TaxTMI 
TaxTMI 
2006 (10) TMI 84
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....lleged by it. It disclosed a returned income of Rs.38,601. The gross profit shown was 4.2 per cent. The Income Tax Officer while framing the assessment order considered the gross profit rate as low and on the basis of a comparable case of M/s United Trading Company as mentioned in the assessment order and also on the ground that no stock register was maintained, made an ad hoc addition of Rs.15,000 in the trading account and further made a disallowance of Rs.2,000 out of travelling expenses and Rs.1,000 out of other expenses. The assessee, being aggrieved, filed appeal before the Appellate Assistant Commissioner, Lucknow. The Appellate Assistant Commissioner sustained the addition of Rs.15,000 and also other disallowances and dismissed the appeal. The assessee, being aggrieved, preferred appeal before the Tribunal. The Tribunal reduced the addition of Rs.15,000 to Rs.13,000 and sustained the disallowance of Rs.2,000 out of travelling expenses on account of personal expenses and deleted the disallowance of Rs.1,000 towards other miscellaneous expenses. 5. We have heard Sri Pawansri Agrawal, learned counsel for the applicant, and Sri Shambhoo Chopra, learned standing counsel appeari....
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....k register before the Income-tax Officer. An inference was drawn by the Assessing Authority that no stock register had been maintained. Under such circumstances, an ad hoc addition of Rs.15,000 was added to the trading result after comparing the gross profit rate of 4.2 per cent. disclosed by the applicant with that of 6 to 7 per cent. disclosed by the United Trading Company. It is also not in dispute that the applicant had surrendered a sum of Rs.30,000 as cash credit which it had deposited in the name of M/s Vijay Tin Works in its books of account. Under section 145 of the Act, as it stood during the relevant period, the Income-tax Officer had the power to make an assessment upon such basis and in such manner as he may determine where the accounts are correct and complete but the method employed is such that in his opinion the income cannot be properly deduced therefrom or where he is not satisfied about the correctness or completeness of the account of the assessee, he may make an assessment in the manner provided under Section 144 of the Act. For ready reference, Section 145 of the Act, as it stood during the relevant period, is reproduced below:- "145. Method of accounting. (....
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....g false in the account books. The mere fact that the profits are low is not material upon which a finding under section 13 can be based, because the assessee may be incompetent or his methods of business may be uneconomic. Again, the fact that there is no stock register only cautions him against the falsity of the returns made by the assessee. He cannot say that merely because there is no stock register the account books must be false. In the aforesaid case, the accounts book were accepted by the Assessing Authority as correct and disclosing a true state of affairs which is not the case at hand and, therefore, no advantage can be drawn by the applicant from the aforesaid decision. 12. In the case of S.Veeriah Reddiar [1960] 38 ITR 152, the Kerala High Court has followed the decision of the Punjab High Court in the case of Pandit Bros. [1954] 26 ITR 159 and has held that the absence of any register or regular stock register were not sufficient reason or material on the strength of which the account of the assessee could be rejected under the proviso to section 13 of the Indian Income-tax Act, 1922. In the aforesaid case, the Income-tax Officer had conceded before the Appellate Assi....
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....ecause the Assessing Authority desires some other accounts book to be maintained over and above what was required by Rule 6-F of the Rules, recourse to the provisions of sub-section (1) of section 145 of the Act could not be taken. The aforesaid decision is of no help to the applicant as, in the present case, we find that the applicant had not maintained the stock register which he was otherwise required to be maintained. It is to be remembered that the stock register is required to be maintained by an assessee in order to enable the Assessing Authority to verify the stocks and to arrive at a conclusion as to whether the trading result disclosed by the assessee is correct or not. In the absence of any such register having been maintained or produced before the Assessing Authority, an inference can be drawn that the account books do not disclose the correct picture of the trading result. 15. In the case of Awadhesh Pratap Singh Abdul Rehman and Brothers v. CIT [1994] 210 ITR 406, this Court has held that it is true that the absence of the stock register and cash memo in a given situation may not per se lead to an inference that the accounts are false or incomplete. However, where t....