Law:

Section:

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 year 1951-52 - Respondent/assessee carried on business of purchasing and selling cloth - For assessment year in question, it filed return of income wherein gross profits were disclosed at rate of 3.8 per cent on turnover - In course of assessment, ITO found that assessee had not entered certain sales in books of account - He, accordingly, rejected books of account and estimated turnover himself - Besides, in view of fact that normal rate of gross profits in similar business carried on by other merchants in locality varied from 6 to 8 per cent, ITO determined gross profits rate for assessee at 6.5 per cent - Whether once books of account of assessee were rejected and rate of gross profits earned by them was found unreliable, it was open to ITO to estimate gross profits at a rate at which profit was earned in similar business by other merchants - Held, yes - Whether, therefore, estimation of profits made by ITO was to be affirmed - Held, yes FACTS For the assessment year 1951-52, the respondent-assessee declared certain income. The ITO discovered that in the business of purchasing and selling cloth carried on by the assessee the gross profits from the turnover disclosed by them worked out at 3.8 per cent while in the case of other merchants carrying on similar business in the same locality it worked out at 6 to 7 per cent, that the relevant vouchers for purchases by the assessees of goods were not produced, and that in respect of those transactions, besides the entries in the books of account, there was no evidence of actual payment of credit purchase. The ITO was, therefore, of the view that the 'purchases remained unproved'. Thereafter, he made detailed enquiries and found that the assessees had not entered certain sales in its books of account. The ITO, therefore, rejected the books of account and estimated the turnover as also the rate of gross profit on estimated turnover. On second appeal, the Tribunal confirmed the estimation of the profits. On reference the High Court held that the estimate of…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492