Production of foreign business accounts can be required where relevant to taxable income, and non-production can justify best judgment assessment.

Income-tax authorities could require production of account-books of a foreign business carried on in British India when the books were relevant to checking the return and determining whether remittances represented capital or profits. The Officer was therefore entitled to call for the ledger, cash book and daybook. Where such books were ordinarily within the assessee's possession and control, failure to comply with the production notice justified a best judgment assessment under Section 23(4) unless the assessee proved inability to produce them. On the stated facts, the books were within the assessee's control and non-production supported assessment under Section 23(4).

---

---

Issues: (i) Whether the income-tax authorities could require production of the account-books of a foreign business carried on by the assessee in British India; (ii) whether, on failure to produce such books, assessment under Section 23(4) of the Income-tax Act was justified.

Issue (i): Whether the income-tax authorities could require production of the account-books of a foreign business carried on by the assessee in British India.

Analysis: The relevant account-books were those necessary for checking the return already made or for enabling the Income-tax Officer to estimate the assessee's income. Where the assessee carried on a foreign business and the books were relevant to determining whether remittances represented capital or profits, the Officer was entitled to call for the books, including the ledger, cash book, and daybook.

Conclusion: The requirement to produce the foreign business account-books was valid.

Issue (ii): Whether, on failure to produce such books, assessment under Section 23(4) of the Income-tax Act was justified.

Analysis: The Court held that the decisive question was whether the assessee could comply with the production order. If the books would ordinarily be in the assessee's possession and control, the assessee had to show incapacity to produce them. On the facts, the books were under the assessee's control and he failed to comply with the notice.

Conclusion: Assessment under Section 23(4) of the Income-tax Act was justified.

Final Conclusion: The reference was answered in favour of the Revenue, upholding the power to demand relevant foreign business accounts and the resulting best judgment assessment on non-production.

Ratio Decidendi: An income-tax authority may require production of accounts relevant to determining taxable income, and where such books are ordinarily within the assessee's possession or control, failure to produce them justifies assessment under Section 23(4) unless the assessee shows inability to comply.

---