Law: Income Tax Act, 1922

Section: 23(3)

Income-tax Act (XI of 1922)---S.23(3)--Income-tax Officer has vast powers under S. 23(3) but he is not to act arbitrarily and without any material on record--Estimate has to be based on facts and circumstances of the case as borne out from the record and not on the bass of whims and desires. Gurmukh Singh v. C.I.T. 1944 I T R 393 ref. JUDGMENT SALEEM AKHTAR, J.-- The applicant is a corporation which had its branches in East Pakistan. In the return of income for the assessment year 1972-73, ending 30-6-1972 the applicant did not disclose any income from the East Pakistan branches. The Income-Tax Officer estimated it as Rs.5,00,000. He further added Rs.17,26,906 the amount lying to the credit of East Pakistan branches as income of the applicant. The applicant filed appeal before the Tribunal where partial relief was granted and the estimated income was reduced to 50% and the treatment to the sum of R5. 17,26,906 was maintained as follows: "The next objection was against taking the sum of Rs.17,26,906 due by the Head Office, to the East Pakistan Branches as trading receipts. In fact the appellant had claimed it as an amount payable to East Pakistan Branches and the Income-tax Officer reduced the gross losses by the amount. He did so quite rightly because the appellant failed to prove that they were not trading receipts. When an assessee fails to prove the receipts they have to be taken as Income receipts. Therefore, the Income-tax Officer rightly set it off against East, Pakistan losses." The reference application filed by the applicant was dismissed. It has filed application under section 66(2) stating that the following question of law arises from the order of the Tribunal which may be decided:- "Whether on the facts and in the circumstances of case and especially in view of addition of Rs. 17,26,906 to the income of the appellant, there was any material to support further addition of Rs. 2,50,000 in regard to East Pakistan Branches." Mr. Iqbal Naim Pasha the learned counsel for the applicant contended that the Tribunal having treated Rs. 17,26,906 as trading receipt against which East Pakistan losses were set-off there was neither material nor…

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