JUDGMENT : Narsing Rao Nandikonda, J. This appeal has been preferred by the assessee under Section 260 (A) of the Income Tax Act, 1961 (for short, ‘the Act’) against the order, dated 31.03.2005, in I.T.A.No.913/Hyd/2002 passed by the learned Income Tax Appellate Tribunal, Hyderabad Bench ‘B’ (SMC) (for short, ‘the Tribunal’) for the Assessment Year 1993-1994. 2. The brief facts of the case are that the Assessee is a partnership firm started its business operations with effect from 12.10.1992. The appellant firm filed income tax returns for the Assessment Year 1993-1994,for the part period i.e., from 12.10.1992 to 31.03.1993 i.e., 5 ½ months declaring income of Rs.4,274/-, whereas the Income Tax Officer assessed the income at Rs.2,24,808/- by making additions. Aggrieved by the additions made by the Income Tax Officer, which was confirmed by the Commissioner of Income Tax Appeals, the appellant filed appeal before the Income Tax Appellate Tribunal, who by its order, dated 31.03.2005 dismissed the appeal ex- parte. Thereafter, the appellant filed Miscellaneous Application No.67/HYD/2007 to reopen and restore the appeal and requested for hearing the appeal on merits. But, the same was rejected by the appellate Tribunal on 05.10.2007. 3. It is stated that the Income Tax Officer issued show-cause notice, dated 25.03.1996 proposing gross profit at the rate of 25% i.e., a sum of Rs.52,750/- to which a sum of Rs.65,088/- was added. It is stated that though the appeal was posted for hearing on 24.03.2005, the counsel for the appellant appeared and sought time for taking certain documents to be furnished by respondent to know the basis of gross profit arrived by the Income Tax Officer, which was erroneously rejected by the Tribunal. It is stated that the Income Tax Officer estimated the gross profit at 26.34 % as against 20.2% offered by the appellant in return of income. But the Income Tax Officer neither rejected the books of accounts nor stated in the assessment order that the regular books of accounts maintained by the assessee have been rejected or disbelieved. It is stated that the income filed by the appellant represents 5 ½ months and not 12 months period and thus the addition of Rs.65,088/- towards estimation of gross profit was erroneous one to the total income. It is stated that the income filed by the appellant represents 5 ½ months and not 12 months period and thus the addition of Rs.65,088/- towards estimation of gross profit was erroneous one to the total income. (a) The Gross Profit of assessee is calculated basing on three aspects and finally on the comparative study of Gross Profit disclosed by other concerns in the vicinity of the assessee firm (Abids, Basheerbagh), involved in the same line of business, which reads as follows: “G.P. of the assessee is calculated as under: (b) 72% of standard gold including making charges and 28% of local purchase gold is admitted as the closing stock available with the firm. The assessee adopted Rs.375/- per gram treating this as average rate of stocks available. There is no basis for this figure. As the assessee admitted maximum value of closing stock to the extent of 72% of standard gold converted, whose value works out to Rs.390/- per gram including making charges as debited by the assessee or at Rs.387/-per gram after restricting the making charges of the assessee as narrated in the following paragraphs, the average rate has got to be more than Rs.380/-. (c) On the basis of sales made by the assessee only 28% of the standard gold converted is sold and balance is from out of local purchase gold. The average rate of purchase of gold from the local market works out to Rs.326/- per gram and standard gold converted works out to Rs.387/- per gram. The average rate of sale on the basis of random samples from out of 20 bills works out to Rs.477.50P per Gram. The Gross Profit earned by the assessee on sale of standard gold converted works out to 23% and local purchase gold works out to 46%.” (d) Comparative study of Gross Profit disclosed by other concerns, in the vicinity of the assessee’s firm (Abids, Basheerbagh), involved in the same line of business for the Assessment Year 1993-1994 is as under: Totaram Jewellers 32.8% Sri Kishan Jewellers 30.04% Javeri Jewellers 16.3% Sriram Jewellers 26.4% 4. It is further held that the time taken for service of the order was 21 years and it cannot be said to be an unreasonable delay so as to raise a presumption against passing of the order in time. It is further held that the time taken for service of the order was 21 years and it cannot be said to be an unreasonable delay so as to raise a presumption against passing of the order in time. Therefore, the