Assessing officer discretion to reject unreliable accounts permits treating accrued amounts as income, upheld here.

Where a taxpayer's books are shown to be unreliable, the assessing officer may reject those accounts and adopt an independent method of assessment; applying that principle, the officers treated accrued mortgage interest of Rs. 1,350 as income for assessment purposes and were held justified. The analysis invokes the assessing officer's statutory discretion to determine method of assessment when accounts are false or valueless, permitting assessment on considerations that indicate real income. Outcome: the treatment of the accrued interest as taxable income is upheld in favour of the revenue.

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Issues: Whether the Assistant Commissioner and the Income Tax Officer were justified in treating the sum of Rs. 1,350 (interest due on a mortgage) as income for assessment purposes.

Analysis: The assessing officer found the firm's books unreliable and, on that basis, included a sum of Rs. 1,350 as income by treating amounts due as received for assessment. Section 13 of the Income-tax Act, 1922 reserves to the assessing officer the question of rejecting accounts or determining the method of assessment when accounts are found unreliable. Where there is reason to believe that accounts are false or valueless for assessment, the assessing officer is at liberty to adopt his own method of assessment and to assess on such consideration as appears to indicate the real income.

Conclusion: The question is answered in the affirmative; the officers were justified in treating the sum of Rs. 1,350 as income. The assessing officer's action is upheld in favour of the revenue.

Ratio Decidendi: Where accounts are shown to be unreliable, Section 13 of the Income-tax Act, 1922 permits the assessing officer to reject such accounts and adopt an independent method of assessment, including treating amounts due (such as accrued interest) as income for assessment purposes.

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