Law: Income Tax Ordinance, 1979

Section: 32,32(3)

(a) Income tax Ordinance (XXXI of 1979)--S. 32 (3) Applicability of Computation of income Gross profit rate Export sales Conversion of C.I.F. basis sales into F.O.B. basis sales Legality of Assessee engaged in manufacture of musical instruments Sales both local and by export Declaring gross profit on aggregate sales Department rejecting declared version on account of certain defects in accounts and working out F.O.B. value on sales and after adding local sales applying a higher G.P. rate Held: Department for whatever reason could not convert C . I . F. sales into F.O.B. sales unless contract with importer itself was on basis of F.O.B. sales Provision contained in S.32(3) of Ordinance was not applicable and same could not be invoked as income could be computed from method employed by assessee. (b) Income tax Ordinance (XXXI of 1979) S. 32 (3) Method of accounting Rejection of accounts Application and scope of S.32 elaborated. Seth Gurmukh Singh v. Commissioner of Income tax Punjab (1944) 12 I T R 393 and Commissioner of Income tax Bombay v. Sarangpur Cotton Manufacturing Co. Ltd. (1938)6 I T R 36 ref. ORDER ZAFFAR HUSSAIN (MEMBER). In this case the department has come in appeal against the order of the learned Appellate Assistant Commissioner of Income tax Taking the plea that while computing the gross profits the A. A. C. was not justified in directing the I . T. O. to re convert the F. O . B sales in to C. I. T. sales and then apply an appropriate rate to such sales. 2. Briefly stated the facts of the case are that the assessee, who is engaged in the manufacture of musical instruments, declared export sales at Rs.1,60,931 and local sales at Rs.1,62,941, the total aggregating Rs.3,23,872. On the total sales a G.P. rate of 35.2% was declared by the assessee. As against this, the position in the preceding year was that the assessee declared export sales at Rs.3,19,564 and local sales at Rs.1,64,949 with a G.P. rate of 36.2% on the total sales of Rs.4,84,531. The I.T.O found that no manufacturing account was maintained, nor was any record of day today consumption of the raw material kept. There was no stock register of raw material or the ready made goods…

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