Income Tax Ordinance (XXXI of 1979)---

----Ss. 22 & 32(3)---Income from business---Estimate of sales---G. P rate-- Addition ---Assessee returned sales showing 27% G.P. rate---Assessing Officer accepted same being verifiable but subjected the sales to 27.7% G.P. rate on the basis of history of the case---Addition was made out of salary expenses as assessee had not maintained the salary register and copies of National Identity Cards of the employees were not furnished---C. I. T. (A) confirmed the same ---Assessee being aggrieved, came up for further appeal- Held, declared results were quite reasonable and unnecessary tinkering involving addition was unjustified---Salaries were easily' verifiable-- Assessing Officer who made no attempt to verify the same was not justified in disallowing any amount under said head---Addition was deleted in circumstances.

Noor Muhammad Qureshi for Appellant. Mian Qasim Ali, D.R. for Respondent.

Date of hearing: 26th February, 1997.

ORDER

Appellant, a private limited company deriving income from manufacturing and sale of 'roof material' is contesting the additions in trading as well as P&L Account for assessment year 1992-93.

2. For the year under appeal,. GP Q 27% had been shown on sales of Rs.11,90,225. The sales being verifiable were accepted and subjected to GP rate of 27.7 % purportedly on the basis of history of the case. In this respect, application of GP rate of 27.2% and its confirmation in appeal had been mentioned by the ITO. It was pointed out by the appellant's Authorized Representative that on revision against the order of the first appellate authority, application of GP rate of 27.2 % had not been confirmed and the declared results were held to be reasonable and accepted by the Member (Judicial). The only basis for application of GP rate of 27.7 % in the year under appeal has since been knocked out. In any case, the declared results were quite reasonable and unnecessary tinkering involving addition of Rs.2,381 was unjustified. The declared trading results, like the preceding year, must be accepted.

3. An addition of Rs.30,000 had been made out of 'salary' expenses' claimed at Rs.1,28,000. The ITO had observed that salary register had not been maintained and copies of I.D. Cards of the employees had not been furnished. The CIT(A) regarded the addition as excessive and reduced the same to Rs.10,000. The treatment by both the authorities is vehemently disputed by appellant's AR. The salaries were shown to have been paid to a Manager and Accountant, a Clerk/Typist, a Storekeeper, two Watchmen and a Peon. It was contended that the ITO or the CIT(A) could. have easily verified the payment of salaries from the recipient whose particulars were duly recorded in the account books. In the absence of such an effort on the part of the ITO, as well as the CIT(A), the addition was claimed to be unjustified. Appellant's contention is quite valid. There was no basis for disallowing the amount of Rs.30,000 as per ITO's order of Rs.10,000 as per CIT (Appeal's)) order. The salaries were indeed easily verifiable. The ITC who made no attempt to verify the same was not justified in disallowing any amount under this head. The addition is accordingly deleted.

4. The appeal succeeds as above.

C.M.S./414/Trib. Appeal succeed.