TMI Blog1960 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ebruary, 1944, and from February, 1945, to February, 1946. The appellant in each of the appeals is the assessee and the respondent is the Commissioner of Income-tax and Excess Profits Tax, Madras. The appellant is a "resident and ordinarily resident" in India and carried on extensive trade in Colombo in grains, fodder, gram and other food-stuffs for cattle and poultry. For the assessment year 1943-1944, the appellant showed a turnover of Rs. 17,74,825 and a gross profit of Rs. 63,217 which is about 3.5 per cent. For the two previous assessment years the appellant's gross profits were 9 per cent. and 8 per cent. respectively. The Income-tax Officer, by his order dated March 20, 1948, rejected the accounts and estimated the gross profit by adding back Rs. 2,38,831 to the returned income. Thus he raised the turnover to Rs. 20,00,000 and the gross income to Rs. 3,00,000 giving a profit of 15 per cent. on the estimated turnover. On appeal to the Appellate Assistant Commissioner, the order of the Income-tax Officer was confirmed. The Income-tax Appellate Tribunal on appeal by its order dated September 14, 1951, after pointing out various defects, rejected the account books but accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and estimated the gross profit rates at 12 1/2 per cent. and 10 per cent. for the respective years. The appellant applied to the Tribunal under section 66(1) of the Act for stating a case to the High Court for its decision on the following two points : "(1) Whether on the facts and in the circumstances of the case, the Department was right in acting under the proviso to section 13 of the Act in the absence of a finding that income, profits and gains cannot properly be deduced from the books produced or that no method of accounting has been regularly employed ? (2) Whether on the facts and in the circumstances of the case, the Department had sufficient materials before it to justify the rates of 12 1/2 per cent. and 10 per cent. gross profits on the total turnover on the ground that the rates worked out by the figures submitted by the assessee work out at a lesser figure ?" The Tribunal dismissed the application on January 15, 1954. The appellant did not apply to the High Court under section 66(2) of the Income-tax Act but obtained special leave from this court against the order of the Tribunal by which it applied the proviso to section 13 of the Income-tax Act. All the six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover was as large as about seventeen lakhs of rupees, without a quantitative tally ; (3) a fairly big sum of money was alleged to have been paid towards purchasing of licenses for export from India ; and Rs. 19,000 worth of purchases were made in Tuticorin when only a small sum of money in cash was shown in the assessee's accounts ; (4) several outsiders' cheques had been entered in the accounts of the assessee without any proof as to why those cheques were paid to the assessee ; and (5) a fairly big sum of money had been invested in India in the purchase of property without money being received from Colombo. On these facts the Tribunal said : "In view of these defects, we are clearly of opinion that the correct profit could not be deduced from the books produced by the assessee, and accordingly hold that the proviso to section 13 of the Act applies in this case. The question, therefore, is regarding the estimate." After giving this finding the Tribunal accepted the turnover as shown in the appellant's books. In making the computation of profits the Tribunal took into consideration the following matters : that the export of food grains from India was prohibited excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He had held that there was absence of vouchers, that the stock account and the manufacturing account had not been kept or produced, that the cheques of other parties had been credited in the accounts of the appellant which had not been explained and that there was purchase of goods and property by the appellant without there being sufficient cash in hand. The Income-tax Officer also said that in other cases where grains were purchased in India and sold in Colombo the rates of profit were higher, ranging between 20 per cent. and 39 per cent. He then worked out profits in respect of various grains in the case of the appellant and found that the average rate of gross profit worked out to 15.8 per cent., and in his opinion the gross profit in fodder should have been higher. He further took into consideration the fact that Colombo was bombed in April, 1942, resulting in panic in that town and therefore during a portion of the accounting year the appellant might not have made the same margin of profit. He estimated the sales at twenty lakhs and the gross profit at three lakhs, thus arriving at a figure of 15 per cent. on the turnover. It appears to us that neither the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h we have set out above, could not make section 13 applicable. For the rejection of accounts several reasons were given by the Appellate Tribunal ; one of these reasons was the non-production of stock registers and manufacturing accounts. This reason was given by the Income-tax Officer and adopted by the Appellate Tribunal. It was submitted that the non-production of stock account was not such a defect as to entitle the taxing authorities to reject the books and apply the proviso to section 13. Reliance was placed on the judgment of the Punjab High Court in Pandit Bros. v. Commissioner of Income-tax. The facts in that case were very different. The Income-tax Officer there added a certain sum to the assessee's profits on the ground that the expense ratio was too high and the profits disclosed were too low and there was no stock register. The finding in that case was that the assessee maintained regular accounts of his purchases and sales and there was no finding by the Income-tax Officer that in his opinion the income could not properly be deduced therefrom. Khosla, J., (as he then was) there said : "There is no finding that there was material before the Income-tax Officer to lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
