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Issues Involved:
1. Validity of false returns and books of account. 2. Applicability of Section 22(3) of the Income-tax Act for revised returns. 3. Powers of the Income-tax Officer under Section 13 and Section 23(4) of the Income-tax Act. 4. Justification of the Income-tax Officer's assessment method and rate. Detailed Analysis: 1. Validity of False Returns and Books of Account: The judgment dealt with the assessment years 1932-33 and 1933-34, focusing on the false returns and books submitted by the assessee. It was established that the assessee had a history of submitting false returns supported by false books. The court noted that for the year 1933-34, the assessee submitted a return showing a loss, which was later amended to show a profit after scrutiny by the Income-tax Officer. The court held that the books and returns were unreliable and did not reflect the true state of affairs. 2. Applicability of Section 22(3) of the Income-tax Act for Revised Returns: The court examined whether Section 22(3) allowed the assessee to submit a revised return after the original false return was discovered. It was held that Section 22(3) is meant for genuine corrections of omissions or wrong statements discovered by the assessee, not for rectifying false returns knowingly submitted. The court emphasized that allowing such revisions would lead to an endless cycle of false returns and corrections. 3. Powers of the Income-tax Officer under Section 13 and Section 23(4) of the Income-tax Act: The court discussed the powers of the Income-tax Officer under Section 13 and Section 23(4). It was noted that Section 23(4) allows the Officer to make an assessment to the best of his judgment when no return is made or when the return is not complied with. Section 13, on the other hand, is a computation section that instructs the method to be adopted in computing profits and gains. The court held that when books are found unreliable, the Officer can resort to the proviso to Section 13, which gives him wide powers to determine the computation basis. 4. Justification of the Income-tax Officer's Assessment Method and Rate: The court addressed the method adopted by the Income-tax Officer, who used an average interest rate on the capital employed by the money-lending firm to compute the income. It was argued that this method was arbitrary and mere guesswork. However, the court found that the Officer's method was reasonable, not vindictive or capricious, and justified given the unreliable books. The court also considered the impact of the Reduction of Interest Act but concluded that it was within the Officer's discretion to decide its relevance to the assessment years in question. Conclusion: The court upheld the actions of the Income-tax Officer, affirming that the rejection of the false returns and books was justified. The Officer's method of assessment, based on an average interest rate, was deemed appropriate given the circumstances. The court dismissed the applications and answered the reference in the affirmative, affirming the Officer's assessment and computation methods.
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