1. These two cross-appeals - one by the assessee and the other by the revenue - relating to assessment year 1991-92 are taken up together and disposed of by a common order for the sake of convenience. ITA No. 717 of 1995 is the appeal by the assessee wherein the dispute is with regard to the following issues :- (ii) Sustenance of an addition of Rs. 95,074 out of the total addition of Rs. 97,980 made by the Assessing Officer by applying a GP rate of 2.5 per cent as against the GP rate of 1.19 per cent declared by the assessee and 2.54 per cent applied by the Assessing Officer; (iii) Addition of Rs. 84,985 made on account of alleged unaccounted for stock weighing 1090 kgs.; (v) Estimation of income for the period 1-4-1990 to 17-5-1990 at 1/7th of the total income; and (vi) Charging of interest under sections 234A and 234B. ITA No. 753 of 1995 is the appeal by the Revenue where the following two grounds have been taken :- (i) The ld. CIT (A) has erred in law in setting aside the issue of addition of Rs. 64,44,880 made on protective basis; and (ii) Allowing a relief of Rs. 9,33,552 made on account of income for the period from 1-4-1990 to 14-5-1990 on the basis of profit declared for the remaining period i.e., 17-5-1990 to 31-3-1991.
2. Briefly the facts are that the assessee firm for assessment year under consideration has derived income from sale of brass scrap only.
The return of income was filed on 31-3-1992 declaring an income of Rs. 1,25,077. In the statement of accounts annexed with the return, the Assessing Officer found that the assessee had declared a gross profit of Rs. 86,474 on total sales of Rs. 72,61,978 for the period 17-5-1990 to 31-3-1991 giving a rate of 1.19 per cent as against the GP rate of 2.54 per cent shown for the assessment year 1989-90. The Assessing Officer required the assessee to explain the reasons for the low gross profit rate in response to which it was explained on behalf of the assessee that most of the goods purchased and sold were of imported brass scrap and the customs duty leviable at the time of placing the orders for purchase of goods was 30 per cent which had increased to 50 per cent at the time of actual receipt of goods and as such the assessee had to incur extra expenditure on account of enhanced customs duty which accounted for the lower GP. The Assessing Officer, however, held that since the assessee was unable to furnish separate details of goods imported as well as the goods locally purchased, the reasons for lower GP were not convincing. He accordingly rejected the book results and estimate the GP by applying a rate of 2.54 per cent as shown in the (last year) and made an addition of Rs. 97,980. The assessee appealed and the ld. CIT(A) after considering the explanation of the assessee, allowed a relief of Rs. 2,906 only and sustained the addition of Rs. 95,077 by applying a GP rate of 2.5 per cent on the declared sales of Rs. 72,61,978 for the period 17-5-1990 to 31-3-1991.
3. There was a search and seizure operation in the case of the assessee on 15-5-1990 when no stock of brass scrap was found and the assessee also stated before Assessing Officer that there was not any stock lying with it. The Assessing Officer however, arrived at a figure of 1090 kgs. as the stock of scrap which should have been available with the assessee taking into consideration the purchases of scrap made in the assessment year 1989-90 and the sales made in that year together with the purchases made by the assessee from 1-4-1990 to 15-5-1990 and the sales made during 1-4-1990 to 15-5-1990. According to the Assessing Officer the calculations which resulted, in the availability of scrap on the date of search are as under :-Purchases : 240132.450 Kg.Less sales : 238411.390 Kg.
------------------opening stock as on 1-4-1990 : 1721.060 Kg.Add purchases from 1-4-1990to 15-5-1990 : 931.400 Kg.
------------------Less sales from 1-4-1990 to 15-5-1990 : 1562.450 Kg.
------------------ The Assessing Officer accordingly held that the assessee must have sold this stock outside the books of account. He accordingly made an addition of Rs. 84,985 on account of sale of unaccounted for stock. On appeal, the ld. first appellate authority confirmed the addition for the reasons given in the impugned order. The assessee is aggrieved and has come in appeal before us.
