Judgment :- (D.MURUGESAN, J.) 1. The assessee has filed the present tax case appeals under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench dated 24.2.2004 made in I.T.A.Nos.969/Mds/2002, 970/Mds/2002, 971/Mds/2002 and 1367/Mds/2002 for the assessment years 1996-97, 1997-98 and 1998-1999 respectively, raising the following substantial questions of law:- "1.) Whether the Tribunal was right in holding that the net profit rate should be 4% and hence the additions are warranted on the facts of the case? 2.) Whether the Tribunal was right in holding that the addition of Rs.5 lakhs under Section 28(iv) representing the foreign travel expenses met by outsiders is warranted on the facts of the case?" 2. The appellant-assessee is the sole proprietrix of the firm M/s Sri Ganesh Electronics, Chennai and the relevant assessment years are 1996-97, 1997-98 and 1998-99. The assessee is a dealer in electronic appliances, namely, Tvs, VCRs, Refrigerators and other home appliances. A survey under Section 133A of the Income Tax Act was conducted in the business premises of the assessee on 3.4.98 and the statements regarding various business activities were recorded and the books of accounts for the financial year 1996-97 (A.Y. 1996-97) were impounded. The assessing officer rejected the books of accounts while framing the assessment and applied the gross profit at the rate of 19.735 percent against the admitted gross profit rate of the assessee at 3 to 5 percent. The assessing officer issued notices under Section 142 as well as under Section 148 calling for returns for the respective assessment years and the notices were served on one S.Raman, the husband of the assessee. The assessee filed the return for the assessment year 1996-97 on 22.3.99 admitted an income of Rs.48,580/-. As there was no response from the assessee, a show cause notice was issued on 19.3.2001 and in response to this notice, the assessee filed the returns for the assessment years 1997-98 and 1998-99 on 26.3.2001. As the assessments were getting barred by limitation on 31.3.2001, the assessing officer completed the assessment on 28.3.2001 and applied the gross profit at the rate of 19.735 percent and determined the total income at Rs.58,61,560/-, Rs.76,99,020/- and Rs.32,48,670/-for the assessment years 1996-97, 1997-98 and 1998-99 respectively. As the assessments were getting barred by limitation on 31.3.2001, the assessing officer completed the assessment on 28.3.2001 and applied the gross profit at the rate of 19.735 percent and determined the total income at Rs.58,61,560/-, Rs.76,99,020/- and Rs.32,48,670/-for the assessment years 1996-97, 1997-98 and 1998-99 respectively. Apart from that, the assessing officer also added a sum of Rs.5,00,000/-as deemed profit accrued to the assessee under Section 28(iv) of the Act on the ground that the assessee had not furnished any details towards the expenses for foreign trip in respect of the assessment year 1998-99. Aggrieved by such assessment orders, the assessee preferred appeals before the Commissioner of Income Tax (Appeals). The assessee produced two comparative cases viz., M/s J.D. Electronics, Chennai and M/s Shalini Enterprises, Chennai, where the net profit rate was assessed at less than 1 percent for the years 31st March, 1996, 31st March, 1997 & 31st March, 1998. The Commissioner of Income Tax (Appeals) applied a net profit rate of 3 percent to the turnover. In addition to that, the first appellate authority raised the profit by one percent for the reason that the assessee enjoyed certain benefits like long suppliers' credits and of not paying any rent for show room etc., and further increased one percent on account of interest by bank borrowals on the ground that the borrowals from banks had been diverted towards non business advances to the husband of the assessee. Ultimately, the first appellate authority arrived at the net profit rate of 5 percent of the turnover for the three assessment years as reasonable and appropriate. So far as the addition of Rs.5,00,000/- under Section 28(iv) for the assessment year 1998-99 is concerned, the first appellate authority deleted the same on the ground of pure gratis involved in the transaction. Aggrieved by the orders of the first appellate authority, the assessee as well as the Revenue preferred appeals before the Appellate Tribunal. After considering all the facts and circumstances of the case, the Appellate Tribunal arrived at the net profit rate of 4 percent for all the three assessment years instead of the 5 percent determined by the first appellate authority and partly allowed the appeals filed by the assessee. After considering all the facts and circumstances of the case, the Appellate Tribunal arrived at the net profit rate of 4 percent for all the three assessment years instead of the 5 percent determined by the first appellate authority and partly allowed the appeals filed by the assessee. So far as the Revenue's appeal challenging the deletion of Rs.5,00,000/- is concerned, the Appellate Tribunal restored the order of the assessing officer and set aside the order of the first appellate authority by holding that it is a perquisite received by the company and hence chargeable to tax. Challenging the above orders of the Appellate Tribunal, the assessee has filed the present tax case appeals. 