TMI Blog1957 (9) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintained at the Nagpur office. 3. In the year of account, the total purchases of the assessee were ₹ 5,75,454, as against ₹ 11,29,164 shown by the books in the year preceding. The main reason for the fall in the purchases was given to be the ban on foreign imports by the Government. It appears that at the material time the Government restricted the imports by licensing them. The total sales were ₹ 8,87,574, as against ₹ 13,43,011 in the year preceding. The gross profit returned by the assessee in respect of the sales of the year of account was ₹ 61,821, as against ₹ 2,51,627 in the earlier year. This would show that the margin of profit shown by the assessee in the year of account was in the neighbourhood of 7 1/3 %, as against 19% in the year preceding. The assessee was asked by the Income-tax authorities to explain the fall in the margin of profit. 4. The assessee by its letter dated 18th March, 1952, explained the reasons for the fall in the margin of profit, as under: (1) Rise in the rate of custom duty, whereby the assessee is said to have paid a sum of ₹ 49,370 more than it would have paid if there would have been no incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional ground taken by the assessee before the Tribunal for the first time. The Tribunal's order clearly shows that in giving the reduction of ₹ 49,500 it had considered the assessee's claim for the deduction of sales tax. 7. The Appellate Assistant Commissioner scrutinised the accounts of the assessee and, after hearing the assessee, modified the assessment by estimating the sales at ₹ 9 lacs as against ₹ 10 lacs estimated by the Income-tax Officer and ₹ 8,87,574 returned by the assessee. The Appellate Assistant Commissioner also reduced the estimate of profit bv 2 %, i.e., to 17 %. The Tribunal further examined the evidence and the various statements produced by the assessee and reduced the estimate by ₹ 49,500. In giving this reduction, the Tribunal took into account all the contentions of the assessee, including the claim of sales tax. The total estimate made by the Tribunal in respect of the gross profit was ₹ 1,08,500 as against ₹ 2 lakhs estimated by the Income-tax Officer. The total expenses claimed by the assessee amounted to over ₹ 1 lakh. 8. It may be noted here that the absence of a stock account, coupled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of the assessee were found to be correct? (2) Were the Income-tax authorities right in adding ₹ 12,174 paid in respect of sales tax to the income of the assessee even though it had not realised it from its customers? 11. Both the parties agree that the facts necessary to draw up a statement of the case have been correctly stated. Mr. Thakar's request for the deletion of paragraphs 8 and 9 has been rejected. In paragraphs 8 and 9 we have tried to indicate the procedure which is adopted by the Tribunal while dealing with cases falling under the proviso to section 13. The Income-tax Officer's order and the Appellate Assistant Commissioner's order are made annexures 'B' and 'C' at the special request of the parties. Mr. Thakar wants that the various statements filed by him should also be made annexures to the statement of the case. As we have relied upon those statements in giving our findings, we do not think it is necessary to make those statements form part of the case. 12. We would most respectfully submit that the only question of law which arises in this case is : Whether on the facts and in the circumstances of the case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal where they had so found and he was unable to draw our attention to any such finding. He pointed out from the order of the Income-tax Officer that the assessee was called upon to furnish quantitative analysis of the goods sold, but was able to sort out the quantities of sales of cycles and motor-cycles only and expressed his inability to furnish such details in respect of accessories. He relied upon this for the inference that the Income-tax Officer found that the gross profits in respect of sales of cycles and motor-cycles only could be correctly ascertained from the accounts. It appears to us to be impossible to read this passage in the order of the Income-tax Officer as a finding that the gross profits could be correctly ascertained from the accounts as kept. The Income-tax Officer dealt with and considered in great detail all material that was placed before him by the assessee; he noticed and commented upon the important fact that no stock register was kept; and considering all these facts, he stated: I am not prepared to accept the result of the trading accounts, as well as the sale position at Bombay branch, and would estimate them at ₹ 10,00,000. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits and gains could not be properly deduced from the accounts that were kept. That, in itself, was sufficient to make the application of the proviso unwarranted. Moreover, the observation relied upon states only a proposition which appears to us to be quite obvious. Whether the absence of a stock register is or is not material must depend upon the other circumstances of the case and the other material which is available to the Income-tax Officer, and if the accounts, notwithstanding the absence of the stock register, enable the Income-tax Officer to deduce properly the income, profits and gains of the business, the mere absence of the register will not be a sufficient ground for invoking the proviso to section 13. But obviously, in this case, it is clear from a mere perusal of the order of the Income-tax Officer that he did not rely only on the absence of a stock register, but considered in detail every single material that was produced including statements prepared by the assessee, and came to the conclusion that from all this material he could not deduce correctly the profits of the business. In our opinion, therefore, the Income-tax Officer was fully justified in forming the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to an amount of sales tax of ₹ 12,174 which was added to the total income of the assessee by the taxing authorities. It appears that in the appeal before the Tribunal the point had not been taken that this amount should be excluded from the total income of the assessee; but by a subsequent written application dated the 20th of October the assessee sought leave to raise this question and apparently the Tribunal allowed them to do so. There is no reference to this amount in the order of the Tribunal; and when the order came to the notice of the assessee, they presented a rectification application on the 12th of January, 1953, pointing out that there was no reference to the question of exclusion of this amount. On that the Tribunal made an order on the 10th of February, 1954, in which they state that this amount was taken into account when the Tribunal gave reduction of ₹ 49,500 to the assessees. Mr. Palkhivala has attempted to persuade us to hold that since the order of the Tribunal does not mention this amount, this statement should be disregarded and in fact the amount was lost sight of by the Tribunal when they passed their order. We cannot countenance any such sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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