TaxTMI 
TaxTMI 
1939 (3) TMI 14
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....It is nevertheless made the basis of the fourth point in the application. It was abandoned without argument before us. 3. As to (3) that line of attack was not taken before the Assistant Commissioner. Accordingly no appeal on that point lay to the Commissioner and no question falls to be stated by him relative to that matter. We are left with (1), 4. As to that the facts would appear to be that a return was made, it was questioned, and the Income-tax Officer under the powers conferred upon him by Section 23(2) served a notice requiring the assessee to produce his books as evidence of the correctness of the return. The assessee produced his books which were scrutinized and found to be unreliable : whereupon the Income-tax Officer pr....
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....ent can and must be in accordance with a computation made under Section 13. The difference is of no importance in our opinion but is a mere matter of phraseology. What is of importance is that the Income-tax Officer must when assessing under Section 23(3) apply his mind to Section 13 proviso in cases where he is rejecting the evidence of the books. 8. Put in another way Section 13 requires that the income, profits and gains, in cases falling within Sections 10, 11 and 12, shall be computed in a particular mode. That mode is "in accordance with the method of accounting regularly employed by the assessee. 9. Thus, if assessee has books disclosing a method of accounting regularly employed by him his income etc., must be computed by follo....
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....t the deduction founded on the revaluations and restored X rupees as the profits. Their Lordships state: ... Their Lordships are further of opinion that if he had so exercised his judgment the Income-tax Officer would not reasonably have come to any other opinion than that the profit shown in the profit and loss account could not be the true figure for Income-tax purposes. 14. We understand this to mean that had he posed himself the question granted the profits cannot be deduced from (or by) this method, is the profit X ? He would have answered, as a reasonable man, No. 15. In the present case the Income-tax Assistant Commissioner in his order dated 1-6-35 on appeal from the Income-tax Officer observed as follows: It....
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....ances. From the assessment records of 1931-32 and 1932-33 it is clear that the cash book was unreliable.... The assessee has made no attempts to reconcile the book balances with the actual cash in hand. 17. He accordingly treated the books as unreliable and proceeded to assess under Section 23(3). 18. This had been done in the previous year but in that year the assessment was arrived at by adding to the assessees figure a lump sum addition of Rs. 25,000, was reduced to Rs. 20,000, and on appeal to the Commissioner was deleted altogether on the ground (see quoted passage in the order dated 1-6-35 at pp. 96 & 97) ... the appropriate course for the Income-tax Officer would have been to make an assessment on some basis that could....
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....s Ramrai Shop, Akola : "No question of law was involved; nor is it possible to turn a mere question of fact into a question of law by asking whether as a matter of law the officer came to a correct conclusion upon a matter of fact. 22. As to the second question we do not consider that it is fairly posed or raises any question here involved. This is not a case of an officer "inventing" an assessment. It is a case of an officer faced with unreliable books doing his best with bad materials. 23. In Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj of Darbhanga their Lordships indicated that an officer computing in accordance with the provisions of Section 13 proviso must not guess, but in arriving at his estimate can take int....
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....nd in such manner as the Income-tax Officer may determine. 29. Suppose the Income-tax Officer says : "I will check this by going right through these books, ignoring the balances which are mere paper balances", can the result arrived at be stigmatized as a guess ? We think not. Is the High Court to check up the figures and decide whether the result is correct ? We think not. There is here neither arbitrary guess work nor capriciousness, vindictiveness or dishonesty. The Income-tax Officer has decided to go to work, in a situation rendered difficult by the assessees misleading books, in a rational way in an effort to arrive at a fair figure. 30. As to the third question we have not had our attention drawn to any principle of assessment ....