Proviso to Section 13 requires independent evidence of unreliable accounts; absent it, assessment must follow the ordinary procedure.

The document clarifies that the proviso to Section 13 cannot be invoked unless independent evidence shows that the taxpayer's accounting method prevents proper deduction of profits; mere low reported profits, allocation of low profit to consignments, or nonuse of a stock register (when none was used historically) are insufficient. The legal principle applied requires objective material demonstrating that accounts are unreliable before resorting to arbitrary computation; lacking such material, the officer must assess under the ordinary part of Section 13. Operative effect: assessment under the proviso was unjustified and assessment should follow the primary provision, favouring the assessee.

---

---

Issues: (i) Whether the Income-tax Officer could lawfully make an assessment under the proviso to Section 13 of the Income-tax Act or whether the assessment should have been made under the first part of Section 13.

Analysis: The assessment relied on rejection of the profits shown in the assessee's accounts because the Income-tax Officer considered the rate of profit unreasonable and noted absence of a stock register. The accounting method in question had been regularly employed by the assessee and accepted by tax authorities before and after the year under assessment. There was no independent evidence demonstrating that the method of accounting was such that profits could not properly be deduced except by resort to the arbitrary computation permitted by the proviso to Section 13. The mere fact of reduced profits, choice of low profit allocation on consignments to a separate office, or the nonuse of a stock register (where no stock register was ever used) did not, without further supporting material, justify displacing the returned profits and invoking the proviso.

Conclusion: (i) The Income-tax Officer had no material to justify assessing under the proviso to Section 13; the assessment should have been under the first part of Section 13. The result is in favour of the assessee.

---