Law: Income Tax Act, 1922

Section: 13

(a) Income tax Act (XI of 1922)---S. 13, proviso (1) Interpretation Applicability of proviso Rejection of accounts Dry cleaning business Department not finding any fault with accounts of assessee but rejecting same on certain grounds and assumptions without pointing out any material defect Held, book results could not be rejected on basis of suspicion unless finding of fact is recorded that on verification account books had disclosed some defect or discrepancy which could not reasonably be explained Department once accepting a particular method of Accounting System adopted by an assessee and found it possible to determine profits on basis of such accounting system, same, held, could not be rejected on ground that accounting system was defective in absence of any glaring defect or discrepancy. Messrs S.M. Yousuf and Brothers v The Commissioner of Income tax (East Karachi) 1974 P T D 45; Star Rolling Mills v. Commissioner of income tax 1974 P T D 200; Vijaya Traders v. Commissioner of Income tax, Mysore 1974 P T D Note 32; Dhakeswari Cotton Mills Ltd. v. Commissioner of Income tax, West Bengal P L D 1956 S C (India) 168; Messrs Coronet Paints & Chemicals Ltd., v. The Commissioner of Income tax (Central)] Karachi 1984 P T D 355 and Imperial Paint and Varnish Works v. Commissioner of Income tax (West), Karachi 1979 P T D 473 ref. (b) Income tax Act (XI of 1922) S. 13, proviso Applicability of proviso Proviso to section 13, held, could not be pressed into service without recording a finding that accounts were defective and determination of profits on their basis was not possible. JUDGMENT AJMAL MIAN, J. By this common judgment we intend to dispose of the above two income tax direct references pertaining to the assessment years 1972 73 and 1971 72, respectively made under section 66(1) of the Income Tax Act (hereinafter' referred to as the Act), which raise the following two common questions: (i) Whether in the facts and circumstances .of the case the Tribunal was entitled to confirm the rejection of book results? (ii) Whether there was material before the Tribunal for estimating the receipts for the assessment year 1972 73 at Rs.1,10,000? It may be observed that…

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