1950 (8) TMI 18

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.... the Income-tax Officer though in the petitioner's accounts submitted to the Income-tax authorities he disclosed a profit of 7? per cent only. In rejecting the petitioner's accounts as regards his profits the Income-tax Officer was mainly influenced by the following factors: (1) The petitioner kept a mixed account for all varieties of yarn which rendered proper check impossible. (2) He sold rupees two lakhs worth of goods for cash to unnamed persons thereby exposing himself to the suspicion that controlled prices were shown in the books whereas higher prices were charged from customers and the excess was pocketed by the assessee without being included in the profits. (3) The neighbouring shop-keepers who were also dealing with....

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....which there is a sharp conflict of judicial authorities in India. The petitioner's method of accounting is mercantile and there seems to be no doubt either about the method or about the deduction of the profits of his business from the method so employed. Therefore if a narrow construction be put on the expression "method of accounting" specified in the proviso to Section 13 as has been done by some High Courts it would appear that that proviso has no application to the present case. The Income-tax Officer did not reject the petitioner's accounts in toto but only rejected those portions of it which showed his gross profits. He accepted the remaining particulars and estimated the gross profits at 12? per cent on the basis o....

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....pport of his view. Thus even those authorities who doubt the legality of applying the proviso to Section 13 to cases of this type seem to have no doubt that in such circumstances Section 23(3) alone would empower the Income-tax Officer to assess the petitioner. In the present case as already pointed out the Income-tax Officer has not quoted the particular section of the Income-tax Act which he applied and it seems to be unnecessary for us to discuss elaborately whether the expression "method of accounting" contained in the proviso to Section 13 should be given a narrow or liberal interpretation. 5. As regards Section 23(3) it seems now well settled that it is open to the Income-tax Officer to take into account other materials tha....