4. The ld. Counsel for the assessee submitted that the departmental authorities were not justified in rejecting the books of account of the assessee and resorting to the proviso to section 145(1). He furnished a comparative chart of the sales and GP shown by the assessee in the immediately preceding years as under :- 1985-86 1986-87 1988-89 1989-90 1990-91 --------- --------- --------- ----------- -----------Sales 60,04,124 61,36,768 59,31,434 1,06,17,240 1,88,98,539GrossProfit 1,13,250 1,16,098 1,40,360 2,69,121 Not available It was submitted that the assessee had maintained complete details of purchases and sales of scrap dealt in by the firm and the Assessing Officer had not found any defects in the accounts maintained by it. It was submitted that the purchases as well as sales were fully vouched and the assessee had given a very reasonable explanation for fall in the GP rate because the bulk of the purchases were of imported brass scrap in which the custom duty had been increased from 30 per cent to 50 per cent of the purchase value which accounted for the fall in the GP rate earned by the assessee. It was submitted that after the search, the records were seized by the departmental authorities and brought to the Income-tax Office where these were burnt in a fire while in the custody of the department during Anti-Mandal agitation. He referred to the decision of the Tribunal in the case of Gupta Metal Industries [IT Appeal Nos. 718 and 754 of 1995], another sister-concern of the assessee, wherein the addition made on account of lower GP rate was directed to be deleted taking into consideration the increase in custom duty on brass scrap from 30 per cent to 50 per cent. Reliance was also placed on the decisions in the cases of ITO v. Janta Pharmacy [1996] 84 Taxman 38; (Chd.) International Forest Co. v. CIT [1975] 101 ITR 721 (J. & K.), Pandit Bros. v. CIT [1954] 26 ITR 159 (Punjab) and Jhandu Mal Tara Chand Rice Mills v. CIT [1969] 73 ITR 192. (Punj. & Har.).
5. As regards the addition on account of alleged sale of unaccounted for stock, he submitted that the value of the so-called unaccounted stock on the date of search was calculated on the basis of assuming that there was no shortage of stock during sorting out operation. He submitted that the assessee purchased the brass scrap in bulk which contained dust or other foreign material and when it was sold, there was bound to be some shortage on account of dust and other foreign material which is removed while sorting out the scrap. It was submitted that in the stock tally available for the period 15-5-1990 to 31-3-1991, such shortage was shown by the assessee at 102.470 kg. on sales of 121395.310 kg. which was accepted by the Assessing Officer.
Accordingly it was submitted that a reasonable amount of shortage ought to have been allowed. He further submitted that the alleged shortage may be on account of several factors, namely, pilferage by theft in the factory and even assuming that the alleged unaccounted brass was sold by the assessee outside the books, even then only the gross profit earned on such sales could be added to the total income and not the entire sales as had been done by the departmental authorities. Reliance was again placed on the decision of Gupta Metal Industries' case (supra) wherein addition is sustained to the extent of G.P. on unaccounted sales following the decision of the Third Member of Ahmedabad Bench in the case of ITO v. Gurubachan Singh J. Juneja [1995] 55 ITD 75.
6. The ld. D.R., relied on the orders of the lower authorities and further submitted that at the time of search no scrap was found whereas as per the books of account maintained for the earlier period i.e., upto 31-3-1990 and thereafter taking into consideration the purchases and sales made, the stock of scrap ought to have been 1090 kgs. and since it was not declared as such, the unescapable conclusion was that the assessee sold it outside the books of account and the departmental authorities were justified in making the addition of Rs. 84,985. As regards the application of G.P. rate, it was submitted that no doubt there was increase in the custom duty right from 30 per cent to 50 per cent, yet this alone could not account for the steep fall in the G.P.rate and as such the ld. CIT(A) was justified an applying the G.P. rate of 2.54 per cent on the declared sales as against 1.19 per cent declared by the assessee and 2.54 per cent applied by the Assessing Officer. Reliance was placed on the decision in Punjab Trading Co. Ltd. v. CIT [1964] 53 ITR 335 (Punj. & Har.), and Chhabildas Tribhuvandas Shah v. CIT [1966] 59 ITR 733 (SC).
