TMI Blog1974 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... t material ? (2) Whether, in the facts and circumstances of the case, the finding given by the Tribunal that the sales made by the assessee during the relevant year were unverifiable is based on record or is an arbitrary finding ? " The short facts relevant for the disposal of this reference may be summed up thus. The assessee is an individual who derives income from the sale of country liquor. The assessment year with which we are concerned in this reference is 1966-67, for which the assessee filed a return showing a total turnover on account of the sales in the course of the year in question at Rs. 12,90,678 and a net profit of Rs. 22,218, which came to about 1,75 per cent. The books of account were duly produced by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were available. The sale price of country liquor was fixed by the excise department of the Government, and the sales could not, therefore, be more than what had been shown by the assessee. It was further contended that the sale of the quantity of liquor as furnished by the assessee could be further verified with reference to the purchase and the stock at the moment as the commodity was rationalised by the excise authorities. None of the arguments on behalf of the assessee, however, found favour with the Tribunal which referred to the assessee's appeal in respect of the previous year and held that the defects as pointed out in the earlier year still being there, the revenue authorities were well justified in rejecting the " books results a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account before the Income-tax Officer, which had been duly examined by him and the defects as pointed out by the Tribunal with regard to a previous year were not all found by the Income-tax Officer. The only two defects found by the Income-tax Officer, for rejecting the book profits or the trading results were that in the absence of cash memos, the sales were not verifiable and that certain transactions were noted in lump sums. No finding has been recorded by either of the authorities below as to the unacceptability of the method and irregularity of the account kept by the assessee. It is well-settled that in the absence of such a finding recorded by the authorities, the book results cannot be ignored or brushed aside. As has been held by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were still there, is clearly an error of record which, in my view, is a question of law. Out of the five defects pointed out by the Tribunal in the previous year's assessment proceedings, the Income-tax Officer has recorded only two defects, if at all they can be termed as defects, namely, the absence of the verifiability of the account, the cash memos not being preserved, and the low figure of the drawings of personal expenses. The Tribunal, therefore, was in serious error inholding that the assessee's books of account for the relevant year with which we are concerned suffer from the same infirmities as the account books of the previous years. As has already been noticed from the recital in the statement of the case submitted by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. Under section 13 of the Indian Income-tax Act, 1922, the corresponding proviso applied with equal force both to the provisions under section 145(1) and under section 145(2) of the 1961 Act. But such is no longer the position. The case, proviso to section 13 of the 1922 Act, has now been made applicable and that too only partially to the provisions of sub-section (1) of section 145. And while taking resort to the provision of this proviso, the Income-tax Officer must give a definite finding that the case falls within the proviso. As held by the Supreme Court in the case of Commissioner of Income-tax v. A. Krishmaswami Mudaliar , this proviso (while their Lordships were considering the effect and scope of section 13 of the 1922 Act) impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer to justify the finding that income cannot be properly deduced from the assessee's regular method of accounting, the assessment made in pursuance of this proviso would be vitiated. For the reasons stated above, I must answer both the questions in favour of the assessee and against the department and hold that on the facts and in the circumstances of the case the finding of the Tribunal upholding the rejection of the book profit shown by the assessee was vitiated by reason of its reliance upon suspicion, surmises as also irrelevant material. I also hold in the circumstances of the case that the finding given by the Tribunal that the sales made by the assessee during the relevant year were unverifiable is not based on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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