TaxTMI 
TaxTMI 
1965 (4) TMI 113
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....ncome disclosed by the assessee?" The assessee is a firm carrying on business in the manufacture and sale of manure mixtures and also purchase and sale of fertilisers. For the assessment year 1953-54 (accounting year ending with March 31, 1953), the total turnover of the business was ₹ 38,01,430, out of which straight fertilisers sales were ₹ 12,26,580 and the sales of mixed fertilisers were ₹ 25,74,850. The net turnover was ₹ 35,99,621 and the gross profit was 13.6%. During the course of the inspection of the account books, the Income-tax Officer found various defects in the stock register, etc., and he considered that 13.6%, the gross profit arrived at by the assessee, was low when compared with not only the ....
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....profit in straight fertilisers would be very much less than that in mixed fertilisers, the average rate of gross profit for the current year would be less than that in the prior year, and that the difference between the rates was only 1.3%. It was also pointed out that the sales in the assessment year were less than the sales during the prior year, whereas the expenses for the two years remained more or less constant. The Tribunal, however, dismissed the appeal, holding that the enhancement on sales was called for and that the estimate by the officer in that regard was reasonable and did not require any modification. The appeal was dismissed. Aggrieved with the order of the Tribunal, the assessee preferred an application under section 66(1....
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....1,940 against the return of ₹ 4,93,041 the difference being about ₹ 50,000 and added this sum to the sum of ₹ 2,80,429 arrived at by him. He also observed: "...having regard to the larger turnover in the assessee's case than in the case of the similar merchant, it might be that the assessee did not get as much profit as 19.3%." The whole basis of the calculation adopted by the Income-tax Officer has neither rhyme, reason nor consistency. In the statement of the case even the Tribunal felt a doubt that the gross profit in 1952-53 may be only 14.9% and not 16.7%. They also observed that they might be permitted to add: "With regard to the contention that the gross profit rate was 13.5% it may be said t....
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....ts during the course of the assessment year and in the previous years and the percentage of profits made by the traders in that particular line of business. But he cannot increase the rate of the percentage of the gross profit of the compared case by an estimate and on that estimate he cannot arrive at an estimated gross profit in the case of the assessee. We feel that the Income-tax Officer has adopted a wrong method, and, under the provisions of section 13, it is always open to the court on a reference to consider whether the method adopted by the Income-tax Officer was a wrong method, wrong in the sense that the method is not one which is likely to result in the true profits and gains being ascertained. As pointed out by the House of Lor....