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 1958-59 - Yield rate of polished rice from husking of paddy declared by assessee-firm was unacceptable to ITO - Assessee explained that lower yield was on account of purchase of paddy in highly moist months of year - However ITO applying section 13 of Act 1922 rejected books of accounts of assessee on ground that no dryage register was maintained and yield from paddy was rather lower as compared to other dealers - Version of ITO was accepted by both AAC and Tribunal - However none of authorities stated how day to day dryage register was maintained and it was also not stated that other firms in same trade were also maintaining that register - It was found that District Food And Supplies Controller had given certificate which showed that Department (Civil Supplies) did not doubt account maintained by assessee - Further, it was also seen that assessee had adopted same method of accounting which was acceptable to department in earlier years - Whether, in view of above circumstances, it could be concluded that authorities were not justified in applying proviso to section 13 to reject books of accounts of assessee - Held, yes FACTS The assessee-firm in the relevant assessment year husked certain quantity of paddy which yielded 62.6 per cent of polished rice. While making assessment for the assessment year 1958-59 the ITO considered that the yield of polished rice shown by the assessee-firm was on the low side and, therefore, called upon the assessee-firm to prove that the yield of rice shown by it was correct. The explanation of the assessee-firm was that most of the paddy had been purchased in the months of October, November and December and the paddy purchased during these three months was highly moist and, therefore, the yield was low. The ITO applied the proviso to section 13 and after rejecting the accounts of the assessee-firm determined the yield of rice at an increased rate and made additions to the income disclosed by the assessee-firm. The reason given by the ITO for applying the proviso to…

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