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Reference No. 8 of 1963, decided on 13th August 1965.

, S. 23‑Assessment‑Matters of separate proceedings, e.g., rates of gross profits adopted in previous years‑‑Can be taken, into consideration and adopted in subsequent year.

Asrarul Husain and Md. Nurul Huq for Petitioner.

Afzalul Huq for Abdul Matin Khan for Respondent.

Date of hearing: 12th August 1965.

.‑The assessee, a limited Company deals in sewing machines and thread and is also manufacturing the same. For the assessment year 1957‑58 the assessee showed a gross profit at the rate of 5.3 %. The Income‑tax Officer being of opinion that the rate of gross profit was abnormally low for this line of business raised the same to 24 %. On appeal by the assessee, the Appellate Assistant Commissioner set aside the order of the Income‑tax Officer and accepted the rate as claimed by the assessee whereupon the Income‑tax Department preferred an appeal to the Appellate Tribunal which in its turn set aside the order passed by the Appellate Assistant Commissioner and restored that passed by the Income‑tax Officer.

The assessee filed an application under section 66 (1) of the Income‑tax Act for reference to this High Court but the Appellate Tribunal being of the opinion that the points raised by the assessee were in relation to the finding of facts rejected the application. Thereafter the assessee filed an application under section 66 (2) of the Act, before this Court and obtained an order directing the‑ Appellate Tribunal to refer to the High Court the following question:

"Whether the Tribunal was justified in law in taking into consideration matters of separate proceedings' relating to earlier assessment years, i.e. the rates of gross profit adopted in previous years in deciding the question as to whether or not the Appellate Assistant Commissioner had rightly deleted the addition of Rs. 15,337 made by the Income‑tax Officer for he assessment year 1957‑58 "

It is contended by the learned Advocate for the assessee that in law, it was not competent for the Tribunal to refer to the rates of the gross profit adopted in the previous years inasmuch as the facts of the assessment year under consideration are not similar to the facts of the previous years of assessment. The second point urged by the learned Advocate is that the conclusion reached by the Tribunal is wrong inasmuch as finding of fact was in favour of the appellant.

We propose to deal with these two questions simultaneously. The assessee pressed two contentions before the Income‑tax Officer, the Appellate Assistant Commissioner as well as before the Appellate Tribunal whether owing to the effect of devaluation of currency from 1st August 1955, the purchases were effected and the price was higher and (2) whether the wages paid during the year were higher. As to the first it has been observed by the Appellate Tribunal that:

(1) "In this year though the trading results of different items of yarn were different, the facts remained that manufacturing account as also quantitative and qualitative analysis of purchases and sales could not be shown;,

(2) when the higher valued price of the imported yarn could fetch at least 17.5%. profit . as shown in the preceding year the carried forward stock of that year at the devalued price would certainly fetch at least that price of the previous year as shown."

In this connection the following observation was made:

"But this year though the bulk of the sales came from the opening stock purchases being negligible."

and as to second point it has been observed:‑

"Another point was taken that the wages paid during the year were higher. But I find the rate given is in the same proportion as that given in the 'preceding year after devaluation."

So from the above findings, it does not appear that the assessee's contention was accepted by the Appellate; Tribunal but the same was rejected after arriving at a different finding.

Now the question is whether the Tribunal was justified in law in taking into consideration matters of separate proceedings relating to earlier assessment years, that is, the rates of gross profit adopted in. previous years. We are of opinion that reference can be made in order, to see the gross profit in this line of business, and adopt the same in subsequent year, other circumstances remaining the same. It appears that for the assessment years 1952‑53, 1953‑54 and 4955‑56, 30 %, 27 % an 28 % were shown by the assessee and the same were accepted by the Department. For the assessment years 1954‑55 and 1956‑57, 2 % and 17.5 % were shown by the assessee but the department raised the same to 26.5% and 24 % respectively. For the assessment year under consideration, namely, 1957‑58 rate of gross profit has been shown as 5.7%. The assessee pleaded that this poor turn over was due to devaluation of Pakistan currency from 1st August 1955 and higher wages paid during this year. We have already quoted the finding of the Appellate Tribunal that for the assessment year 1956‑57 when the devaluation was enforced and the stock was purchased at the devaluation rate even then the assessee showed the rate of gross profit of 17.5 % and it has been further' found by the Appellate Tribunal that wages paid during the year were not higher than the rate given in the preceding years after devaluation. So in our opinion, in the facts and circumstances of the case the Appellate Tribunal was justified in law in taking into consideration matters of separate proceedings relating to earlier assessment years, that is, the rates of gross, profit adopted in the previous years.

Hence we answer the question in the affirmative. Respondent is entitled to costs.

‑I agree.

S. Q. Reference answered in the affirmative.

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