Law: Income Tax Act, 1922

Section: 13,30,12

Income tax Act ( of 1922)--S. 13 read with Ss. 30 &. 12.-Additional tax.-Method of accounting -Assessee not employing any regular method of accounting-Same method of accounting employed by assessee for several years prior to year in dispute but not objected to by Department on any ground--­Assessee sufficiently demonstrating that in manufacturing process of silk fabrics from silk yarn there was only one stage of weaving yarn into cloth and, therefore, [no question of maintaining stage-wise production account arose-Addition of amount to gross profit disclosed by assessee for year in dispute under S. 13-Held, not justified in circumstances of case. UDGMENT SAIDUZAMAN SIDDIQUI, J.--This direct reference under section 66 (1) of the, Income-tax Act has been filed by the applicant/assessee to question the addition of a sum of Rs. 1,25,000 by the Income-tax authorities under sec­tion 13 of the Act to the declared gross profit for the year 1964-65. The applicant during the assessment year 1964-65 submitted its return of come disclosing total sales of Rs. 27,18,094. A gross profit of Rs. 4,21,809 as shown by the applicant in its return on the above sales. The percentage of gross profit on the above sales works out to 15.7 % as against 21.3% declared by the assessee during the last previous assessment year. The Income­ tax Officer called upon the applicant to explain the reason for the shortfall Percentage of profit during 1964-65 which was explained by the applicant follows : "Your honour bad asked to our clients to explain why G. P. percentage has gone down from 21.3 % to 15. 7 %. In this connection our client:, has given the following explanations :- (a) In the immediately preceding year the assessee recovered Rs. 1,27230 being Dyeing, Finishing and Twisting charges while during this year they have recovered only Rs. 44,109. This fall in the receipt is on account of production for 7 months only as well as our clients stopped accepting fresh order for Dyeing, Finishing and Twisting. Hence there was overall fall of Rs. 83,094 in G. P. because of this item. We may add here that Dyeing, Finishing and Twisting charges recovered are being credited to manufacturing…

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