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Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment year 1978-79 - Assessee made payment of certain amount to karigars by post-dated cheques - ITO added said amount to income of assessee - Whether since assessee had made entries of payment on date when actual payment was not made, such payments and books of account maintained by assessee were clearly unreliable and, therefore, ITO was justified in invoking provisos to section 145(1) and 145(2) - Held, yes FACTS The assessee was following mercantile system of accounting. The ITO, while scrutinizing the purchases made by the assessee, found that the assessee had made payment of certain amounts to Kari gars by a few post- dated cheques. The ITO, holding that the book results were not acceptable, added the said amount to the income of the assessee. On appeal, the Commissioner (Appeals) sustained the addition partly. On second appeal, the Tribunal con firmed the order of the Commissioner (Appeals). On reference : HELD The assessee, no doubt, was maintaining its books of account as per mercantile system and further, it had entered the payment to three 'Karigars' by post-dated cheques which were issued, not on the date of the cheque but on the date when these were handed over. That entry was made in cash-book, which obviously was false, as payment is to be recorded when it is actually made even if it is either by way of cash or by cheque or draft. In the instant case, as the assessee had made entries on date when the actual payment was not made, the payment having been made by post-dated cheques, books of account maintained by it were unreliable and, therefore, the ITO was justified in invoking the provisos to sub-sections (1) and (2) of section 145. [Para 9] Therefore, there was no illegality in the order passed by the Tribunal. [Para 10] K.M. Sahai for the Applicant. A.N. Mahajan for the Respondent. JUDGMENT 1. The Tribunal, Allahabad, has referred the following two questions of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court : "1. Whether, on the facts and circumstances of the case, the proviso to…

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