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Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment years 1967-68 to 1969-70 - Whether where accounts books of assessee company were rejected by ITO on ground that they were not audited and there was no correlation between consumption of raw materials and production of finished goods, Tribunal without considering defects indicated by ITO, was not justified in holding that assessee's accounts were flawless - Held, yes - Whether, therefore, matter was to be remitted to Tribunal for disposal afresh - Held, yes - [Matter remanded] FACTS The ITO rejected the books of assessee-company on the ground that all the account books of the company had not been produced before the auditors and, therefore, accounts had not undergone the scrutiny of audit, and that correlation between consumption of raw materials and production was not possible in the absence of a manufacturing account and, therefore, the book profit could not be accepted. The first appeal was unsuccessful. On second appeal, the Tribunal, however, held that the assessee's accounts were flawless and, therefore, directed the ITO to accept the book results disclosed for three years. On reference : HELD In the instant case, justice of cause would be answered if the appeal was to be reheard by the Tribunal, it was not appropriate to express any definite view as the Court was apprehensive that indication of any view would prejudice either party before the appellate authority. It was enough to say that the pointed reasons advanced by the ITO were not met and, therefore, the ultimate conclusion was not warranted. It was quite possible that the same appellate authority after scrutinising all the materials in an analytical way may come to the same conclusion and this court's order would not stand in the way of reaching such a final decision. [Matter remanded] JUDGMENT R.N. Misra, J.-On applications made by the revenue under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), by order dated 10th September, 1975, this court directed the Appellate Tribunal, Cuttack Bench, to state a case and refer the following question for opinion of this court:…

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