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Issues involved: Determination of profit margin for assessment years, arbitrariness in adopting profit margin, consideration of available data for each year, application of uniform percentage for several years, relevance of prior record of the assessee, guidance from previous court decisions.
Judgment Summary: The court addressed the contention that the Tribunal's adoption of a profit margin for later years based on an earlier year's rate without considering the varying profit margins reported by the assessee was arbitrary and impermissible. It was argued that each assessment year should be treated independently, and the liability for tax should be determined based on available data or estimates for each year separately. The Tribunal's approach of applying a fixed percentage uniformly for multiple years was deemed inappropriate, especially considering the differences in profit margins reported by the assessee and the unique features of the dairy industry in which the assessee operated. The court emphasized the need for estimates to be based on figures available for each year and to take into account the assessee's prior record. Referring to a decision by the Karnataka High Court, the court highlighted that while profits estimated in an earlier period could guide estimations for subsequent years, this guidance is only applicable when the business conditions remain similar. Consequently, the court ruled in favor of the assessee on the first two questions and directed the Tribunal to reconsider the profit margin for each year separately. Regarding the third question, the Tribunal was granted the authority to determine a different rate, provided it is done in accordance with the law and with reference to relevant data for each assessment year.
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