TMI Blog1974 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... essee could not be determined and resort must, therefore, be had to the proviso to section 13 of the Indian Income-tax Act, 1922. The relevant assessment year was 1950-51 and the court is concerned in this reference with the branches of the assessee-firm at Madras, Ootacamund and Coonoor. The Income-tax Officer rejected the books of account of the assessee-company and resorted to the provisions of the proviso to section 13 on the ground that, having regard to the method of accounting employed by the assessee-company, the income, profits and gains could not be properly deduced from the books. He, therefore, estimated the true profits of each of the said branches at a certain percentage under that proviso. On appeal by the assessee, the Appellate Assistant Commissioner was of the same view, viz., that the main defect in the assessee's books of account was the absence of stock tallies and the fact that the sales had not been recorded with identifiable details as to the quality of the goods sold. On further appeal to the Tribunal, that view was confirmed, the Tribunal observing as follows : " However, at all the three places it was found that there were no stock tallies and the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting could, therefore, be held to be a method wherefrom the true profits made by the assessee could not be deduced. The observation made in the concluding part of the judgment in the said case that the circumstances found by the Income-tax Officer along with the absence of the quantitative tally about the stocks of purchases and sales were " sufficient material " for the purpose of resorting to the proviso to section 13 appears to have been merely a rejection of the argument on behalf of the assessee which was advanced in those terms before the Bench in the said case, and cannot be read as laying down that it is the function of the court to inquire into the sufficiency of that material. It is too well settled by now to take such a view. A yearly inventory of the nature on which Mr. Advani relied cannot possibly serve the purpose of a stock tally, for whilst it only shows the opening stock and the closing stock of goods in that year, it does not show the purchases made during the year or the sales effected during the year. The mere difference between the opening balance and the closing balance Would not be any evidence that the same represented sales from which the profits made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion of the Tribunal, but is concerned only with the question whether there was any material in support of the finding of the Appellate Tribunal relating to the applicability of the proviso to section 13 as the question as to whether income, profits and gains could or could not be properly deduced from the method of accounting regularly adopted by the assessee was a question of fact which had to be determined by the taxing authorities. It was pointed out clearly by the Supreme Court in the concluding part of its judgment in the said case that the only question of law that could possibly arise was whether there was any material for the finding of the taxing authorities in regard to the same. The decision of this court in the case of R. B. Jessaram Fatehchand (Sugar Dept.) v. Commissioner of Income-tax [1970] 75 ITR 33 (Bom) was also cited before us, but I do not propose to deal with it, as it has no relevance to the question which we have to consider. Mr. Advani relied strongly on the judgment of the Punjab and Haryana High Court in the case of Jhandu Mal Tara chand Rice Mills v. Commissioner of Income-tax [1969] 73 ITR 192, but I am afraid with respect to the learned judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits and gains of the business being computable from those accounts, the taxing authorities were not justified in rejecting those books. I am not really concerned with the actual facts or the decision in the said case, but the Kerala High Court has laid down the legal position in a case like the present one correctly and with remarkable clarity. It stated as follows at page 492 : " Whether the accounts of the assessee are maintained according to the method regularly employed by him, whether they are correct and complete, and whether the income can be properly computed from the accounts are all pure questions of fact. The Appellate Tribunal's finding on these matters are not liable to attack for want of sufficiency of materials. But if the findings are not supported by any materials or if the materials relied on are irrelevant or they are such that no Tribunal can reasonably come to such findings on the said materials, then a question of law would arise, and the High Court would be justified in holding that the findings cannot be sustained on any materials. " Having laid down the correct approach as a matter of law, the High Court in the said case proceeded to apply the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave arrived at that opinion, this court would not be justified in taking a contrary view on the reference. Indeed, the fact that there were no stock tallies, as well as the fact that quite a few sales were not recorded with identifiable details, have not been disputed even in the course of arguments before us. The main contention of Mr. Advani, both before us as well as before the Tribunal, was that having regard to the nature and magnitude of the business of the assessee-firm, it was not possible at all for the assessee-firm to maintain stock tallies or to record its sales with identifiable details, but that contention must be held to have been negatived by the Tribunal, by necessary implication. Having regard to these findings of the Tribunal which are conclusive and binding upon us, the present reference must be answered against the assessee-firm. S. K. DESAI J.-I agree and have nothing to add. By the Court : The questions referred to us are answered as follows : Question No. 1.--In the affirmative. Question No. 2.--Unnecessary in view of the answer to question No. 1. The assessee must pay the Commissioner's costs of the reference. - - TaxTMI - TMITax - I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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