1. This appeal has been filed by the Revenue against the judgment of the learned Tribunal dated May 16, 2005, deciding the cross-appeals of the assessee and the Revenue whereby dismissing the appeal of the Revenue and partly allowing the appeal of the assessee and maintaining the gross profit rate to be applied at 2.51 per cent.
2. The appeal was admitted on April 4, 2006, by framing the following substantial question of law:
“Whether acceptance of gross profit rate by the Tribunal is not sustainable in law because it is based on ignoring the relevant material concerning the assessee's own result of the previous year which vitiates the finding?”
3. We have heard learned counsel for the parties and have gone through the impugned judgments. The Assessing Officer rejected the books of account for valid reasons and invoked the provisions of section 145 of the Income-tax Act, 1961, and made assessment by applying the gross profit rate of 15 per cent. on the sales disclosed by the assessee and, accordingly, the additions were made to the different result. This matter relates to the assessment year 2000–01. The Assessing Officer for arriving at this conclusion considered that the assessee had disclosed the gross profit rate of 2.30 per cent. as compared to 2.51 per cent. in 1999–2000, and 16.04 per cent. in the assessment year 1998–99. Against that the order, the assessee filed appeal and the learned Commissioner upheld the invoking of section 145 and examined the aspect of gross profit rate to be applied and considered that the gross profit rate declared by the assessee during the year is far less than the G.P rate (gross profit rate) shown by the other assessees who are in the same line of business and applied the gross profit rate at 14.5 per cent. Against this, the assessee filed appeal, being Appeal No. 448 of 2004, and the Revenue also filed appeal, being Appeal No. 464 of 2004. The learned Tribunal negatived the contention of the assessee about challenge to invoking the provisions of section 145. Then, the aspect of gross profit rate to be applied was considered in paragraph 4 and it was found that the Assessing Officer considered certain cases as comparable applied gross profit rate of 15 per cent. which was reduced in appeal to 14.5 per cent. but then it was considered that the Assessing Officer does not get unfettered powers to apply any gross profit rate of his choice, and he is supposed to be guided either by the gross profit rate declared by the assessee or the profit rates declared by the comparable cases.
4. Then, it was considered that in resorting to the application of gross profit rate on the basis of comparable cases, it is necessary that those cases should be in fact, comparable with reference to the volume of business, location and other host of factors, and it was found that the objections raised by the assessee were not, however, dealt with and, therefore, in the absence of any change in the factual position normally the profit rate declared and accepted in the preceding year constitutes a good basis for working out the gross profit. Accordingly, since in the earlier year the gross profit rate declared and accepted was 2.51 per cent. the same rate should be applied by the learned Tribunal for this year also.
5. Assailing the impugned order, it is contended by learned counsel for the Revenue that in the year 1998–99, the gross profit rate at 16.04 per cent was applied and, therefore, there was no justification for the Tribunal to reduce the gross profit rate at 2.51 per cent.
6. Learned counsel for the assessee supported the impugned order and informed that the gross profit rate of 2.51 per cent. as applied in the assessment year 1999–2000 was applied after scrutiny of return and this gross profit rate has been upheld right up to the Tribunal.
7. Learned counsel for the Revenue is not in a position to dispute this factual aspect of the matter about the gross profit rate of 2.51 per cent. having been applied for the assessment year 1999–2000 and that having been upheld by the learned Tribunal.
8. Since the question as framed only comprehends the ignoring of the relevant material on the part of the Tribunal concerning of the assessee's own results of the previous year and that to be vitiating the finding while as noticed above, the assessee's own result of the previous year was the gross profit rate of 2.51 per cent. and the same has been upheld by the Tribunal for this year also.
9. In that view of the matter, the question as framed is required to be answered against the Revenue and in favour of the assessee and is so accordingly answered.
10. The appeal thus has no force and is dismissed.