Law: Income Tax Act, 1922

Section: 66(2),13

(A) Income tax Act, 1922 (XI of 1922)-Section 13---Rejection of accounts-Method of accounting regularly employed by assessee- Profits and gains not properly deductible from the accounts --- Whether accounts liable to be rejected-Held yes (B) Income-tax Act, 1922 (XI of 1922)-Section 13-Rejection of accounts-Manufacturer of yarn and cloth -- Absence of spinning masters report and Gate pass register-Whether accounts can be rejected on these counts without specifically finding fault with the books of accounts produced-Held yes. (C) Income-tax Act, 1922 (XI of 1922)-Sections 13, 66--Rejection of accounts- Question of law or fact---Question challenging the adequacy of the material and not absence of material for findings of the Tribunal- Whether gives rise to question of law-Held no. The assessee was a manufacturer of yarn and cloth. For the charge year 1957-58 the assessee filed return showing a net loss of Rs. 2,06,172. The Income-tax Officer rejected the account books produced by the assessee on the ground that the profits and gains could not be properly deduced in the absence of spinning master's report and the Gate pass register. He found that yield of yarn was 85% as against 80.84% shown by the assessee and that there was an under-statement by Rs. 1,80,000 in the accounts in respect of sales of cloth and yarn. He finally made assessment on an income of Rs. 26,03,558. Against the order of assessment the assessee went in direct appeal before the Tribunal. The Tribunal reduced the percentage of yield of yarn from cotton from 85% to 83% and estimate of sale of cloth from 18,00,000 to Rs. 10,00,000. He, however, maintained the order rejecting the books of accounts for the reasons given by the Income-tax Officer. Against this order the assessee filed application seeking reference on the questions as to whether there was any material on the record to hold that (i) the production as shown was low and the addition was justified; and (ii) sale rates of yarn and cloth as shown were incorrect. Dismissing the application the High Court: Held, that: (i) in this case the Income-tax Officer as well as the Income-tax Appellate Tribunal have come to the conclusion that without…

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