Accounting Basis Rejection: officer may adopt an alternative valuation but must disclose basis; additions for short measure need evidence.

An assessing officer may reject an assessee's chosen accounting basis and substitute an alternative method, provided the officer discloses the basis and valuation methodology used for the substitution; this permits adoption of alternative prices but requires transparency of computation. Conversely, additions to income asserted on account of alleged short measure (kasar) cannot be made without evidence specific to the assessee; speculative or industry-wide assumptions do not suffice. The document directs re-quantification consistent with these principles where prior additions lacked evidential foundation.

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Issues: (i) Whether the Income Tax Officer was entitled to reject the assessee's method of computing income and adopt his own basis and manner of computation; (ii) Whether the Income Tax Officer was entitled to add to the assessee's income an amount in respect of kasar (short measure) in the absence of evidence.

Issue (i): Whether the Income Tax Officer could reject the assessee's accounting basis and adopt his own basis under the Act.

Analysis: The officer declined to accept the assessee's practice of valuing sales by market price applied to stock diminution and, invoking statutory authority, substituted his own prices and basis in the assessment order. The Court observed that where an accounting basis is rejected the officer may adopt an alternative basis but should disclose the basis by which he arrived at his valuations.

Conclusion: The Income Tax Officer was entitled to reject the assessee's method and to adopt his own basis, subject to the requirement that the basis for the adopted prices be shown.

Issue (ii): Whether additions to income for kasar (selling by short measure) could be made without evidence of such practice by the assessee.

Analysis: The officer made a large addition on the assumption that short measure was a common practice and that the assessee must have followed it; there was no evidence on record of short measure by the assessee. The Commissioner later substituted a composite percentage addition but did not allocate or justify the specific portion attributable to kasar.

Conclusion: The Income Tax Officer was not entitled to make any addition to the assessee's income on account of kasar in the absence of evidence of short measure.

Final Conclusion: The question referred under Section 66(3) is answered in the affirmative insofar as the officer may reject the assessee's accounting basis and adopt his own, but any addition for kasar is not permissible without evidence; the matter is remitted to the Commissioner for re-quantification consistent with these conclusions.

Ratio Decidendi: An assessing officer may reject an assessee's method of accounting and adopt an alternative basis, but additions to income, especially for alleged practices such as short measure, require evidence specific to the assessee and cannot be made on mere assumption.

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