ORDERABDUL RASHID QURESHI, JUDICIAL MEMBER. - These two appeals have been filed by the assessee to agitate on record, by the learned CIT(A) on 27.5.95.
2. The brief facts of the case are that the assessee, a private limited company derives income from running a printing press.
The assessee filed returns to declare a loss of Rs.29,341 and Rs.9,392 which was originally assessed at net income of Rs.272,201 and Rs.258,000 respectively for the years 1992-93 and 1993-94. The learned CIT(A) set side these assessments with the direction to make further inquiries about the nature of the business of the assessee and to pass de novo assessment orders in the facts and circumstances of the business of the assessee. In response to notices for re-assessment by the Assessing Officer the assessee filed trading and profit and loss accounts for the years 1992-93 and 1993- 94 showing net profit for the year 1992-93 at Rs.21,619 and \ for the year 1993-94 at Rs.33,424.
The trading account for the year 1992- 93 disclosed sales for the year 1992-93 disclosed sales of Rs.
1,866,405/- consisting of sales at Rs.1,101,405/- on which shown at Rs.765,000/-. The trading account for the year 1993-94 disclosed sales at Rs.2,157,205 which consisted sales of Rs.1,406,765 on which tax was deducted at source and the sales on which tax was not deducted at source were disclosed at Rs.750,439. The assessee filed statements in respect of sales on which tax was deducted at source for the years under appeal. The Assessing Officer treated the sales on which tax deducted at source as deemed income under section 80-C and proceeded to estimate the income in respect of sales on which tax was net deducted at source, in doing so he bifurcated the trading end profit and loss account and estimated the sales on which tax was not deducted at source in respect of the assessm ent Year 1992-93 at Rs.14 lac and applied G.P. Rate thereon at 35% and after making disallowances out of profit and loss account assessed income at Rs.283,225. Similarly in respect of the Assessm ent Year 1993-94 the sales were estimated at Rs.17 lac against the disclosed sales on which tax was not deducted at source at Rs.750,439 and after applying G.P. Rate at 35% and making some disallowances out of P & L account assessed the income at Rs.336,331.
3. The above treatment by the to was challenged before the CIT(A) who did not say anything regarding the treatment in respect of deemed income under section 80-C and relief in respect of sales estimate of income under the head income from business. However, the sales estimates were reduced to Rs.13 lac and Rs.15 lac respectively for the years under appeal.
4. The assessee being dissatisfied with the treatment meted out by the learned CIT(A) came up in appeal before us agitating that the to was not justified in bifurcating the business of the assessee.
It may be mentioned here that the assessee has not furnished to the to full details of the sales made by him showing names and addresses etc. Of the customers. The Assessing Officer partly assessed the income under section 80-C as deemed income and partly assessed the income from business or profession in respect of the same business of printing and sale of stationary against the orders of the customers. The assessee also agitated the sales estimate by the to being arbitrary and without any basisand unwarranted in the facts and circumstances of the business of the assessee. The learned AR for the assessee has submitted that the sales were fully verifiable for which complete^ details were provided to the to who has not pointed out any discrepancy. The learned AR has also submitted that the GP rate declared by the assessee is better than the GP rate disclosed in comparable cases viz. NTA 07-07-1721424 M/s. Lion Press (Pvt.) Ltd., and NTN 07- 03- 1708094 M/s. S.A. Rashid & Co. Private Ltd. In both these cases G.P. Rate was applied at 26%. The learned AR further argued that the to was not justified in bifurcating the same business of the assessee in two different businesses one relating to printing and supply of stationery to NBP and the other relating to printing and supply of stationary to customers. The learned AR further submitted that the estimate of sales adopted by the to is without any basis and unwarranted in the facts and circumstances of the business of the assessee, and the learned CIT(A) has not truly appreciated the facts of the case. The learned AR has pointed out that the Assessing Officer has not appreciated the provisions of section 80-C which are not applicable in the case of a manufacturer. He further argued that the provision of section 80-C prohibits allowance! Or deduction against deemed income and his treatment of bifurcating trading and profit and loss expenses to treat allowances and deductions against deemed income was unwarrented in law. It has also been pointed out that either whole of the income shall be deemed under action 80-C or the income shall be assessed under section 23 in respect of the business of the assessee.
5., The learned L.A. Agreed with the contentions raised by the assessee and she pointed out that in case the assessee had opted to be assessed under section 80-C whole income shall be deemed under section 80-C or otherwise he deserves to be assessed under section 23 in respect of who receipts being a manufacturer.
6. After hearing both the parties we are of the view that both the assessments pertaining to years 1992-93 and 1993-94 are set aside and the case is remitted back to the learned AssessingAuthority with the direction to inquire into the contention of the assessee for determination whether the payments received by the assessee are of the nature on which tax is deductible at source. If the contention of the assessee is found to be correct, he shall be assessed under section 80-C and if the assessee opt to be assessed under section 23, the whole income of the assessee shall be assessed under section 23 in the facts and circumstances of the business of the assessee. The assessee will be allowed opportunity to explain the verifiability of the receipts.