Consistent accounting method controls income computation unless revenue proves true income cannot be deduced from the books.

A regularly employed and consistently accepted method of accounting must be used for income computation unless the revenue can show on proper grounds that true income cannot be deduced from it. The mere possibility that another method would yield more tax is insufficient. On the facts, the appellate authorities found that the assessee's accounts disclosed the year's profits and there was no justification for rejecting them simply because interest was recognised on settlement of accounts. The proviso to Section 13 of the Indian Income-tax Act, 1922 was therefore not properly applicable, and the estimated interest additions were not justified.

---

---

Issues: Whether, on the facts and circumstances of the case, and having regard to the assessee's regularly employed method of accounting, the proviso to Section 13 of the Indian Income-tax Act, 1922 could be applied to reject the book results and estimate interest income.

Analysis: The assessee had consistently followed the same accounting method for many years, and the method had been accepted by the revenue for earlier periods. Section 13 makes the regularly employed method of accounting the normal basis of computation unless the Income-tax Officer can properly conclude that income, profits and gains cannot be deduced therefrom. The fact that a different method might have produced more revenue is not enough. The opinion of the Income-tax Officer is open to scrutiny, and it must rest on good grounds supported by material. Here, the appellate authorities had found that the method adopted by the assessee did disclose the profits of the year and that there was no justification for discarding the accounts merely because interest was accounted for on settlement of accounts.

Conclusion: The proviso to Section 13 was not properly invocable on the facts, and the additions made by estimating interest income were not justified.

Ratio Decidendi: Where an assessee regularly employs a consistent method of accounting, that method must be accepted for computation unless the revenue establishes on proper grounds that true income cannot be deduced from it; a mere possibility of higher taxation under another method is insufficient.

---