ORDER ASHFAQ AHMAD, ACCOUNTANT MEMBER.- The appeal has been filed by the appellant against the order of the IAC Range-II, Zone-A, Lahore, dated 9.1.1990 in respect of the assessment year 1988-89. The appellant is aggrieved on account of enhancement of gross profit rate from 25% to 35% by the IAC under section 66-A of the Ordinance.
2. The brief facts of the case are that in the order passed by the to, gross profit rate was applied at 25%. The IAC reopened the case under section 66A on the ground that the gross profit rate comes to 35%. In response to notice under section 66A the assessee explained to the IAC that in earlier years the format of the computation of income was statedly different insofar as commission allowed on sales was excluded from the turnover disclosed and on this basis application of gross profit rate of 35% was in order whereas in the assessment year 1988- 89, sales figures being (allegedly) inclusive of commission allowed, application of gross profit rate of 25% was appropriate. The reply of the assessee was however not accepted by the IAC as there was no formal agreement between the assessee and its sales agent regarding the commission to be allowed to them and he, therefore, proceeded to apply, gross profit rate of 35%.
3. During the course of the hearing of this appeal before us, it was pleaded by the learned AR that separate discounts had been allowed to salesman and, therefore, application of gross profit rate at 25% by the assessing officer was just and fair. In support of his contention, (from the legal point of view) the learned AR of the assessee cited a case decided by this Tribunal reported as NTR 1990 Trib. 267 in which it has been stated as under:-
(a) S. 66-A. Loss of revenue resulting from an assessment framed in strict compliance with law- Whether such loss renders the assessment to be erroneous insofar as it is prejudicial to the interest of revenue warranting action u/s. 66-A-Held, No. S. 66-A. Assessm ent though departing from the past history yet not suffering from any error of law- Whether such a departure from the past history renders the assessment erroneous insofar as it is prejudicial to the interest of revenue warranting action u/s. 66-A- Held. No".
4. We have considered the arguments put forth by the appellant and there appears to be some merit in his contention from the legal point of view. In the light of the reported judgment cited by him, we vacate the order passed by the IAC and direct that gross profit rate of 25% should be applied in this case in this year. However, it is clarified here that this should not be made a precedent for application of gross profit rate for any of the subsequent assessment year where the gross profit rate is to be applied on the merits of the case. In the impugned year the application of 25% gross profit rate has been restored for the reason that action under section 66A was not warranted.
5. As a result of the above discussion, the appeal filed at the instance of the assessee-appellant succeeds accordingly.