K.T. Saoji vs Commissioner of Income Tax

V.A. Mohta, J.—The following question has been referred at the instance of the assessee.

"Is not the decision of the Tribunal confirming the gross profit rate of 12% contrary to the evidence and material on record, especially the agreements between the assessee and other pharmaceutical companies, bills, correspondence, etc, whereby it was established that the assessee could get a profit between 5% and 7% only ?"

The assessee deals in medicines. He sells products manufactured by different manufacturers such a Pfizer, Warner, etc. For the assessment year ending 1967, the assessee showed a gross profit of Rs. 55,484 as per his account books to which the Income Tax Officer made an addition of Rs. 4,917. While the assessee''s statement about the rate of commission was accepted in respect of Pfizer and Warner products, it was not so done in respect of the commission given by the other companies. The assessment order of the Income Tax Officer gives no reason as to why the book entries were rejected in part and on what basis a conclusion about commission paid by other companies being 12% was arrived at.

Aggrieved by the addition of Rs. 4,917, an appeal was carried to the Appellate Assistant Commissioner. It came to be dismissed on the ground that whereas agreements in respect of two companies were produced on record, agreements entered into with the other companies were not produced. Further appeal was carried to the Income Tax Appellate Tribunal. On the date of hearing, none appeared for the appellant. There was an application for adjournment but it came to be rejected. The Income Tax Appellate Tribunal quoted part of the order of the Appellate Assistant Commissioner and observed "we agree with this reasoning"

An application for rehearing of the appeal was made. Ex parte decision was set aside. The matter was heard afresh. However, the Tribunal saw no reason to take a different view of the matter and maintained the earlier conclusion. Copies of the letter of appointment from various companies such as Dumex Pharmaceuticals, Themis Agencies, National Pharmaceuticals, J. L. Morison Son and Jones (India) Private Limited were produced which specified the rates of commission. They were between 5% and 7% as disclosed in the books of accounts. There is no reference whatsoever to those letters of appointment in the order.

Shri Thakkar, learned counsel for the assessee-applicant, has submitted before us, an in our judgement rightly, that this is a case of total non-application of mind to the relevant material on record and that the decision of confirming gross profit rate at 12% is contrary to the evidence. He also made a correct grievance that the rehearing was treated merely as a formality. Neither the points urged nor the documents produced find even a passing reference in the order passed by the Tribunal. At first blush, the question would appear to be a pure question of fact, but, having regard to the peculiar situation to which we have made a reference, it seems to us that the addition on the basis of 12% gross profit rate amounting to Rs. 4,917 was demonstrably for no reason.

Under the circumstances, we answer the question in the affirmative and in favour of the assessee.

We direct the Tribunal to hear the appeal afresh, consider all the material on record and then arrive at a final conclusion. There shall be no order as to costs.