Regular accounting method cannot be rejected for want of stock register or low profits without supporting material.

The proviso to Section 13 could be used only where material showed that profits could not properly be deduced from the assessee's regularly employed accounting method. Mere absence of a stock register, when none had ever been maintained and the same method had been accepted in earlier and later years, did not justify rejection of the accounts. A low profit rate, without further grounds for disbelieving the books, was insufficient to support an arbitrary estimate. The Income-tax Officer therefore exceeded his function by substituting personal notions of business prudence for the assessee's accounts, and assessment under the proviso to Section 13 was not justified.

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Issues: Whether the Income-tax Officer was justified in rejecting the assessee's regularly employed method of accounting and assessing profits under the proviso to Section 13, instead of making the assessment under the first part of Section 13.

Analysis: The assessment power under the proviso to Section 13 could be invoked only if there was material to show that the profits and gains could not properly be deduced from the method of accounting regularly employed. The mere absence of a stock register, where the assessee had never maintained one and the same accounting method had been accepted in prior and subsequent years, did not by itself justify rejection of the accounts. A low rate of profit, without some further basis for disbelieving the accounts, was insufficient to authorize an arbitrary estimate of profits. The Income-tax Officer had therefore gone beyond his function in substituting his own notions of business prudence for the accounts maintained by the assessee.

Conclusion: The assessment under the proviso to Section 13 was not justified, and the assessment ought to have been made under the first part of Section 13.

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