7. We have considered the rival submissions. In the assessment year under consideration, the assessee had dealt in purchase and sale of brass scrap. The G.P. shown this year was 1.19 per cent which was rather low as compared to the G.P. declared right from assessment year 1985-86 to 1989-90. The reasons explained by the assessee were that there was increase in the custom duty on scrap from 30 per cent to 50 per cent which accounted for the fall in the G.P. rate. However, this increase in the customs duty alone should not have been responsible for the steep fall in the G.P. rate because the sale price of scrap must also have been increased by the assessee itself taking into consideration the increase in the customs duty on imported scrap. The fact that no scrap was found at the time of search also goes to show that all was not well with the accounts maintained by the assessee which unfortunately were destroyed in the fire in the Income-tax office. Taking into consideration the totality of the facts and circumstances of the case, we are of the opinion that it will be fair and reasonable if the addition to the trading account is worked out by applying a G.P. rate of 1.9 per cent as against 1.19 per cent declared by the assessee and 2.5 per cent applied by the learned CIT(A). We order accordingly. Thus the ground regarding the addition made by applying a G.P. rate is partly adjudicated in favour of the assessee.
8. Coming to the addition made on account of sale of unaccounted for stock, we are of the opinion that the addition should be made only on account of G.P. in relation to unaccounted sales of brass scrap after allowing shortage of 1 per cent which shortage had been accepted by the Assessing Officer himself for the period 15-5-1990 to 31-3-1991. We direct accordingly and for this we adopt the reasoning as given by the Bench in the case of Gupta Metal Industries (supra). We may point out that in the case of Gupta Metal Industries (supra) shortage was directed to be allowed at 5 per cent because there the assessee was dealing in manufacturing goods in the form of brass sheets which were obtained by melting scrap and as such the shortage was bound to be more whereas in the present case before us, the assessee was dealing only in re-sale of brass scrap and the shortage cannot be more than 1 per cent.
Accordingly we direct that the addition on account of unaccounted scrap be calculated by allowing shortage of 1 per cent and by applying G.P.rate of 1.9 per cent on sales of remaining scrap at the average rate of Rs. 80 per kg. as adopted by the learned CIT(A).
9. At the time of hearing, the learned Counsel for the assessee submitted that he did not want to press for the disallowance of Rs. 5,000 out of telephone expenses. Accordingly this issue is decided against the assessee and in favour of the Revenue.
10. Ground No. 5 in the assessee's appeal and ground No. 2 in the Revenue's appeal relate to the estimate of income of the assessee for the period 1-4-1990 to 15-5-1990. As already mentioned earlier, there was search and seizure operation on the premises of the assessee on 15-5-1990 when all the records were seized and taken to the office of the ITO and subsequently destroyed in fire during Anti-Mandal agitation. The assessee started its books of account from 17-5-1990 and closed on 31-3-1991. For the period from 1-4-1990 to 15-5-1990 there were no books of account and the Assessing Officer made the addition of Rs. 9,63,184 at 1/7th of the income which was computed for the period 17-5-1990 to 31-3-1991 as against an estimated income declared by the assessee at Rs. 15,635. The assessee appealed and the learned CIT(A) discussed this issue in paras 5.1 and 5.2 of the impugned order and allowed relief of Rs. 9,33,552 to the assessee. The assessee and the Revenue both are aggrieved with the order of the CIT(A).
