TMI Blog2005 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law under section 256(1) of the Income-tax Act, 1961, (hereinafter referred to as "the Act"), for opinion of this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that where proper books of account and documents have been maintained under rule 6F of the Income-tax Rules, 1962, the income can be properly deduced therefrom and the proviso to section 145(1) of the Income-tax Act, 1961, cannot be invoked?" The present reference relates to the assessment year 1991-92. The brief facts of the case are as follow: The assessee is an individual having income from carrying on services of pathology, X-ray, and ultrasound test. The Assessing Officer noticed that a register of receipts of X-ray tests and ultrasound tests was maintained. According to him, there were discrepancies in it inasmuch as no stock register of raw material was maintained. The closing stock in consumption record showed some variation with closing stock as per inventory; there was no satisfactory explanation why X-ray films and ultrasound films more than the number of patients were used, some reports were prepared on the basis of screen display, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act that, inter alia, every person carrying on medical profession 'shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act'. Thereafter, it is laid down in sub-section (3) that the Board may prescribe by rules the books of account and other documents to be kept and maintained under sub-section (1) and the particulars contained therein. The relevant rule is rule 6F of the Income-tax Rules, 1962. Sub-rule (1) of rule 6F lays down, inter alia, that every person carrying on medical profession shall keep and maintain the books of account and other documents specified in sub-rule (2). The books are quite extensive as the following, namely: (i) a cash book; (ii) a journal, if the accounts are maintained according to the mercantile system of accounting; (iii) a ledger; (iv) carbon copies of bills, whether machine numbered or otherwise serially numbered wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him: Provided that nothing in this clause shall ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45(1) of the Act. It is laid down therein that where the accounts are correct and complete but the method employed is such that the income cannot properly be deduced therefrom, the computation shall be made upon such basis and in such manner as the Assessing Officer may determine. We hold that where proper books of account and documents have been maintained under rule 6F of the Income-tax Rules, 1962, the income can properly be deduced therefrom and, therefore, the proviso to section 145(1) cannot be invoked. No error of discrepancy has been pointed out in the books and documents maintained under rule 6F of the Rules. We, therefore, hold that sustaining of an addition of Rs. 2 lakhs is not justified. The addition is deleted." We have heard Sri R.K. Upadhyaya, learned standing counsel appearing on behalf of the Revenue, and Sri S.D. Singh, learned counsel for the assessee-respondent. Learned standing counsel submitted that the Tribunal has erred in holding that once the assessee is found to have maintained the books of account in accordance with rule 6F and no defect is found in such books of account, the proviso to section 145(1) cannot be invoked. He submitted that the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Assessing Officer but the method employed is such that, in the opinion of the Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing Officer may determine: Provided further that where no method of accounting is regularly employed by the assessee, any income by way of interest on securities shall be chargeable to tax as the income of the previous year in which such interest is due to the assessee: Provided also that nothing contained in this sub-section shall preclude an assessee from being charged to income-tax in respect of any interest on securities received by him in a previous year if such interest had not been charged to income-tax for any earlier previous year. (2) Where the Assessing Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where no method of accounting has been regularly employed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. 44AA.(1) Every person carrying On legal, medical, engineering or architectural profession or the profession of accountancy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted with the power to compute the income on such basis and in such manner as he may determine in a situation when it is found that the method adopted by the assessee is such that the income cannot properly be deduced. There are commonly two methods for the maintenance of the books of account; one is cash and another is mercantile system. However, it is open to opt a hybrid system, i.e., mixed system of accountancy. In the present case, there is no allegation that the method of accountancy adopted by the assessee is such out of which the income cannot properly be deduced. The objection is that the assessee has not maintained any account to correlate the total number of films consumed with the total receipts. It means that the assessing authority desired that in addition to the books of account maintained by the assessee, the some books of account should be maintained in the nature to correlate the total number of films consumed with the total receipts. In our opinion, this cannot be the basis for invoking the provision of section 145(1) of the Act. Section 44AA of the Act has been introduced by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, which require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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