Law: Income Tax Act, 1961

Section: 145

Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of Indian Income-tax Act, 1922] - Method of accounting - Rejection of accounts - On assessee's inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee's books of account showing result in respect of cash sale transactions, and made addition - AAC deleted additions but Tribunal restored ITO's orders - Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers - Held, yes - Whether, therefore, rejection of book results of assessee was unjustified - Held, yes - Whether, consequently, additions made to assessee's income were liable to be deleted - Held, yes FACTS The ITO after rejecting the explanation given by the assessee and the broker through whom the sale transactions had been effected, for their inability to supply the addresses of the purchasers, held that the result shown by the assessee's account books in respect of the cash sale transactions could not be accepted. He, accordingly, made certain additions to the gross profits shown by the assessee's account books. On appeal, the AAC held that having regard to the fact that the ITO had not found that any sales had been suppressed from or omitted to be shown in the accounts by the assessee or that they had been shown to have been made at lower rates, the ITO was not justified in not accepting the book results as shown by the assessee and in applying the proviso to section 13 of 1922 Act of the case. Thus, he deleted the addition. On revenue's appeal, the Tribunal restored the ITO's order. The assessee's reference application under section 66(1) of 1922 Act was also rejected by the Tribunal. On reference under section 66(2) : HELD The ITO had scrutinised closely the account books of the assessee and had found no fault with them excepting that the addresses of the customers for the cash sales of sugar had not been entered. It was not found by him that there were any other reasons for not accepting the said cash sales, such as, for instance, the sales being at lower rates than what were prevailing in the market or that they were not comparable with the other verified…

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