11. This issue was considered by us in the case of Gupta Metal Industries (supra) wherein it had been held that profits in an enterprise do not accrue or arise on day-to-day basis and these are to be computed/estimated only at the end of the accounting year. In the absence of any record available for the period under dispute, we have directed in the case of Gupta Metal Industries (supra) that it would be fair and reasonable if the net profit was estimated at 1.5 per cent of the sales for the period 1-4-1990 to 17-5-1990. We direct so accordingly here also with the stipulation that if the profit so computed is less than the profit declared by the assessee on estimate basis, then the profit declared should be adopted.
12. The last ground in the assessee's appeal is regarding the chargeability of interest under sections 234A and 234B. The learned Counsel for the assessee has disputed the very levy of interest under the charging section and submitted that the department should have proved that the interest was leviable and since no speaking order was passed, the very levy was not justified. The learned D.R. submitted that the charging of interest under sections 234A to 234C was mandatory and it was of compensatory in nature. This issue was also adjudicated by us in the case of Gupta Metal Industries (supra) wherein we held that the charging of interest under sections 234A to 234C was mandatory. Accordingly we uphold the order of the learned CIT(A) in this regard. However, we direct that the interest should be charged after giving appeal effect to this order.
12A. Coming to the Revenue's appeal, the only other ground is against the action of the learned CIT(A) in setting aside the issue of addition of Rs. 64,45,880 to the file of the Assessing Officer for fresh adjudication. The Assessing Officer had made this addition in view of certain noting on the seized document from which inference was drawn that unaccounted sales till 15-5-1990 had been made to the extent of Rs. 64,44,880. This addition was made by the Assessing Officer on protective basis as the substantive addition on this account was made in the case of M/s. Luxmi Dhatu Udyog (P.) Ltd., the concern who manufactured the goods as per indication in the seized documents. The assessee appealed and pleaded before the learned CIT(A) that the seized papers were not allowed to be inspected by the assessee nor copies of the same were furnished. It was pleaded that the addition had been made purely on assumption and presumption and papers relied on were never confronted to the assessee. The learned CIT(A) held that the papers relied on by the Assessing Officer in making the addition could not be confronted to the assessee as the same had been destroyed in fire and were not available with the Assessing Officer. However, in the absence of such papers, the learned CIT(A) held that the Assessing Officer was duty bound to confront the assessee whatever material was in his possession with the details mentioned in the appraisal report etc.
before making the addition and since proper and adequate opportunity in this regard was not allowed, he set aside the issue to the file of the Assessing Officer for fresh adjudication with the direction that the contents of the appraisal report be confronted to the assessee. He further observed and in no case, the entire sales could be the subject-matter of addition and what was assessable was the profit on sales and not the entire sales. Accordingly the CIT (A) set aside the issue to the file of the Assessing Officer for fresh adjudication.
13. After hearing the parties to the dispute, we do not find any infirmity in the reasoning and conclusion of the learned CIT (A) in this regard whose order we uphold and do not find any merit in the ground taken by the Revenue.
14. In the result, the assessee's appeal is partly allowed and that of the Revenue is dismissed.
1. I have gone through the order proposed by my learned brother, but could not persuade myself either with his ultimate findings or conclusions as arrived at by him in regard to ground Nos. (i), (ii), (iii) and (v) of the assessee's ITA No. 717 of 1995 and Ground no. (ii) of ITA No. 753 of 1995, though I fully agree with the reaming order in both the appeals and my reasons for the same are as under :- 2. All the facts and arguments of the parties are well-detailed in the order above and I need not repeat the same. The main plank of the assessee's argument in respect of these grounds (i) to (iii) is an increase of Excise duty and application of G.P. rate in the case of Gupta Metal Industries (supra), another sister-concern, and shortage etc. on account of pilferage, dust, etc. but no evidence or material whatsoever has been led to substantiate the claim of the assessee.
