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Application of GP rate as adopted by the AAC for the assessment years in question. Analysis: The case involved appeals by the assessee regarding the application of the Gross Profit (GP) rate as adopted by the Assistant Commissioner of Income Tax (AAC). The assessee, engaged in the business of manufacturing drugs, subcontracted the manufacturing process due to the absence of a manufacturing license. The assessee contended that the AAC erred in estimating sales and applying a 24% GP rate without considering the decline in business and other relevant factors. The assessee's counsel argued for a lower GP rate, citing proper maintenance of books of accounts and the inapplicability of Section 145(1) proviso. Reference was made to previous Tribunal decisions to support the argument for a reduced GP rate due to the unique circumstances of the case. The Departmental Representative (D.R.) supported the AAC's order, emphasizing the lack of serious challenge to the application of Section 145(1) proviso. The D.R. highlighted the Tribunal's adoption of a 24% GP rate for a comparable year and urged for upholding the AAC's order for both assessment years. Upon reviewing the orders of the authorities and considering the arguments presented, the Income Tax Appellate Tribunal (ITAT) acknowledged the significant decrease in turnover in the business. The ITAT found it appropriate to apply a GP rate of 20% for one assessment year and 22% for the other, based on the disclosed GP rates by the assessee and the specific business circumstances. The ITAT directed the Income Tax Officer (ITO) to calculate the relief accordingly and provide consequential relief to the partners. As a result, the appeals by the assessee were partly allowed, granting relief in line with the adjusted GP rates for the respective assessment years.
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