1964 (7) TMI 44 - HC - Income Tax

High Court rules against taxation of notional income from rejected snake skins, finding lack of evidence.

The High Court ruled in favor of the assessee, finding that there was no evidence to support the taxation of notional income from rejected snake skins. ... - Issues:Assessment of income based on rejected snake skins for the years 1950-51, 1951-52, and 1952-53.Analysis:In this case, the primary issue revolves around the additions made to the assessee's income for the assessment years 1950-51, 1951-52, and 1952-53, based on the rejection of certain tanned snake skins deemed unsuitable for sale. The Income-tax Officer contended that the assessee's rejections were excessive, valuing the excess skins at a specific amount and estimating a gross profit to be added back to the taxable income. The Appellate Assistant Commissioner and the Tribunal subsequently reduced the additions, but the matter was brought before the High Court for further review.Regarding the assessment year 1952-53, the High Court noted that the additions included two components: one related to the rejections and the other due to inflated figures provided by the assessee for the cost of tanning. The assessee's counsel did not object to the addition concerning inflated figures but focused solely on the rejections issue.The High Court emphasized that the department did not contest the fact that the assessee's gross profit margin exceeded that of similar dealers, nor did they dispute that the comparable case used by the department was not truly comparable due to significant differences in turnover. The court highlighted that there was no evidence to suggest that the rejected skins were sold by the assessee or that any income was derived from them. The court reasoned that without proof of sale or income generation, the assessee could not be taxed on a notional income basis. The court concluded that there was no justification for the additions made in the assessment years and ruled in favor of the assessee.In summary, the High Court found that the department failed to establish that the rejected skins were sold or generated income for the assessee. Therefore, the court held that there was no legal basis for taxing the assessee on a notional income from the rejected skins. The court ruled in favor of the assessee, emphasizing the lack of justification for the additions made by the authorities in the assessment years in question.