Account rejection for arecanut purchases unsupported by independent vouchers was unjustified where records were otherwise regular.

The proviso to section 13 of the Indian Income-tax Act, 1922, and the corresponding proviso to section 145 of the Income-tax Act, 1961, could not be invoked to reject accounts merely because arecanut purchases were supported by the assessee's own bought notes. The accounts were otherwise regularly maintained and accepted for the other commodities traded in, and the absence of independent vouchers was explained by the nature of the business, where sellers were agriculturists and such documents were ordinarily unavailable. There was no finding that the purchases were inflated or bogus. On these facts, the provisos were not attracted, and the issue was answered in favour of the assessee.

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Issues: Whether the proviso to section 13 of the Indian Income-tax Act, 1922, and the corresponding proviso to section 145 of the Income-tax Act, 1961, could be invoked to reject the assessee's accounts merely because the purchases of arecanut were supported only by the assessee's own bought notes.

Analysis: The accounts were otherwise regularly maintained and were accepted for three out of the four commodities dealt in by the assessee. The only defect relied upon was that arecanut purchases were evidenced by bought notes maintained by the assessee itself, a feature common in that line of business where sellers were agriculturists and independent vouchers were ordinarily unavailable. There was no finding that the purchases were inflated or bogus. A finding based on facts having no real relevance to the conclusion, or unsupported by material, gives rise to a question of law and is open to examination.

Conclusion: The proviso to section 13 of the Indian Income-tax Act, 1922, and the corresponding proviso to section 145 of the Income-tax Act, 1961, were not attracted on these facts. The question was answered in the negative, in favour of the assessee.

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