TMI Blog1977 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 was very low as compared to the receipts shown by the assessee himself in earlier years and the mileage covered by the assessee in those years. It was also observed that the receipts shown in the account books of the assessee were not verifiable as the assessee had not maintained counterfoils of the tickets issued in the previous year and in the daily collection sheets maintained by the assessee some 15 tickets issued by him had not been accounted for and the practice admittedly has been that one ticket could be issued to a group of persons. On this reasoning, the Income tax Officer found that the correct position of income and profit could not be assessed from these accounts. He, therefore, applied the proviso to section 13 of the Indian Income-tax Act (hereinafter referred to as "the Act") and proceeded to compute the assessee's income from the transport business and determining by that process lie found that Rs. 1,00,000 should be added to the receipts shown by the assessee. The Income-tax Officer adopted the method for determining the assessee's income from the transport business on the basis of mileage covered and taking the average seating capacity of the bus to be 35 he fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of which the accounts and total receipts of the assessee are ascertained. He, therefore, contended that this was not sufficient material on the basis of which the Income-tax Officer and the authorities in appeal could hold that a true position of profits and income could not be deduced from the accounts maintained by the assessee and, therefore, according to learned counsel, there was no material on the basis of which the proviso to section 13 of the Act was applied. Learned counsel contented that in the assessments of the previous year and the subsequent years the daily collection sheets have been accepted and at no point of time was the assessee called upon to produce the counterfoils of tickets and in that event not maintaining the counterfoils could not be made a ground to infer that the collections could not be verified. Learned counsel at length stated the method of accounting maintained by the assessee. According to him the assessee resides at Indore and his business was carried on at Rewa by the officers of the assessee and the regular system followed at Rewa was that every day when the vehicle returned on the return trip a collection sheet was prepared showing the tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer or Rs. 50,000 as ultimately has been ordered by the Appellate Tribunal. According to learned counsel, the authorities were not entitled to act on the basis of surmises and assumptions and they have not followed any comparable or proper method as, according to learned counsel, even those assessees having transport business in the same area have been assessed on total receipts much less than those of the assessee in the present case. In support of his contentions learned counsel referred to a series of decisions and contended that the assessment order passed by the Income-tax Officer and ultimately maintained by the Appellate Tribunal is not justified. Learned counsel appearing for the department on the other hand contended that the Income-tax Officer has given a clear finding that it was not possible for him to adduce the true position of income and profits from the accounts maintained by the assessee and he, therefore, applied the proviso to section 13 of the Act. According to learned counsel, in fact, the questions referred themselves go to show that there is no controversy that the Income-tax Officer applied the proviso to section 13 and that he gave a cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is no finding to attract the proviso to section 13 and it was as a result of this that, although the petition was allowed and the Tribunal was directed to state the case, yet the questions framed were as they have now been referred by the Tribunal to us and the first question quoted above clearly goes to show that the only grievance made was that there was now material before the Tribunal to come to a finding that the assessee's account books do not disclose his true profits. Even apart from it the order passed by the Income-tax Officer and the Appellate Assistant Commissioner and the Tribunal goes to show that they have been harping on the question that the accounts shown by the assessee are not sufficient to deduce the true position of income and profits. Consequently, it could not be contended that there is no specific finding given by the Income-tax Officer or the appellate authorities and, therefore, the proviso to section 13 cannot be attracted. Apart from it, it is clear that the only two questions referred to us do not indicate that the question about the finding also was a debatable question and that not having been referred, it is not possible for us to embark upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtly irrelevant, or where the Tribunal draws upon its own imagination, imports facts and circumstances not apparent from the record, or bases its conclusions on mere conjectures or where no person judicially acting and properly instructed as the relevant law could have come to the detemination reached. In all such cases the findings arrived at are vitiated." It, therefore, only follows that if the conclusions arrived at by the Tribunal are not based on any material or are based on irrelevant material the find- ing is not binding on this court. In fact, it appears that it is because of this that the Division Bench of this court framed question No. (1) as it has been framed. If we come to the conclusion that there is material for the Income-tax Officer or the Appellate Tribunal to come to the conclusion that the true position of income and profits could not be deduced from the accounts of the assessee, then alone the proviso to section 13 of the Act could be attracted. Learned counsel for the assessee placed reliance on Motipur Sugar Factory (P.) Ltd. v. Commissioner of Income-tax [1974] 95 ITR 401 (Pat), where the accounts of the assessee were rejected under section 13 for non-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds as subsidiary evidence. It is difficult to comprehend the reasoning of the Tribunal when actually the parchas could not be primary evidence of the fact of actual purchase of sugarcane by the assessee-company. In Income-tax Appeal No. 1341-Pat. of 1969-70, which I have referred to above, the Tribunal has relied on those very documents and registers, which were produced by the assessee in the instant case, to show the actual purchase of sugarcane. The Tribunal in that case has made the following observation : '.......... a separate ledger account for each of the growers is maintained and a ledger folio is given in the weighment register. Under the circumstances, if one wants to verify the purchases of sugarcane he should rely on the weighment register and not on a slip or purja which was just in the shape of an identity slip or a card that the goods of the holder would be weighed by the company or would be purchased by the company. On examining the weighment register we were satisfied that unless any discrepancy is found in the weighment register, it could not be said that the purchases were inflated by the company'." It appears that it is in the context of these facts that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act. The decision reported in Commissioner of Income-tax v. McMillan Co. [1958] 33 ITR 182 (SC) lays down that whether the income, profits and gains can properly be deduced from the assessee's method of accounting is undoubtedly a matter which the Appellate Assistant Commissioner can go into when he has seisin of the appeal from the order of assessment of the Income-tax Officer. Apparently, therefore, this decision is of no help so far as the present case is concerned. It is, therefore, clear that if the Income-tax Officer had material to come to the conclusion that the true position of gains could not be deduced from the accounts maintained by the assessee he had jurisdic- tion to proceed under the proviso to section 13 of the Act. It was contended that non-production of counterfoils was not material because the accounts were audited by a renowned firm of chartered accountants. Although this argument was advanced at the bar and it was also contended that a report of the auditors was placed on record, but there is nothing to indicate that there was any statement or an explanation submitted by the assessee that until the accounts were audited the counterfoils were maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late authorities have reduced it even further to the amount of Rs. 50,000. Learned counsel placed reliance on a decision reported in Harakchand Radhakisan v. Commissioner of Income-tax 1962) 46 ITR 196 (Assam) to contend that the figure arrived at by the authorities is merely based on conjecture. In that decision, it was observed at page 201 : The Tribunal in its order has observed that after rejecting the results as per books the Income-tax Officer made an addition of Rs. 27,445 and of Rs. 4,740 and that the assessee's books disclosed a total refraction of 6.4% which was not established. The order of the Tribunal is mainly based on the rates usually adopted in this part of the country. The Assistant Income-tax Commissioner has based his order on the circumstance that the rates applied by the Income-tax Officer were the same as were applied by his predecessor in respect of the assessment for the immediately preceding year. The Income-tax Officer has based his assessment on the conjecture that the refraction should be allowed at the rate of 2%, the oil yield should be 32% and the oil cake production should be 66%. There is no material which would justify such an inference. No scie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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