question of introduction of cash in any irregular manner in the books of accounts does not arise. It was also held that the action the Assessing Officer in estimating the gross profit @ 26.34% and making an addition of Rs.65,088/- was an erroneous one. In relation to addition of Rs.62,666/- on account of expenditure disallowed towards making charges claimed to have paid, the learned CIT(A) observed as under: “It cannot be denied that once the books of account have been rejected and the gross profit has been estimated at 26.34% on par with the profit declared by another similar jeweler in the area, the question of further addition on account a direction expenditure such as payment of making charges was not called for. Hence, the addition of Rs.62,666/- is deleted.” 5. After hearing the Department and the assessee representative has finally decided the appeal upholding the order passed by the learned CIT (A). The assessee contended that when the above appeal was posted for hearing on 24.03.2005, the counsel for the appellant could not appear before the Tribunal and sought time for furnishing the documents to be filed by the respondents to know the basis of gross profit arrived at by the ITO and the same was refused by the learned Tribunal. The said refusal led to filing of an MA No.67/HYD/2007 to re-open and restore the above appeal which was heard ex parte and requested for hearing the appeal on merits and the same also was rejected by the learned Tribunal. The present appeal is filed being aggrieved by the said order on the following grounds. 6. The appellant preferred an appeal against the said order before the learned Income Tax Appellate Tribunal on the following grounds: 1. The present appeal is filed being aggrieved by the said order on the following grounds. 6. The appellant preferred an appeal against the said order before the learned Income Tax Appellate Tribunal on the following grounds: 1. The petitioner filed return of income under the status as association of persons for the assessment year 1993-94 and declared the income at Rs.4,274/- which the Income Tax Officer assessed under the status as unregistered firm, for which there is no such status as unregistered firm, the status has been omitted w.e.f. the assessment year 1993-94 as such the assessment order is liable to be set aside as there is no such status. 2. The Income Tax Officer while proposing the notice, dated 25.03.1996 whose copy enclosed herewith, estimating proposal to the gross profit in the assessment at 25% by proposing to add a sum of Rs.52,750/- but while passing the final assessment order estimated gross profit at @ 26.34% the income at Rs.65,088/-. Thus the difference addition of Rs.12,338/- is unwarranted and quite contrary to law. 3. Final assessment order cannot proceed beyond show cause notice which propose estimation of gross profit at 25%. Thus the excess additional of gross profit is unwarranted and illegal. 4. That the Income Tax Officer failed to reject the regular books of accounts maintained by the assessee which disclosed the gross profit percentage at 20.2%, thus the estimation of gross profit without rejecting the books of accounts or without disbelieving the regular books of quite contrary to law. Thus the estimation if gross profit at @ 26.34% is quite arbitrary and illegal. 5. That the Income Tax Appellate Tribunal ought to have looked into all the documents including the assessment records before venturing to pass the ex-parte order. Thus the Income Tax Appellate Tribunal erred in passing the ex-parte order without looking into the facts resulted into arbitrary dismissal. 7. Heard Sri Tejprakash Toshiniwal, learned counsel for the appellant and Smt. Bokaro Sapna Reddy, learned Junior Standing Counsel for the Income Tax Department, appearing for the respondent. 8. Having heard both the counsel, the following substantial questions have been framed for consideration: “1. Final assessment order cannot proceed beyond show cause notice which propose estimation of gross profit at 25%. Thus the excess additional of gross profit is unwarranted and illegal. 2. 8. Having heard both the counsel, the following substantial questions have been framed for consideration: “1. Final assessment order cannot proceed beyond show cause notice which propose estimation of gross profit at 25%. Thus the excess additional of gross profit is unwarranted and illegal. 2. That the Income Tax Officer failed to reject the regular books of accounts maintained by the assessee which disclosed the gross profit percentage at 20.2%, thus the estimation of gross profit without rejecting the books of accounts or without disbelieving the regular books of quite contrary to law. Thus the estimation if gross profit at @ 26.34% is quite arbitrary and illegal.” 