Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment year 1989-90 - Assessee-company was engaged in business of manufacture and sale of kattha and cutch which were derived from processing kher wood - Assessing Officer, during course of assessment proceedings, rejected books maintained by assessee under provisions of section 145 on ground that assessee had not maintained quantitative records in respect of kher wood trees on basis of their weight, though assessee had maintained completed quantitative details on basis of number of trees purchased - Under those circumstances, Assessing Officer on basis of number of logs purchased by assessee and on basis of past records calculated yield of kattha at 14.13 per cent and on basis of yield so determined Assessing Officer determined sale of kattha/cutch at higher figure and treated same as undisclosed sale - Commissioner (Appeals) and Tribunal applying GP rate of 25 per cent reduced addition - Whether merely on basis of number of logs purchased by assessee and on basis of past records or any other extraneous material, Assessing Officer could not have calculated yield of kattha - Held, yes - Whether, therefore, method adopted by Assessing Officer in deriving yield of kattha from kher wood was not a sound method and no addition could be made in that respect - Held, yes - Whether, however, addition made by Commissioner (Appeals) and Tribunal was reasonable - Held, yes ORDER S.K. Kulshrestha, J. - The above two appeals under section 260A of the Income-tax Act, 1961, arise from the order dated 18-8-2000 passed by ITAT in ITA Case No. 880/IND/92 and IT A Case No. 818/IND/92, both, for the assessment year 1989-90. The revenue's appeal has been admitted on the following substantial questions of law : "1. Whether, on the facts and in the circumstances of case, the ITAT was justified in law in confirming the order of the CIT(A) thereby sustaining addition of only Rs. 2,71,104 on the basis of application of gross profit rate even when the Assessing Officer had specific addition of Rs. 66,57,128 and Rs. 8,12,467 respectively on account of sale of Kattha and Cutch outside regular books…

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