Law:

Section:

Section 145, read with section 256, of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment year 1979-80 - ITO made additions to income of assessee - On appeal, Commissioner (Appeals) deleted part of addition - Tribunal upheld rejection of accounts but estimated assessee's income at reduced figure - Whether questions as to whether in view of finding that reliance could not be placed on assessee's book result, Commissioner (Appeals) and Tribunal were justified in interfering with additions made by ITO and whether Tribunal was justified in estimating income of assessee at reduced amount were referable questions of law arising out of Tribunal's order - Held, yes FACTS The Income-tax Officer made additions of more than Rs. 6.43 lakhs and completed the assessment. On appeal, the Commissioner (Appeals) sustained additions of Rs. 3.5 lakh and deleted the balance amount. On second appeal, the Tribunal rejected the books of account of the assessee and held that it would be reasonable to determine the income of the assessee at Rs. 1.41 lakhs. The reference application filed under section 256(1) by the revenue was rejected. On application under section 256(2) : HELD The Tribunal was directed to refer the questions of law as to whether on the facts and in the circumstances of the case and also in view of the finding that 'reliance could not be placed on the assessee's book results' the Commissioner (Appeals) and the Tribunal were justified in interfering with the addition made by the ITO and whether the Tribunal was right in holding that it would be reasonable to determine the income of the assessee at Rs. 1,41,000. Note: The case was decided in favour of the revenue. P.K. Ravindranatha Menon and N.R.K. Nair for the Petitioner. K.I. Mayankutty Mather for the Respondent. JUDGMENT K.S. Paripoornan, J.-The Revenue is the petitioner herein. The respondent is a firm, an assessee to income-tax. The firm contains 14 partners. We are concerned with the assessment year 1979-80. The assessee declared a total income of Rs. 68,690. The return was rejected. The Income-tax Officer took elaborate evidence and added a sum of Rs. 6,43,380 to the admitted…

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