TMI Blog1953 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... the case on the questions of law indicate in the order. Accordingly the Tribunal has stated the case and referred the said questions of law. They are: (1) Whether in a case to which the proviso to Section 13 applies the Income-tax Officer is bound to disclose in his order the basis and the manner of computation of the income, gains or profits, and to disclose the date on which he arrives at the result. (2) If the answer to this question is in the affirmative, is there any material on record to warrant the estimate of the profits at the several rates adopted in this case? These questions arise for the both the years. 2. The assessee, a Hindu undivided family, carrying on business in cloth and yarn, has two shops at Sagar one at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account. Sometimes, the Income-tax Officer makes a lumb sum addition to the income disclosed; sometimes he disallows a part of the expenses claimed by the assessee; sometimes he applies a percentage rate to the sales as disclosed by the assessee's books; sometimes he applies a rate to the sales as estimated by him. There is no hard and fast rule as to what method he should adopt in a particulas case...... After all is said and done, an estimate is an estimate. It is a leap in the dark. The Tribunal further states that when an assessment under Section 23(3) read with the proviso to Section 13 comes up before the Appellate Tribunal, comparable cases-there are no two truly comparable cases as the Tribunal concedes-are brought to it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire the Income-tax Officer to make such disclosure, it is necessary on the principles of natural justice. In Sarupchand Hukamchand In re [1945] 13 I.T.R. 245 Kania, Ag. C.J., observed a page 256:- In fairness and in law, I think, it is the duty of the authority entrusted with the task of recording its finding, to give every opportunity to the other side to meet the case which the authority thought was in existence. Without giving such opportunity to the assessees it is not proper to rely on any evidence or any fact which he ultimately takes into consideration for arriving at his conclusion. See also Commissioner of Income-tax v. Khemchand Ramdas [1940] 8 I.T.R. 159. The order is appealable and must stand scrutiny by an appellate c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Privy Council stated in Commissioner of Income-tax, Bombay v. Sarangpur Cotton Manufacturing Co. Ltd. [1938] 6 I.T.R. 36, 40:- But there may well be more complicated cases in which nevertheless, it is possible to deduce the true profit from the accounts and the judgment of the Income-tax Officer under the proviso must be properly exercised. It is misleading to describe the duty of the Income- tax Officer as a discretionary power. It is certainly not a leap in the dark. The Income-tax Officer is not entitled to make a guess without evidence: Commissioner of Income-tax v. Kameshwar Singh [1933] 1 I.T.R. 94 P.C. at 106. 5. As appears from the concluding observations in the statement of the case, the Appellate Tribunal does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax [1926] 21 Nag. L.R. 165, 180, in an assessment under the proviso to Section 13, The taxing authorities must find out the true income of the assessee as, after all, income-tax is leviable on income, profits and gains and not on imaginary sums which do not represent true income. We therefore answer the first question in the affirmative. 6. As regards the second question, unfortunately the statement of the case is not satisfactory. This is evidently due to the view of the Appellate Tribunal that the assessment was a leap in the dark. Instead of referring the case back under Section 66(4) and wasting considerable time, we propose to examine the orders of the Income-tax Officer to see if there is any material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re mostly of handloom and other fabrics whose prices were not controlled. Sales were retail to a large extent. The Income-tax Officer has stated that the prices of handloom cloth went higher during the accounting year owing to the control of millmade cloth. There is no record of quantitative and qualitative particulars. It was therefore impossible to deduce the percentage from the trading account. As the Appellate Assistant Commissioner has stated, he had seen higher margin of profits in some cases. The Appellate Tribunal was satisfied that this was a reasonable percentage of profits. 9. As regards the cloth business of the Katra Bazar shop, the sales were both of mill-made and handloom cloth and the nature of sales was wholesale and ret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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