9. It is pertinent to mention that the Tribunal dismissed the appeal on the ground that the appellant did not get ready with the appeal and sought for adjournments, number of times, as such the matter was disposed of without hearing the appellant on merits. It is also pertinent to mention here that the appellant has also filed M.A. to reopen the case and to give him an opportunity to submit his case and the same was also rejected by the learned Tribunal. 10. During the course of arguments, learned counsel for the appellant has submitted that the Tribunal passed the ex parte order contrary to law and that the petition filed by the appellant to reopen the case and to hear the appeal on merits was also erroneously rejected by the Tribunal. 11. It is further contended that Income Tax Officer issued show cause notice on 25.03.1996 for assessment year 1993-1994 calling for explanation in respect of proposed additions and information for finalization of assessment. In the show cause notice the Income Tax Officer proposed to adopt the Gross Profit at the rate of 25% on the basis of net estimate, but by actual figures of purchase and sale and working out of trading account by making addition of Rs.52,750/- in the value of closing stock. 12. The main grievance of the appellant in the present appeal is that the Income Tax Appellate Tribunal did not provide an opportunity though he has sought certain documents to furnish by the respondent. But no copy provided by the Income Tax Officer. But the same was rejected and refused. 12. The main grievance of the appellant in the present appeal is that the Income Tax Appellate Tribunal did not provide an opportunity though he has sought certain documents to furnish by the respondent. But no copy provided by the Income Tax Officer. But the same was rejected and refused. Further contention of the petitioner- appellant is that the income tax office issued notice on 25.03.1996 proposing gross profit at the rate of 25% proposing a sum of Rs.52,750/- and added sum of Rs.65,088/- and arrived at gross profit of Rs.26.34% taking the basis of Income Tax Officer by comparing the gross profit percentage arrived at from various dealers of the vicinity. As contended by the appellant, the Income Tax Officer estimated at 26.34% as against 20.2% offered by the appellant in the return of income. The Income Tax Officer neither rejected the books of accounts nor stated in the assessment order that the regular books of accounts maintained by the assessee has been rejected or disbelieved and that the income filed by the appellant represents 5 ½ months and not 12 months period. Thus, the addition of Rs.65,088/- towards estimation of gross profit was erroneous one on the total income. 13. He further argued that the Final Assessment Order cannot go beyond the show cause notice proposing the estimated gross profit at the rate of 25% and excess gross profit is unwarranted and illegal. He also further contended that admittedly, a show-cause notice was issued by the Income Tax Officer wherein considering the existing closing stock as committed by the percentage of profit earned by the appellant on the sales varies between 17% to 31% on standard gold converted jewellery and local purchased jewellery. The average gross profit works out to 25%. It is also contended in the notice that there are some traders in the similar line who have admitted gross profit of 25% or more in the relevant Assessment Year, as such the Income Tax Officer has proposed to adopt the gross profit rate at 25% not on the basis of estimate but on actual figures of purchase and sale and working out of trading account by making addition of Rs.52,750/- in the value of closing stock. The main grievance of the appellant is that the said Final Assessment was passed taking the estimated Gross Profit of 26.34 % of the income which is beyond the show notice. 14. This Court is of the opinion that once the Assessing Officer has taken the Gross Profit at the rate of 25%, the same cannot go beyond the show cause notice mentioned by the Income Tax Officer/Assessing Officer. Therefore, the order passed by the CIT (A), which was confirmed by the learned Income Tax Tribunal are liable to the set aside. 15. In view of the reasons stated above, the substantial questions of law framed are answered in favour of the appellant and against the respondent. 16. Accordingly, the appeal is partly allowed. The gross profit which was assessed as per the show-cause notice, dated 25.03.1996, is hereby confirmed. There shall be no order as to costs. Miscellaneous petitions, if any, pending shall stand closed.