Law:

Section:

Section 254, read with section 145 of the Income-tax Act, 1961 [Corresponding to section 33(4), read with section13 of the Indian Income-tax Act, 1922] - Appellate Tribunal - Order of - Assessment years 1943-44 to 1945-46 - Assessee-firm carried on business of aerodrome work, katcha building constructions etc. - On firm's failure to produce books of account for relevant assessment years, ITO took sum total of receipts of assessee for three accounting years and, thereupon adopted profit rate of 40 per cent in exercise of his power under section 13 read with section 23(4) of 1922 Act - Tribunal, however, opined that ITO should have applied rate of profit to annual receipts instead of total receipts and that by amalgamating receipts under one assessment ITO raised tax liability of assessee which was not fair - Besides, Tribunal also reduced profit rate from 40 per cent to 30 per cent - Whether Tribunal was right in asking ITO to assess assessee on receipt basis with regard to contracts carried out and completed during year of accounting, there being every presumption that incomes were paid as soon as they became due - Held, yes - Whether, however, as regards reduction of flat rate of profit, Tribunal did commit a mistake of law in arriving at said finding for which there was no relevant evidence to support- Held, yes FACTS Two persons 'S' and B constituted an unregistered firm sharing the profits and losses in the proportion of 9-as and 7-as respectively. The business, of which the profits and gains were the subject of assessment, consisted of aerodrome work under the Central Public Works Department, certain katcha building constructions under the Military Engineering Service and small supply of potatoes to Garrison Engineer. During the accounting year 1942-43, the assessee received a sum of Rs. 2,92,256. During the next year, that is 1-4-1943 to 31-3-1944, they received a sum of Rs. 86,434 and during the following accounting year of 1-4-1944 to 31-3-1945, they received a sum of Rs. 25,703. Besides it appeared, there were certain estimated outstanding bills to the credit of the assessee which had been excluded from assessment. On firm's failure to produce, books…

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