Law: Income Tax Ordinance, 1979

Section:

Income-tax-----Rejection of account books---Where the account books are found to be unreliable or incomplete, the Income Tax Officer would be justified in rejecting the books and making assessment on the basis of a flat rate of profit applied to the turnover or gross receipts as shown by the books or to the turnover or gross receipts as estimated by him or on any other reasonable basis of estimate. Although the Income Tax Officer has very wide powers and is not fettered by technical rules of evidence and pleadings, but there is no overriding restriction on his and that is that he must act honestly on the material, however inadequate before him, and not vindictively, capriciously or arbitrarily. Where the account books are found to be unreliable or incomplete, the Income Tax Officer would be justified in rejecting the books and making an assessment on the basis of a flat rate of profit applied to the turnover or gross receipts as shown by the books or to the turnover or gross receipts as estimated by him or on any other reasonable basis of estimate. ORDER FAKHRUDDIN SIDDIQUI (MEMBER).---The impugned order, dated 24-11-1984, passed by the learned CIT (A), Rawalpindi (Headquarters at Faisalabad), has aggrieved both the parties for the charge year 1980-81 on the grounds of rejection of returned version and confirmed in appeal, over and above expenses and to set aside the assessment on basis of round addition made by the I.T.O. at the rate of Rs.22 net income per bale by the assessee and the round addition of Rs.30,000 against the addition of Rs.3,81,000 by both the parties at litigation. 2. Briefly recounted that the assessee, a registered firm, derived income from running a Cotton Ginning Factory, had declared income of Rs.9,478 duly accompanied by copies of P&L account and a balance-sheet. It was stated that total cotton purchased during the year was of Rs.87,00,487 yielding an average rate of Rs.180.24 per maund. Similarly the assessee showed purchases from commission agents at Rs.84,24,707 giving an average purchase rate of Rs.180:52 per maund. Rest of the cotton were purchased from various Beoparies for Rs.2,75,780.29 giving average purchase rate of…

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