1989 (12) TMI 144 - AT - Income Tax

Summary

Issues:
1. Whether the CIT(A) erred in passing an order under s. 154 by entertaining the application filed by the assessee for rectification of the appellate order.
2. Whether the CIT(A) erred in restricting the addition to Rs. 30,000 as against Rs. 66,018 made by the ITO.

Detailed Analysis:
1. The appeal by the Revenue was directed against the order of the CIT(A), Nasik, reducing the gross profit addition to Rs. 30,000 from Rs. 66,018 made by the ITO under s. 154 of the IT Act, 1961. The Revenue contended that the CIT(A) erred in entertaining the application for rectification filed by the assessee. The assessee, a registered firm engaged in the business of remoulding tires, had reported a gross profit rate of 10.08% on a turnover of Rs. 6,64,472. The ITO, considering past records and applying the proviso to s. 145(1), estimated the turnover at Rs. 6,65,000 and added Rs. 66,016 to raise the gross profit to 20%. On appeal, the CIT(A) reduced the addition to Rs. 30,000, resulting in a gross profit rate of 14.58%. The Revenue challenged this reduction.

2. The original consolidated appellate order by the CIT(A) did not address the addition in gross profit in the trading account, although it was dealt with in earlier years. The CIT(A) rectified this omission after an application by the assessee, reducing the addition to Rs. 30,000 based on past records. During the hearing, the departmental representative supported the ITO's order, while the assessee's counsel backed the CIT(A)'s decision. The CIT(A) rectified the original order to address the ground related to gross profit addition, ultimately sustaining the addition of Rs. 30,000, resulting in a gross profit rate of 14.58%. The Tribunal upheld the CIT(A)'s decision, noting that the rate was higher than the previous year despite the higher turnover, indicating justification for rectification and sustaining the addition.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to restrict the gross profit addition to Rs. 30,000.