Law: Income Tax Act, 1922

Section: 13

Income-tax Act (XI of 1922)--S. 13-Assessee employing a regular method of accounting and accounts maintained regularly-Income-tax Officer not entitled to reject book results without finding any flaw, defect or discrepancy to accounts - Income-tax Officer cannot merely adopt a flat rate or make addition in income arbitrarily even in cases where accounts or methods employed were rejected as being such that true income could not be deduced from account --income-tax Officer is required to base such additions on material or evidence of which due notice must be given to assessee--Income-tax Officer cannot lay hand on irrelevant material but has to act on some rational basis-Additions made arbitrarily in gross profits by Income-tax Officer are not justified. Muhammadi Textile Mills Ltd. v. Commissioner (East) Karachi (1982) 45 Taxation 140 ; Roshan Cloth House v. Commissioner of Income-tax (East), Karachi 1983 g T D 63 and Mian Ghulam Murtaza v. Commissioner of Income­ tax, Lahore 1981 P T D 180 ref. JUDGMENT FAKHRUDDIF H. SHAIKH. J. -These three direct references under section 66(1) of the Income-tax Act, 1922 thereinafter referred to as the said Act) have been filed by the same party and have arisen out of the sate order of the Income-tax Appellate Tribunal, hence they are being decided by this judgment. 2. In I. T. R. No. 72 of 1973 following questions have been referred to this Court for opinion: - "(i) Whether on the facts and in the circumstances of the case the proviso to section 13 of the Income-tax Act could be invoked and book results rejected in cotton ginning business at Chiniot? (ii) Whether there was any material' on record for the basis adopted by the learned Tribunal for computing the income of the applicant from `Oil Milling Business at Lyallpur'? iii) Whether there was any material before the Tribunal to uphold and confirm rejection of book results, estimate of sales and gross profit rate in regard to 'Oil Milling Business' and not to set aside the assessment order for fresh investigation? (iv) Whether there was any material before the Tribunal to uphold and confirm disallowance of Railway Freight and cotton expenses in 'Oil Milling Business' at…

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