These arguments are of casual and general nature and not supported by any evidence. In my view, case of sister-concern, referred to above, is distinguishable on facts as the business is separate and ratio of said case cannot be applied to the present case. In the case of application of profit rate, two cases cannot be said to be similar and exactly facts here are distinguishable. Accordingly, in view of the facts and circumstances of the case, and after going through the case law cited and discussed above in the order, in my view, order of first appellate authority deserves to be upheld and addition made by the Assessing Officer and to the extent sustained by the CIT (A), on both these counts, deserves to be confirmed. I hold accordingly.
3. As regards ground No. (v) of the assessee's appeal and ground No.(ii) of revenue's appeal are concerned, for the reasons and basis as adopted by learned CIT(A), which I adopt as that of mine, I uphold her order on the point and this ground fails.
4. In respect of rest of the grounds in both the appeals, I do agree with the reasoning and conclusion of my learned brother.
1. On a difference of opinion between the Members who heard these appeals, the following points of difference are referred to the Hon'ble President for the opinion of the third Member :- (1) Whether, on the facts and in the circumstances of the case, the Accountant Member is justified in adjudicating the issue of additions of Rs. 95,074 and Rs. 84,985 partly in favour of the assessee or the order of the CIT(A) sustaining these additions should be upheld as held by the Judicial Member (2) Whether, on the facts and in the circumstances of the case the Accountant Member is justified in modifying the order of the CIT(A) in estimating the profit for the period from 1-4-1990 to 17-5-1990 or the order of the CIT(A) should be upheld as held by the Judicial Member 1. On a difference of opinion between the Members who heard these appeals, the following points of difference were referred to me as a Third Member by the Hon'ble President under section 255(4) of the Income-tax Act, 1961 :- 1. Whether, on the facts and in the circumstances of the case, the Accountant Member is justified in adjudicating the issue of additions of Rs. 95,074 and Rs. 84,985 partly in favour of the assessee or the order of the CIT(A) sustaining these additions should be upheld as held by the Judicial Member 2. Whether, on the facts and in the circumstances of the case, the Accountant Member is justified in modifying the order of the CIT(A) in estimating the profit for the period from 1-4-1990 to 17-5-1990 or the order of the CIT(A) should be upheld as held by the Judicial Member 2. I have heard both the parties at length and have also perused the orders passed by the tax authorities. The separate orders passed by the learned Accountant Member and learned Judicial Member have also been minutely looked into. There is no dispute between the learned Member about the facts but I propose to summarise these as under first of all vis-a-vis question No. 1.
3. During the assessment year under consideration, the assessee derived income from sale of brass scrap. It filed a return declaring an income of Rs. 1,25,077. On total sales of Rs. 72,61,978 for a period commencing on 17-5-1990 and ending on 31-3-1991, it declared a GP rate of 1.19 per cent as against a GP rate of 2.54 per cent shown for the assessment year 1989-90. On being asked to explain the decline in the gross profit rate, the assessee stated that most of the goods purchased and sold consisted of imported brass scrap and custom duty had been increased to 50 per cent at the time of actual receipt of goods although the rate was 30 per cent at the time of placing the orders. It was pleaded that extra expenditure on account of enhanced custom duty led to the lowering of the GP rate. This plea did not find favour with the Assessing Officer on the ground that the assessee had not been able to furnish separate details of goods imported as also the goods locally purchased. The Assessing Officer accordingly rejected the book results and estimated the GP by applying a rate of 2.54 per cent as shown in assessment year 1989-90 ('last year' erroneously mentioned in the order of the learned Accountant Member) and made an addition of Rs. 97,980.
On further appeal, the CIT(A) allowed a relief of Rs. 2,906 only and sustained addition to the extent of Rs. 95,077 by applying a GP rate of 2.5 per cent on the declared sales.
