TaxTMI 
TaxTMI 
1997 (8) TMI 112
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsideration the assessee had shown g.p. at the rate of 7.4% on total sales of Rs. 99,44,697. In the course of assessment proceedings, while scrutinising one of the wages payment register (Tudwai Wages), the AC observed that attendance of workers were shown on 29th and 30th February also. It was also observed that no worker had put his signature in token of having received the wages, but had put thumb impression instead. It was, therefore, concluded that the books of the assessee are unreliable and he applied the provisions of section 145(2). Accordingly, he disallowed the following expenses: ------------------------------------------------------ Nature of Total Expenses ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; Total Disallowances 17,47,271 ------------------------------------------------------ The CIT(Appeals) confirmed the disallowances in toto. 3. The learned counsel for the assessee made detailed submissions before us with regard to the nature of business, the mode of operations and the peculiar aspects of the business during the year. Besides this, it was submitted that there was no reason for the Assessing Officer to reject the book results. Mentioning of two wrong dates did not have any bearing on the accounting aspect of the entire records or the correctness of the entire records. Admittedly the dates were wrongly mentioned, but the wages, which were paid on the basis of metric tons worked open, wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Officer is scrutinising the account books, he has to do so objectively and judiciously. His prime duty under the Act is to assessee the real income as per the provisions of the Act and levy tax thereon. These, that is the prime object of the Act and the prime duty of the Assessing Officer thereunder, are so elementary to the process of assessment that it hardly needs elaboration. 7. Where accounts are maintained by an assessee, the process of determining the income would start from the income as reflected by the books, and then adjustments thereto will be made as per the provisions of the Act. It is a different after where books are not maintained, and as we are not concerned with such a situation in the present appeal, we do not dwell ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....based on the quantity worked upon which is easily verifiable from other records. This register has no bearing on the accounts at all. In our opinion, the explanation is quite plausible. Not only that, if the Assessing Officer was not convinced by the explanation, it was not that he was helpless. He could have verified the payment of wages from other relevant records. The assessee did offer them for verification, but the Assessing Officer chose to overplay with the dates of 29th and 30th February. 9. Another observation by the Assessing Officer was that no worker has signed the register but all of them put their thumb impressions. The Assessing Officer just could not digest this despite being aware of the fact that the literacy rate in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....expect such state of affairs arid only a utopist is entitled to have such expectation. Correct books of account has to be understood as fairly correct books of account. Thus a few missing vouchers or a few defects here and there, strictly speaking, may render the books to be incorrect, but yet, they may be fairly correct. In such case, it is more appropriate to make legitimate disallowances, rather than reject the books whole hog. Profits deduced from such fairly correct books are near to real income liable to tax than the income determined by wild estimates. The Indian Companies Act, 1956 also envisages that the profit and loss account of a company should reflect a true and fair view of the profit or loss. Thus, in case of corporate sector....