TMI Blog1939 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners made a return, for Income Tax purposes, of the profits of their business at ₹ 1,538. The Income Tax Officer did not accept the said return and issued a notice under Section 22(2) of the Act of 1922. Pursuant to that notice the petitioners appeared before him and produced certain books. The Income Tax Officer after hearing the petitioners assessed them on a sum of ₹ 21,669. The petitioners appealed to the Assistant Commissioner who reduced the assessment to a sum of ₹ 17,000. The petitioners turnover during the year in question was ₹ 1,58,403 and the Income Tax Officer had declined to accept the petitioners return on the ground that the income showed a profit of less than one per cent on the turnover which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners before him, went into the figures relating to the petitioners, trade so far she was able in order to test the accuracy of the returns. He stated in his assessment : An analysis of the purchase and scale shows that under normal circumstances the assessee makes the profit at the following rates on whole scale business . Then he states the percentage of profits the petitioners makes on the various classes of goods. He says : Taking all these things into consideration I think that it will be conservative estimate if I fix the rate of profit in wholesalers business as 12 1/2 p.c. and that in the retail business at 15 p.c. That is with regard to the Karimganj business. As regards the Chandpur business the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t those heavily increased assessment. In the year in question the stock was obviously that carried over from the previous returns which were clearly wrong. The Income Tax Officer was justified in being thoroughly suspicious of the return and when he went into the figures of the returns and analysed them as far as he could, they indicated, wherever reliable data were available that the rates of profit were much higher than those shown in the returns. It was his duty to make the assessment under the section 23 (3) and in doing to be guided by the previous of section 13 of the Act. It is clear to me - as it was to the Income Tax Officer -that the method of making the return based on precious false basis and the material of the return its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuch as the Income Tax authorities not having found that from the method of accounting employed by the assessee in their account books, the income, profits and the gains of the business could not be properly deduced they were bound to compute the income, profits and the gains in accordance with the method of accounting shown in their account books in view of the provisions of Section 13 of the Act. The contention presupposes that the account books on which the assessees rely are genuine. It appears, however, from the findings of the Income Tax authorities that the account books which the assesses field and which were considered by the Income Tax Officer under the section 23(3) do not represent a true state of affairs of the business. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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