4. It may also be mentioned that there were search and seizure operations in the case of the assessee on 15th May, 1990 and during the course of said operations, no stock of brass scrap was found. The Assessing Officer, however, worked out a figure of 1090 kgs. as the stock of scrap which should have been available with the assessee taking into account the purchases made in assessment year 1990-91 (wrongly stated as 1989-90 in the order of the learned Accountant Member) and the sales made during the same period plus the purchases made for the period 1-4-1990 to 15-5-1990 and the sales made during the same period. I do not propose to set out the calculation in this respect as the same finds due place in the order of the learned Accountant Member in para 3. On the ground that the assessee must have sold the aforesaid stock outside the books of account, the Assessing Officer made an addition of Rs. 84,985. On further appeal, the CIT(A) confirmed the addition on the same line of reasoning.
5. Being aggrieved with the aforesaid two additions sustained by the CIT(A), the assessee came up in appeal before the Tribunal. At this stage, the viewpoint canvassed on behalf of the assessee was to the effect that the tax authorities were not justified in rejecting the books of account and applying the proviso to section 145(1). A comparative chart of sales and GP was furnished and this pertained to assessment years 1985-86 to 1989-90 not considering assessment year 1990-91 since the record was not available having been burnt. It was submitted on behalf of the assessee that it had maintained complete details of purchases and sales and no defects had been found by the Assessing Officer. It was also the submission that purchases and sales were fully vouched and the reasons given for the fall in the GP rate were valid and reasonable, more so when the bulk of the purchases was of imported brass scrap where the custom duty had been increased from 30 per cent to 50 per cent. In support of the viewpoint canvassed, reliance was placed on the unreported decision of the Tribunal in the case of a sister-concern, namely, Gupta Metal Industries (supra) as also the following decisions :- 6. As regards the addition on account of alleged sale of scrap, the learned counsel for the assessee submitted that the so-called unaccounted stock on the date of search was calculated on the basis of the assumption that there was no shortage of stock during sorting out operations. It was pointed out that the assessee purchased brass scrap in bulk which contained dust and other foreign material and on sale there was bound to be some shortage. It was submitted that in the stock tally available for the period 15-5-1990 to 31-3-1991, such shortage was shown by the assessee at 102.470 kgs. on sales of 121395.310 kgs.
which was accepted by the Assessing Officer. The submission, in other words, was to the effect that some shortage was required to be allowed.
It was also the further argument that a part of the shortage may be on account of pilferage by theft in the factory and even on the assumption that the alleged unaccounted brass was sold by the assessee outside the books, even then it was only the GP earned which was required to be added to the total income and not the entire sale figure as had been done by the tax authorities. Reliance was once again placed on the decision of the Tribunal in the case of the sister-concern, i.e., Gupta Metal Industries (supra). The Third Member decision of the Ahmedabad Bench of the Tribunal in the case of Gurubachan Singh J. Juneja (supra), was also relied upon.
7. In pleading the revenue's case, the learned D.R. strongly relied upon the orders of the lower authorities and the subsequent arguments advanced by her were more or less a reiteration of the reasons recorded by the said authorities in rejecting the assessee's claim and making and sustaining the impugned additions.
8. The learned Accountant Member in considering the viewpoints canvassed by both the parties took the view that the GP rate shown at 1.19 per cent was "rather low" as compared to the GP rates declared during assessment years 1985-86 to 1989-90. According to him, the increase in the custom duty on scrap from 30 per cent to 50 per cent could not account for the fall in the GP rate to the extent found, more so when the sale price of scrap must have also been increased by the assessee after taking into consideration the increase in the custom duty. The learned Accountant Member also upheld the view of the tax authorities in the sense that he opined that the non-availability of scrap at the time of search went to show that all was not well with the accounts maintained by the assessee. Taking into account the totality of the facts and circumstances, he in the ultimate analysis held that a GP rate of 1.9 per cent as against 1.19 per cent declared by the assessee and 2.5 per cent applied by the CIT(A) would be fair and reasonable.
