Accounting method accepted in earlier years cannot be rejected without reliable proof of falsity or improper income deduction.

The proviso to section 13 of the Indian Income-tax Act, 1922 was held inapplicable where the assessee consistently followed an accepted accounting method and the authorities failed to show that the accounts were false or that income, profits and gains could not properly be deduced from them. Rejection of the accounts based on low yield, absence of a day-to-day dryage register, and comparison with another case lacked a reliable foundation, and the absence of such a register was not shown to be decisive. The appellate estimate was therefore treated as an arbitrary approximation rather than a computation based on proved material, and the addition of Rs. 15,000 was unsustainable.

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Issues: Whether the proviso to section 13 of the Indian Income-tax Act, 1922 was applicable on the facts, and whether the addition of Rs. 15,000 could be sustained.

Analysis: The assessee maintained a method of accounting that had been accepted in earlier years, and the authorities did not establish that the accounts were false or that the income, profits and gains could not properly be deduced from that method. The rejection of the accounts rested mainly on low yield, the absence of a day-to-day dryage register, and comparison with another case, but no reliable basis was shown for requiring such a register or for treating its absence as decisive. The estimate made by the appellate authorities was not founded on concrete material on record and amounted to an arbitrary approximation rather than a computation based on a proved basis or manner. The existence of departmental control over milling and the certificate verifying the purchases and production also weakened the inference that the accounts were unreliable.

Conclusion: The proviso to section 13 was not applicable, and the addition of Rs. 15,000 was unsustainable.

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