TMI Blog1962 (12) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... own in the assessee's return as 67,112 lbs. of sheet-rubber, in the next year as 77,982 lbs. and in the third year, when 20 acres more have been newly tapped, as 80,771 lbs. For the assessment year 1955-56 the Income-tax Officer mistook the yield returned as 60,292 lbs. and, therefore, calculated the average yield at 335 lbs. per acre, held it to be too low for the trees, which at his inspection on January 9, 1957, were found to be very healthy, rejected the assessee's accounts as untrue and incomplete, estimated the yield at a flat rate of 450 lbs. per acre and assessed the income accordingly. On appeal, the Assistant Commissioner observed: It has been clearly brought to light that the Goodhope Estate was one abandoned by A.V. Thomas Co., bought by the appellant in a neglected state in 1947 and is being slowly improved and is a developing concern. The rubber yield in the several years show marked difference. What was 62,863 lbs. in 1954-55 has come up to 67,112 lbs. in the current year.........Even for the current year it works out to an average yield of 375 lbs. per acre and for ordinary plants the yield is only fair.........I do not find any reason to discre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected to state a case and refer four questions, namely: (1) Whether the Commissioner, acting under section 34, has jurisdiction or power to revise an order passed by the Appellate Assistant Commissioner functioning as an appellate authority under section 31? (2) The powers under section 34 being specifically made subject to the provisions of the Act, whether section 34 can be invoked by the Commissioner, when the order of the Appellate Assistant Commissioner is made appealable as per section 32 of the Act? (3) Whether the Commissioner can, in the case of escaped income, act under section 34 in view of the specific provisions in section 35? (4) Whether on the facts and circumstances of the case the Commissioner was justified in concluding that the estimate of the income should be made? The reference made accordingly is the I.T.R. No. 8 of 1961. Questions Nos. (1) and (2) above, taken together, seem to be covered by authority. In Anantha Mallan v. Commissioner of Agricultural Incometax [1963] 47 I.T.R. 93, 98 it is held: ...because the Commissioner in both the cases had objections to the Appellate Assistant Commissioner's assessments, he ought to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding with the Appellate Assistant Commissioner. The accounts are also seen, accepted on sufficient and inadequate grounds and against ordinary principles adopted in arriving at the net income. While admitting that the yielding rubber trees are very healthy and the estate is a developing one, the same Agricultural Income-tax Officer has estimated and reduced the yield for the two years which is much lower than that determined for the previous year. In view of the reasons stated above, the assessments for the years 1956-57 and 1957-58 are set aside and the cases are remanded to the Agricultural Income-tax Officer, Kottarakara, for further enquiry, local inspection and fresh disposal. The applications, one in respect of each year, requesting five questions to be referred to the High Court under section 60 of the Agricultural Income-tax Act were rejected by the Commissioner. The assessee then moved O.P. Nos. 1203 and 1204 of 1959 to compel references; and thereupon this court directed the Commissioner to state two cases and refer three questions in each under section 60(2) of the Act. The two references that followed are I.T.R. Nos. 13 and 14 of 1961, and the questions referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil court to enforce the attendance of any person and examine him on oath or affirmation, to compel the production of documents, and to issue commissions for the examination of witnesses and for ascertaining the yield and cultivation expenses in respect of any land. In order to check perjury and the use of false or fabricated evidence and to maintain the dignity of the office, the proceedings are declared judicial proceedings within the meaning of sections 193 and 228 of the Penal Code. Section 18(3) of the Agricultural Income-tax Act (corresponding to section 23(3) of the Income-tax Act) directs: ...........the Agricultural Income-tax Officer, after considering such evidence as such person (the assessee) may produce (in support of the return) and such other evidence as that officer may require on the specified points, assess the total agricultural income of the assessee and determine the sum payable by him on the basis of such assessment. The observations of Sir Sulaiman C.J. in Gopinath Naik v. Commissioner of Income-tax [1936] 4 I.T.R. 1, 22 are pertinent here: Under sub-section (3) of this section the Income-tax Officer has to hear such 'evidence' as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t surprising that the Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills without showing that statement to the assessee and without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the mill in question. It is not known whether the mills which had disclosed these rates were situate in Bengal or elsewhere, and whether these mills were similarly situated and circumstanced. Not only did the Tribunal not show the information given by the representative of the department to the appellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his Chamber...We think that both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It follows that the mere impression gathered by an officer on inspection of the estate cannot be taken as substantive evidence to form the sole basis of an assessment as the Commissioner in these cases seems to have thought. If the officer thought the return of the assessee too poor for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of these cases. The law does not permit the income-tax authorities to reject the accounts produced by an assessee as incorrect or unreliable unless there is some positive material to hold so. Acceptance of accounts kept in the usual course of business is the rule; and their rejection must be the exception for proper reasons only. If the authority sees any reason to suspect the accounts, he is to require proof from the assessee on specified points and the assessee is bound to give convincing proof thereon. Likewise is the Commissioner's observation, An expenditure of nearly 70% is quite abnormal and against facts . He himself has observed the estate a developing one . The requirement of a larger proportion of expenditure to improve an abandoned estate is nothing abnormal. The Income-tax Officer has stated the accounts to be supported by check-roll, wages-book and bills for purchases of manure and like vouchers. It was then a matter for verification of the accounts with the relative vouchers, and not for speculation or suspicion. The proposition the higher the income derived the lower would be the expenses appears novel. Normally, it is higher expenditure th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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