9. As regards the addition on account of alleged sale of stock of scrap, the learned Accountant Member once again confirmed the action of the tax authorities in making an addition on this score but taking note of the decision of the Tribunal in the case of Gupta Metal Industries (supra) he directed the Assessing Officer to allow shortage of 1 per cent which the Assessing Officer himself had accepted for the period 15-5-1990 to 31-3-1991. He also took into account the fact that in the case of Gupta Metal Industries (supra) shortage was directed to be allowed at 5 per cent but the facts were different in the sense that the said assessee was dealing in manufacturing goods in the form of brass-sheets which were obtained by melting scrap and shortage was bound to be more whereas in the case of the assessee it was dealing only in resale of brass scrap. In the final analysis, the learned Accountant Member directed application of GP rate of 1.9 per cent on sales of remaining scrap at the same rate as adopted by the CIT(A), i.e., average of Rs. 80 per kg. after allowing shortage at 1 per cent.
10. As against the aforesaid view expressed by the learned Accountant Member on the additions of Rs. 95,074 and Rs. 84,985, the learned Judicial Member confirmed the view taken by the CIT(A) adopting the reasoning and basis of the first appellate authority as that of his own. A reading of the order of the learned Judicial Member shows that he has done so primarily on the ground that the decision of the Tribunal in the case of Gupta Meal Industries (supra), is not applicable as the facts are distinguishable. According to him, no two cases can be similar when the question comes to the application of a rate of profit. I would straightaway agree with the learned Judicial Member on this aspect of the matter since the best indicator is an assessee's own case, and its past history provided the facts and circumstances remain the same. One must, however, go further into the aspect of applying the decisions not rendered in an assessee's own cases but in the cases of other assessees either identically placed or otherwise. The learned Accountant Member has discussed the matter at length in his order and insofar as the addition on account of the gross profit rate is concerned, he has not accepted the assessee's viewpoint in entirety but accepted the revenue's case insofar as the applicability of proviso to section 145(1) is concerned. As already noted by me earlier, the learned Accountant Member categorically observed that the increase in custom duty could not take care of the entire decline in the GP rate as compared to assessment year 1989-90 but allowing part benefit to the assessee and taking into account the past history of the case as set out in para 4 of his order he in the ultimate analysis concluded that it would be fair and reasonable to apply a GP rate of 1.90 per cent. In fixing the aforesaid GP rate, it was noted by him that all was not well with the accounts maintained by the assessee, more so when no scrap was found at the time of search. In other words, the decision of the Tribunal in the case of the sister-concern, i.e., Gupta Metal Industries (supra), has been taken into account only for the limited purpose of allowing some benefit to the assessee vis-a-vis the increase in the custom duty. The learned Judicial Member has not considered this aspect of the matter but has proceeded to uphold the order of the CIT(A) on the ground that the arguments advanced on behalf of the assessee are of a casual and general nature and not supported by any evidence. He has not rebutted any of the points made by the learned Accountant Member in allowing some relief to the assessee on account of GP rate but has proceeded to adopt the reasoning of the CIT(A) as that of his own.
11. In the course of arguments before me by both the parties in respect of the addition on account of GP rate, the learned counsel for the assessee strongly relied upon the order of the learned Accountant Member whereas the learned D.R. supported the view expressed by the learned Judicial Member.
12. After hearing both the parties, I am of the opinion that the view expressed by the learned Accountant Member is the correct one inasmuch as it is not only fair and reasonable but takes into account all the facts and circumstances of the case and the decisions relied upon on behalf of the assessee during the course of hearing. As already stated by me, the decision of the Tribunal in the case of sister-concern, where the facts are distinguishable, has been applied for a limited purpose although applicability of proviso to section 145(1) has been upheld. The past history in the assessee's own case has also been considered and it may not be out of place to mention that in assessment years 1985-86 and 1986-87, the GP rate accepted was quite identical to the rate applied at 1.9 per cent by the learned Accountant Member in the year under consideration.
