COMMISSIONER OF INCOME TAX Vs. PREM RAJ DAULATRAM

JUDGEMENT

(1.) THIS reference has been made by the Tribunal, Delhi Bench "C", in compliance with the directions of this Court contained in the order dated February 16, 1970, in D.B. Civil IT Case No. 66 of 1969. It arises out of the order dated October 5,1967, by the Tribunal in IT Appeal No. 11677 of 1965-66. The assessment year under consideration is 1959-60 (ending on March 31, 1959). The assessee, Dr. R. C. Gupta, carries on business under the name and style, Dr. R. C. Gupta & Company as well as M/s Laxmi Cycle Industries. He filed a return in the name of Dr. R. C. Gupta and Company, declaring an income of Rs. 3,022 from the property as well as business in cycle and motor parts, etc. He also filed another return in respect of his business carried on under the name and style, M/s Laxmi Cycle Industries, and returned "nil" income (though the trading and profit and loss account showed a profit of Rs. 248). The ITO, however, did not accept the income as returned by the assessee. He determined the income from property as well as from the business carried on under the name and style, Dr. R. C. Gupta & Company, at Rs. 4,525 and the income from the business carried on under the name and style, M/s Laxmi Cycle Industries, at Rs. 1,785 as disclosed from the books. But he also found that the books of account produced by the assessee did not disclose a correct state of affairs and that the assessee had concealed the income derived by him from the sale of cycle parts which he had imported. These transactions, according to the ITO, were outside the books. Consequently, he obtained details of the transactions of sale made by the assessee in respect of the imported cycle parts and calculated profit on the same at the rate of Rs. 4 per set (consisting of one pair of hub, a chain and a free-wheel) as against Rs. 3 per set admitted by the assessee, in respect of 4,791 sets. Thus, the ITO added a sum of Rs. 19,164 to the income shown by the assessee. Certain other additions were also made but we are not concerned with the same. Suffice it to say that he computed the total income of the assessee at Rs. 55,248 by his order dated October 29, 1963 (annex. A). The ITO also issued notice to the assessee to show cause why penalty be not imposed on him under s. 271(1)(c) of the IT Act, 1961 (which will hereinafter be referred to as "the Act").

(2.) DISSATISFIED with the order of the ITO, the assessee filed appeal before the AAC, who, by his order dated October, 12, 1964, held that the rate of profit on each set of the imported cycle parts sold by the assessee should have been calculated at Rs. 8 per set instead of Rs. 4 as was done by the ITO. However, he found that the total number of sets sold by the assessee was only 2,291 as against 4,791 determined by the ITO. Calculated on the revised basis, he assessed the income from the sale of the cycle parts at Rs. 18,328 as against Rs. 19,164 determined by the ITO. The assessee filed further appeal to the Tribunal which maintained the addition of Rs. 18,328 as determined by the AAC. The copies of the orders of the AAC and the Tribunal have also been submitted by the Tribunal and are marked annexs. "B" and "C", respectively.