Law: Income Tax Act, 1922

Section: 13

Income Tax Act, 1922 (XI of 1922)- Section 13-Rejection of accounts substantial defects- found in the account books Accounts rejected basis of Awan Committee"-formula -Whether justified Held no. We have time and again emphasised that the formula prescribed by the Awan Committee is not for universal application. It is only when substantial defects are discovered in the books of accounts and same are rejected that the assessing officer can resort to make estimate of production and while doing so he can justify his, estimates with reference to the formula and not unless the books are, discard. In the case before us, the assessing officer could not discover any defects in the books of accounts in spite of a thorough scrutiny conducted by him. The mere fact that production of cloth was not upto the formula could not be valid ground for making an addition which incidentally in the appellants case has jumped up the production to more than 100% of the yarn consumed; JUDGMENT [The order was passed by A. A. ZUBERI, Accountant Member] -- The Appellant-company is a manufacturer and vender of cotton Yarn and Cloth. The appeal impugns the order of the Learned Appellate Assistant Commissioner,,,,,,,,Range.................. on appeal No. 2889/KC/A/76-77 dated 20-1-1977 relating to assessment year 1973-74. 2. The learned Counsel for the Appellant submitted that income for the year was declared Rs. 2, 03,610/-Sales were recorded at Rs. 16140415 on which Gross Prom of 17.8% was disclosed which was higher than 13.15% of the immediately preceding year. The wastage in the Spinning Section was 16.0% and production, of Yarn per spendal per shift at 5.03. The assessing officer accepted all these. In the Weaving Section, wastage was claimed at 8.55% and Cloth production per loom at 26.01 while the Yarn consumed was 20,30,643 Lbs. The assessing officer considered the shortage in Cloth production as excessive and reducing it to be 4.53% added Sale a sum of Rs. 5, 09,444/ in the Total Income an express shortage at 81,225 Lbs. It was submitted that the assessing officer did not discover any defects in the records and the bookkeeping of the Appellant but made the addition simply for the…

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