3. We have heard Mr.V.S.Jayakumar, learned counsel for the appellant and Mr.T.Ravikumar, learned counsel for the respondent. 4. Question No.1: It is seen from the order of the assessing officer that a survey was conducted under Section 133A of the Act in the business premises of the assessee on 3.4.98 by the Income Tax Officer, CIB-II, during which physical inventory of stock was taken and the books pertaining to the financial year 1996-97 (A.Y.1997-98) were impounded and only marks of identification were made in the books relating to the financial year 1997-98 (A.Y.1998-99). It is also seen that a number of defects in the maintenance of account books, erasures, pencil entries, undercasting the figures, wrong carry forward of figures from page to page in the day book on almost all the days, non-availability of vouchers for major part of expenses claimed etc., were pointed out. It was also seen that the books for purchases and sales had been written upto 31.3.98 and on the basis of these and the value of closing stock, the trading account for the assessment year 1998-99 was prepared duly taking into account the purchase returns, sales return, discount received and that the gross profit rate was worked at 19.735 percent. It was the case of the assessee that such percentage of profit cannot be achieved in the business as, according to the assessee, the gross profit was in the range of only 3 percent in all the preceding years of assessment. It was also the case of the assessee that the assessing officer had omitted to take into account the purchase value from the trading account produced by the assessee. It was also the case of the assessee that the assessing officer had omitted to take into account the purchase value from the trading account produced by the assessee. On a challenge to the said order, the first appellate authority, after considering the survey report, assessment orders, remand report, miscellaneous records, confidential records, margin chart and the explanation adduced by the assessee, arrived at the net profit rate of 3 percent. To arrive at the said percentage, the first appellate authority took into consideration the following facts:- "(i) Whereas, the books for A.Y.1996-97 were impounded, it is not known as to why the books for the subsequent two years (At least the registers for sales and purchase) could not be impounded. The appellant has made some extra entries of purchase which are supported by invoices of reputed companies and cannot be easily brushed aside as non reliable. The entire purchase account however has remained beyond verification. At this stage, it is very difficult to decide whether for A.Y.1998-99, the correct and complete purchase figure was 1.34 crores as seen on the date of survey of Rs.1.59 crores as found now from the record (considering the further invoices for the months of February and March 1998 totalling to about Rs.25 lakhs) which have been accepted by the sales tax authorities. (ii) There is nothing sacrosanct about the opening stock valuation of Rs.34 lakhs adopted by the survey party for preparing their trading account, particularly because during the survey itself, they have found a file where the stock valuation as on 1.4.1997 was recorded as Rs.39 lakhs and was accordingly returned to the bank. (iii) The survey report is full of facts precisely emphasising the defects and anomalies in the books of accounts. The entire report has discussed "improper maintenance of books" illustrating various types of defects in maintenance of ledger accounts. Similarly, whereas on one hand wrong totalling of day book balances has been noticed, on the other hand, cash shortages of certain dates have been alleged. (iv) The very fact that for two out of three years, without any material, the A.O., has estimated gross profit, shows that A.O., had resorted to section 145 for those two years. In view of the above, it is extremely difficult for me, even to presume that books of accounts could be considered to be correct or complete. (iv) The very fact that for two out of three years, without any material, the A.O., has estimated gross profit, shows that A.O., had resorted to section 145 for those two years. In view of the above, it is extremely difficult for me, even to presume that books of accounts could be considered to be correct or complete. Correct profits cannot be ascertained if we start from these accounts. Therefore, the only option is to reject the book result as unreliable and to compute an estimate of gross profit or net profit. Since the ledger accounts are not credit worthy, even recording of expenses cannot be accepted to be either complete or correct. Therefore, the only prudent choice is to go for an objective and reasonable estimation of net profit based on the turnovers. The assessed turnovers in the sales tax orders will be the only proper legal basis. Until and unless, the sales tax authorities on some ground reopen or reassess these turnovers, it is always objective to accept the assessed sales as the basis for profit estimation." The first appellate authority also took into consideration the net profit rate arrived in respect of two other business houses viz., M/s J.D.Electronics and M/s Shalini Enterprises in