Law: Income Tax Act, 1922

Section: 13

Income-tax Act (XI of 1922)---S. 13--Rejection of account books--Assessee dealing in machine-tools and workshop equipments on wholesale and retail basis--Stock register though not maintained, but profit rate disclosed was not ridiculously low--Book version, held, was not liable to rejection and addition made to declare income was not justified. ORDER NASIM HASAN SHAH, J.--The respondent Messrs Choudhri Brothers is a registered firm dealing in machine-tools and workshop equipments and is also involved in wholesale as well as retail trade business. For the assessment year 1962-65, it filed a return of income showing sales of Rs.13,81,326 and declared a profit of Rs.1,49,526 which worked out a profit rate of 10.8 per cent on the sales. The Income-tax Officer rejected the book version of the respondent on the ground that the list covering the sales were not exhaustive and not verifiable. He also found that the firm had not maintained a stock register. Consequently, he estimated the total sales at Rs.14,15,000 and calculated the profit rate as 12.5 per cent. The respondent filed an appeal before the Appellate Assistant Commissioner who scaled down the addition of Rs.27,349 made by the Income-tax Officer to the returned income of the respondent to Rs.10,000. Not feeling satisfied the respondent preferred the second appeal before the Income-tax Appellate Tribunal which was rejected. The respondent then moved the Tribunal for reference of the following question of law to, the High Court:-- "Whether on the facts and circumstances of the case there was evidence or material before the Appellate Tribunal to come to the conclusion that the account books were liable to be rejected under the proviso of section 13 of the Income-tax Act?" The Tribunal refused to make the reference whereupon the respondent made application to the High Court under subsection (2) of section 66 of the Income-tax Act for a direction to the Tribunal to refer the aforesaid question. The Division Bench of the Lahore High Court before which the application came up for decision, being of the view that the question posed by the respondent did arise, proceeded to decide it itself because of the change in…

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