Law:

Section:

(a) Income-tax Act (XI of 1922)- -- S. 23 read with S. 13-Method of accounting-Cash sales-Mere fact that a part of sales was cash-Not by itself a ground for rejecting book version-Cash sales found to be verifiable-No adverse inference would arise in such case-Prices charged for cash sale lower than prices charged for credit sales or verifiable cash sales-Inference can be drawn that income, profits and gains have been minimised-Sales made only on cash basis-Assessee, in such case, to prove bona fides of his sale prices. [Presumption]. Cash sales are a fact of life. There is no principle of accountancy or rule of law that an assessee must sell his goods either on credit basis or to verifiable parties only. The mere fact that a part of the sales were cash would not by itself be a ground for rejecting the book version. Where cash sales are found to be verifiable no question of drawing an adverse inference would admittedly arise. When the cash sales are verifiable as well as unverifiable, it would be open to the Income-tax Officer to scrutinise the unverifiable sales by comparison with the rates charged for verifiable cash sales or credit sales as the case may be. Where the prices charged for cash sales are lower than the prices charged for credit sales or verifiable cash sales the Income-tax Officer may legitimately draw the inference that the income, profits and gains have been minimised. It would still depend on the facts of each case whether or not the true profit can or cannot be properly deduced from the assessree's account. Where, however, the sales are made only on each basis it is for the assessee to prove the bona fides of his sales price by producing additional evidence, e.g. prevailing sale prices, indicated by quotations in trade journals, market rates and even rates charged by local dealers of the locality on the relevant dates. Star Rolling Mills v. Commissioner of Income-tax 1974 PTD 200 ref. S. M. Yousaf & Brothers v. Commissioner of Income-tax PLD 1974 Note 59 at p. 99-1974 PTD 45 distinguished. (b) Income-tax Act (XI of 1922)- -- S. 23--Comparative data lot available and possibility of profits being minimised not ruled oat-Absence of…

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