Law: Income Tax Act, 1922

Section: 12

[Income Tax Act, 1922 (XI of 1922)]..........Section 13, proviso-Rejection of account-Best assessment-Manufacturer of paints and varnishes Absence of manufacturing register or any other document reflecting purchases of raw materials and production of finished goods»-Profits not properly deducible from the accounts maintained-Book version rejected pressing in aid proviso to section 13-Whether justified-Held yes-Best assessment mode by Income Tax Officer believing the some to be fair estimate although process involving some amount of guess work-Whether assessable on that ground alone-Held no. Proviso to Section 13 of the Act would apply when no method of accounting has been regularly employed or the method employed does not reflect the correct income, profits and gains. On fulfillment of any of these two conditions the Department would be justified in rejection of the book version. In the present case a document which the Income Tax Officer has chosen to call "Manufacturing Register" had not been produced. No doubt the maintenance of a register bearing same name is not mandatory because under the second proviso to Section 13 of the Act the Central Board of Revenue had not required the maintenance of such register. All the same the documents that a manufacturer has to maintain reflect the purchases of raw materials and the production of finished goods as without such record the Department cannot co-relate consumption with production and as a consequence correct income, profits and gains could not he deduced. On a consideration of the material placed before us we are of the view that the Income Tax Officer was correct in pressing in aid the proviso to section of the Act for rejecting the book version. In order to escape the liability accruing from best assessment it has to be shown that the Income Tax Officer has acted either dishonestly or vindictively or capriciously. If on the other hand the Income Tax Officer makes the assessment only believing the same to be a fair estimate, although the process would involve some amount of guess- work, the assessment would not be assailable on that ground alone. In the present case the assessee had on re-computation disclosed…

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