TaxTMI 
TaxTMI 
1960 (2) TMI 9
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....turnover of Rs. 17,74,825 and a gross profit of Rs. 63,217 which is about 3.5 per cent. For the two previous assessment years the appellant's gross profits were 9 per cent. and 8 per cent. respectively. The Income-tax Officer, by his order dated March 20, 1948, rejected the accounts and estimated the gross profit by adding back Rs. 2,38,831 to the returned income. Thus he raised the turnover to Rs. 20,00,000 and the gross income to Rs. 3,00,000 giving a profit of 15 per cent. on the estimated turnover. On appeal to the Appellate Assistant Commissioner, the order of the Income-tax Officer was confirmed. The Income-tax Appellate Tribunal on appeal by its order dated September 14, 1951, after pointing out various defects, rejected the account books but accepted the appellant's turnover and computed the profits at 15 per cent. on grains imported from India and 12 1/2 per cent. on grains purchased in Ceylon. It held that correct profit for the year under assessment could not be deduced from the books produced by the appellant. The excess profits tax for the chargeable accounting period from February 10, 1942, to January 16, 1943, was decided on the basis of the income-tax assessment for....
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....rofits and gains cannot properly be deduced from the books produced or that no method of accounting has been regularly employed ? (2) Whether on the facts and in the circumstances of the case, the Department had sufficient materials before it to justify the rates of 12 1/2 per cent. and 10 per cent. gross profits on the total turnover on the ground that the rates worked out by the figures submitted by the assessee work out at a lesser figure ?" The Tribunal dismissed the application on January 15, 1954. The appellant did not apply to the High Court under section 66(2) of the Income-tax Act but obtained special leave from this court against the order of the Tribunal by which it applied the proviso to section 13 of the Income-tax Act. All the six appeals were heard together and a common question arises whether the Income-tax Appellate Tribunal was justified in applying the proviso to section 13 of the Income-tax Act. It was contended by the appellant in Civil Appeals Nos. 218, 219 and 221 of 1955 that the Income-tax Appellate Tribunal was not justified in applying the proviso to section 13 and assuming that the proviso did apply then the percentage worked out was unjustified an....
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....to why those cheques were paid to the assessee ; and (5) a fairly big sum of money had been invested in India in the purchase of property without money being received from Colombo. On these facts the Tribunal said : "In view of these defects, we are clearly of opinion that the correct profit could not be deduced from the books produced by the assessee, and accordingly hold that the proviso to section 13 of the Act applies in this case. The question, therefore, is regarding the estimate." After giving this finding the Tribunal accepted the turnover as shown in the appellant's books. In making the computation of profits the Tribunal took into consideration the following matters : that the export of food grains from India was prohibited except under a licence, that there was an acute shortage of cattle fodder in Ceylon and the appellant had to resort to dubious means in order to obtain grains, that during a substantial portion of the year of accounting there was no price control in Colombo, that as the appellant was a manufacturer of forage by mixing several kinds of grains and powdering them and sold them in packets of various weights, the appellant must have made higher profits ....
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....a and sold in Colombo the rates of profit were higher, ranging between 20 per cent. and 39 per cent. He then worked out profits in respect of various grains in the case of the appellant and found that the average rate of gross profit worked out to 15.8 per cent., and in his opinion the gross profit in fodder should have been higher. He further took into consideration the fact that Colombo was bombed in April, 1942, resulting in panic in that town and therefore during a portion of the accounting year the appellant might not have made the same margin of profit. He estimated the sales at twenty lakhs and the gross profit at three lakhs, thus arriving at a figure of 15 per cent. on the turnover. It appears to us that neither the Income-tax Officer nor the Appellate Tribunal relied upon the profits made by traders in other cases as a basis for arriving at any conclusion as to the percentage at which the income should be computed and that they used that material for a different purpose. It is extremely doubtful if the order of the Income-tax Officer or the Tribunal would have been different if no reference had been made to the rate of profits in other cases. In other words, the profits i....
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....t the books and apply the proviso to section 13. Reliance was placed on the judgment of the Punjab High Court in Pandit Bros. v. Commissioner of Income-tax. The facts in that case were very different. The Income-tax Officer there added a certain sum to the assessee's profits on the ground that the expense ratio was too high and the profits disclosed were too low and there was no stock register. The finding in that case was that the assessee maintained regular accounts of his purchases and sales and there was no finding by the Income-tax Officer that in his opinion the income could not properly be deduced therefrom. Khosla, J., (as he then was) there said : "There is no finding that there was material before the Income-tax Officer to lead him to the conclusion that a proper statement of income, profits and gains could not be deduced from the material placed before him. All he said was that the profits appeared to be somewhat low and there was no stock register." The want of a stock register was, in that particular case, not a very serious defect because the account books had been found and accepted as correct and disclosed a true state of affairs. It cannot, therefore, be said t....