on, certain books of accounts were seized by the sales tax authorities and on the basis of that, an assessment was made by the ITO by estimating the profits on the suppressed business. This assessment was set aside in appeal by the Tribunal, which had directed the books to be examined and a balance-sheet to be prepared. As the balace-sheet was not filed before the ITO and as no day-to-day stock register was produced before him and also as the applicability of the provisions of Section 145 was not disputed as stated before the AAC, the ITO proceeded to assess the income by adopting a rate of gross profit of 5 per cent. However, while making an addition, the ITO took the view that the gross profit shown by the assessee at Rs. 1,12,910 on a turnover of Rs. 29,22,074 was not correct gross profit. According to him, the gross profit should have been reduced by an amount of Rs. 51,607, which represented the sales tax liability. On this calculation, the ITO arrived at a gross profit of Rs. 61,303 as disclosed by the assessee's books. The 1TO, therefore, made an addition of Rs. 82,220 to bring the gross profit to the level of 5 per cent.

(3.) REGARDING the cash credits, the Tribunal upheld the order of the AAC in deleting these amounts and held that while making an assessment for the assessment year 1958-59, the provisions of the old Act were applicable.