Law:

Section:

(a) Income tax Act (XI of 1922) S. 13, proviso Method of accounting Mere absence of stock register Held, does not necessarily justify rejection of accounts in absence of other defects. S. H. Namasivayam Chettiar v. Commissioner of Income tax, Madras. (1960) 38 I T R 579 and Nasir Industries, Karachi v. Commissioner of Income tax, South Zone, West, Karachi 1967 PTD 205 distinguished. (b) Income tax Act (XI of 1922) _ S. 13, proviso Method of accounting Retail business Proportion of unverified cash sales, not substantial Held, outright rejection of results of account books not proper in such case. Messrs S. M. Yousuf & Bros. v. The Commissioner of Income tax, East, Karachi 1974 PTD 45 ref. (c) Income tai Act (XI of 1922) . S. 13, proviso Method of accounting Gross profit rate shown by assessee not ridiculously low as compared with general rate applied in earlier year but, in fact, improvement in turnover and gross profit rate Held Income tax Officer not justified in resorting to proviso to S. 13 in circumstances of case. Star Rolling Mills v. Commissioner of Income tax 1974 PTD 200 ref. JUDGMENT I. MAHMUD, J. The following question of law has been referred to the High Court under section 66 (1) of the Income tax Act, 1922 on the application of the Commissioner of income-tax, Karachi (West): "Whether on the facts and in the circumstances of the case the Income-tax authorities were justified in applying the proviso to section 13 of the Income tax Act, 1922?" 2. The assessee, a registered firm carried on business as dealer in hardware, tools and workshop equipment. For the assessment year 1964 65, the assessee returned a total turnover of sales amounting to Rs. 5,22,715 and disclosed a profit of Rs. 1,01,878 giving a gross profit rate of 19.5 %, as against 15 % in the preceding year. The Income tax Officer rejected the book version on the ground that retail sales which were supported mostly by cash memos, could not be verified without names of customers and also that in the absence of stock register, detail quantitative analysis was not forthcoming. Accordingly, he determined the assessee's income under the proviso to section 13 of the Income tax Act, by…

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