respect of the three assessment years, where it was seemingly a low figure of less than one percent. Only on such satisfaction, the first appellate authority held that he was inclined to fix the net profit percentage of around 3 percent for the assessee. In addition to this, the first appellate authority increased the profit percentage by 2 percent on the ground that the assessee was enjoying certain benefits like long suppliers credits, non-payment of rent for showroom and on account of interest through borrowals from banks. In our opinion, even though the Appellate Tribunal had concurred with the findings of the first appellate authority on consideration of the materials and records produced by the assessee and the Revenue on factual aspects, it erred in fixing the net profit percentage at 4 percent for all the three years. On the facts and circumstances of the case, we feel that a net profit percentage of 3 percent for the assessment years 1996-97, 1997-98 and 1998-99 would be proper and reasonable and accordingly modify the order of the Appellate Tribunal to this extent. 5. On the facts and circumstances of the case, we feel that a net profit percentage of 3 percent for the assessment years 1996-97, 1997-98 and 1998-99 would be proper and reasonable and accordingly modify the order of the Appellate Tribunal to this extent. 5. Question No.2: During the financial year 1997-98, the assessee with her husband had undertaken trips to Singapore, Malaysia, Bangkok and Ceylon for a period of 17 days apart from her son Mr.R.Krishamurthy who visited Singapore. It was the case of the assessee that the entire expenses relating to travel, stay, foreign currency requirement of the assessee and her husband had been met by M/s MRC Electronics (Onida) in appreciation of the business done for them by the assessee and the travel expenses of her son were met by M/s Godrej India Ltd in appreciation of the business done by her son on their products and no cash amounts were received on this account. However, the assessing officer rejected the said contention on the ground that no details were furnished by the assessee and he determined a sum of Rs.5,00,000/-as a perquisite received by the assessee, which is taxable under Section 28(iv) of the Act. On appeal, the first appellate authority accepted the contention of the assessee and held that since gifts are acts of gratis, those cannot have the nature of income in the hands of the recipient and that there will be no scope for assessment under Section 28 (iv). With that finding, the first appellate authority deleted the addition of Rs.5,00,000/-. When the matter was further taken up on appeal by the Revenue, the Appellate Tribunal, after going through the provision of Section 28(iv), held that though it is an admitted fact that such trips are usually given by the manufacturing companies to their retailers for the development of business, it rejected the contention of the assessee that the said perquisite did not fall within the purview of Section 28(iv), as the perquisites are chargeable to tax and that the benefit which the assessee derived had a direct nexus between the business of the assessee and the benefits derived and these benefits cannot be called "gratis" as held by the first appellate authority. Accordingly, the Appellate Tribunal set aside the order of the first appellate authority and restored the order of the assessing officer. Accordingly, the Appellate Tribunal set aside the order of the first appellate authority and restored the order of the assessing officer. In our opinion, both the assessing officer and the Appellate Tribunal have rightly held that the perquisites of business are taxable under clause (iv) of Section 28 of the Act, which contemplates that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable to income tax under the head "profits and gains of business or profession". However, on the facts and circumstances of the case, we find that during the relevant financial year, the assessee and her family had undertaken trips to Singapore, Malaysia, Bangkok and Ceylon for a period of 17 days apart from the son of the assessee visiting Singapore in connection with the business, which expenses have been met by M/s MRC Electronics (Onida) and M/s Godrej India Ltd. However, no materials have been either produced before the lower authorities or before us as to the basis on which the amount of Rs.5,00,000/-has been arrived at, in the absence of any details furnished by the assessee or by the Revenue. To this limited extent, though we uphold the orders of the assessing officer and the Appellate Tribunal that the perquisites of business is profit under section 28)iv) of the Income Tax Act, we set aside the orders of the lower authorities only insofar as the determination of Rs.5,00,000/- in the absence of any details furnished by the assessee and remit the matter to the assessing officer to arrive at the quantum on the basis of materials/details furnished by the assessee in this regard. Such exercise shall be done as expeditiously as possible and in any case within a period of two months from the date of receipt of a copy of this order. In fine, all the tax case appeals are disposed of accordingly. Consequently, T.C.M.P.Nos.555 to 570 of 2004 are closed. No costs.