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Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-tax Act, 1922] - Method of accounting - Rejection of accounts - Assessment years 1951-52, 1952-53 and 1953-54 - Assessee-firm was carrying on business of contractors and executing contracts under Damodar Valley Corporation - Revenue authorities rejected books of assessee-firm and estimated profits under proviso to section 13 of Act of 1922 - Whether in view of fact that there was sufficient material upon which revenue authorities could reject account books of assessee and apply proviso to section 13 of 1922 Act, impugned order passed by them was to be upheld - Held, yes FACTS The assessee-firm was carrying on business of contractors and executing contracts under the Damodar Valley Corporation. The ITO rejected the books of assessee-firm and estimated the profits under the proviso to section 13 of 1922 Act. On appeal, the AAC held that proviso to section 13 of 1922 Act was properly applied to the case. On further appeal, the Tribunal held that since stock registers were not maintained for the relevant assessment years, true profits could not be ascertained and, therefore, the proviso to section 13 of 1922 Act was correctly applied by the ITO. On reference : HELD The question of application of the proviso to section 13 of 1922 Act had not passed from the region of fact to the region of law because there was sufficient material upon which the income-tax authorities could reject the account books of the assessee and apply the proviso to section 13 of 1922 Act. Note : Decision was against the assessee. CASE REVIEW CIT v. Sarangpur Cotton Manufacturing Co. Ltd.[1938] 6 ITR 36, Sri SukhdeodasJalanv. CIT[1954] 26 ITR 617, D.D. Kapoor v. CIT[1955] 27 ITR 348 andGhanshyamdasPermanand v. CIT[1952] 21 ITR 79followed & relied upon. CASES REFERRED TO CIT v. Ahmedabad New Cotton Mills Co. Ltd. AIR 1928 Bom. 510, CIT v. Sarangpur Cotton Mfg. Co. Ltd.[1938] 6 ITR 36 (PC), Ghanshyamdas Permanand v. CIT[1952] 21 ITR 79 (Nag.), Kapoor v. CIT[1955] 27 ITR 348 (Pat.), Sukhdeodas Jalan v. CIT[1954] 26 ITR 617 (Pat.). JUDGMENT The assessee in all these cases is a firm consisting of two…

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