13. In coming to the addition of Rs. 84,985 on account of the alleged sale of 1090 kgs. of brass scrap outside the books of account, the learned Accountant Member has once again upheld the view of the tax authorities to the extent that he has confirmed the addition not to the extent of the alleged sale consideration but only to the extent of GP rate once again at 1.9 per cent as in the case of the first addition but after allowing 1 per cent shortage with reference to the decision of the Tribunal in the case of sister-concern where the shortage allowed was much higher at 5 per cent taking note of the difference in the business carried on. As against this, the learned Judicial Member has once again adopted the reasoning of the CIT(A) and confirmed the addition whereas it must be appreciated that when the CIT(A) decided the matter, the judgment of the Tribunal in the case of the sister-concern was not available having been delivered subsequently. As against the reasoning given by the learned Accountant Member in allowing part relief to the assessee, the learned Judicial Member has not rebutted any of the points made in allowing necessary relief. In the final analysis, I, after considering the submissions of both the parties, agree with the view taken by the learned Accountant Member to sustain the addition to the extent of GP rate at 1.9 percent on the sale of scrap after allowing shortage of 1 per cent. In concluding, I would agree with the learned Accountant Member insofar as the first point of difference consisting of two additions is concerned.
14. In respect of second point of difference, the facts are set out in para 10 of the order of the learned Accountant Member and to summarise these, there were search and seizure operations on the premises of the assessee on 15-5-1990 when all the records were seized and taken away by the Income-tax Deptt. but subsequently these were destroyed in a fire during Anti-Mandal agitation. The assessee recommenced the writing of its books of account from 17th May, 1990 and closed these on 31st March, 1991. In other words, there were no books of account for the period 1-4-1990 to 15-5-1990. In order to work out the income for the period when there were no books of account, the Assessing Officer made an addition of Rs. 9,63,184 being 1/7th of the income which was computed for the balance period when the books were available. As against this, the assessee had declared estimated income, for the period in question at Rs. 15,635. Being aggrieved with the order of the Assessing Officer, the assessee appealed to the CIT(A) who allowed a relief of Rs. 9,33,552 to the assessee. Both the parties came up in appeal before the Tribunal against the decision of the CIT(A).
15. The learned Accountant Member took note of the fact that an identical issue had been decided by the Bench (incidentally, with the same constitution as the Members who have differed in the present case) in the case of Gupta Metal Industries (supra), expressing a view to the effect that profits do not accrue on a day-to-day basis and these are to be worked out only at the end of the accounting period. In the absence of the record available for the period in question, the learned Accountant Member held that it would be fair and reasonable if the net profit was estimated at 1.5 per cent of the sales for the period 1-4-1990 to 17-5-1990. He directed the Assessing Officer to recompute the same on these lines but with the rider that in case the profit declared by the assessee was higher, then the profit so declared should be adopted. A perusal of para 10 of the order of learned Accountant Member shows that he has wholly relied on the decision of the Tribunal in the case of Gupta Metal Industries (supra). As against this, the learned Judicial Member confirmed the view taken by the CIT(A) adopting the views of the first appellate authority as his own.
16. I have already observed while deciding the first point of difference that the learned Judicial Member has not rebutted any of the points made by the learned Accountant Member nor has he contradicted any of the findings of fact recorded in the order of the learned Accountant Member. I have also stated that the benefit of order of the Tribunal in the case of Gupta Metal Industries (supra), was not available to the CIT(A) as the decision of the Tribunal came about subsequently. This aspect of the matter appears to have inadvertently escaped the attention of the learned Judicial Member. I have also observed while deciding the first point of difference that facts of two cases cannot be identical but decision rendered in another case can be relied upon for the reasoning and ratio expressed and which has been done in the present case by the learned Accountant Member. In this view of the matter, I agree with the decision of the learned Accountant Member in respect of the second point of difference as well inasmuch as proper reasons have been given for taking the view in question and that too following a decision of the Tribunal in the case of a sister-concern to which both the Hon'ble Members constituting the Division Bench in the present case were parties.
17. The matter would now go back to the Division Bench for passing an order in accordance with the majority opinion.