Law: Income Tax Act, 1922

Section: 13

(a) Income-tax Act (XI of 1922)----S. 13-Assessee's cloth Mills-Rejection of assessee's account by Income-tax Officer-Books of account kept on same hoes as dis­cussed in order of assessment relating to earlier years-Account main­tained in great detail and all information was made available to I.-T.O. All necessary details obtained and examined by I.-T.O. Shortfall .in production of cloth per pound of cotton - Assessee giving proper explanations where there was deviation in production which I.-T.O. could not rebut-Assessee's contention that higher consumption was due to increased cost of material used and energy looking reasonable I.-T.O. rejecting account in an entirely summary manner with generalised observations and not giving details of, such parallel cases as observed in his order where gross profit was shown to be more than that of assessee's-Held : Appellate Tribunal was justified in accepting books version of assessee in circumstances. (b) Income-to Act (XI of 1922)- -- S. 13-Rejection of assessee's account by Income-tax Officer-Even in a case where gross profit had come down to 21% from the previous 25.7% if method of accounting maintained by assessee was same as in previous years which had been accepted earlier, results of assessee's account should be accepted. Rohm Cloth House v. Commissioner of Income-tax 1983 P T D 63 fol. (c) Income-tax Act (SI of 1922)-- S. 13-Rejection of account of assessee by Income-tax Officer­ Finding of I. T. O. merely based on gross profits of comparable cues without giving any specific details of same-Such finding, held arbitrary-Income-tax Officer, under S. 13, has discretion to make an estimate after rejecting account-Income-tax Officer, after observing that accounts had been maintained on same lines as discussed in orders of early years and at necessary details had been obtained and examined, was not justified in rejecting result of such accounts merely because rate of gross profit had gone down though a reasonable explanation for same had been offered by assesses--Discretion, in rejecting accounts, held further, was not exercised in a correct manner in circumstances. JUDGMENT MUHAMMAD ZAHOORUL HAQ, J. -There are three…

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