Defective accounts and inability to deduce true profits justified rejection of books and estimation under the proviso to section 13.

Where account books are defective and do not permit true profits to be properly deduced, the taxing authority may reject the books and estimate income under the proviso to section 13 of the Income-tax Act, 1922. The court treats the applicability of that proviso as a question of fact, and will not interfere where there is material supporting the finding. On the stated facts, absence of a proper stock register and work-in-progress register justified rejection of the accounts and application of the proviso.

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Issues: Whether the proviso to section 13 of the Income-tax Act, 1922 was validly applied on the facts of the case.

Analysis: The assessee's account books were found defective because no proper stock register and no register of work-in-progress were maintained for the relevant years. On those facts, the income-tax authorities held that the true profits could not be properly deduced from the books and rejected them, estimating income under the proviso to section 13. The controlling principle is that where the method of accounting does not enable the correct profits to be ascertained, the matter is one of factual judgment for the taxing authority, and the court will not interfere if there is material supporting that view.

Conclusion: The proviso to section 13 was rightly applied; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where there is material showing that the accounts are defective or do not permit the correct profits to be deduced, the applicability of the proviso to section 13 is a question of fact for the income-tax authorities.

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