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Issues involved: Application u/s 256(2) of the Income-tax Act, 1961 regarding misdirection by the Income-tax Appellate Tribunal in applying section 145(2) for best judgment assessment.
Judgment Summary: The High Court considered an application u/s 256(2) of the Income-tax Act, 1961, questioning the application of section 145(2) for best judgment assessment by the Income-tax Appellate Tribunal. The Assessing Officer found defects in the account books of the assessee, leading to the conclusion that they were neither correct nor complete. The absence of verifiable purchases and sales, lack of vouchers for expenses, missing stock register, and inability to provide retail sale prices of liquor were noted. The Assessing Officer invoked section 145(2) and proceeded with best judgment assessment, a decision upheld in subsequent appeals. The Tribunal observed the incredibility of the reported income compared to the turnover and upheld the rejection of account books. The Court noted that the findings were not challenged, and the contention that section 145(2) was not applicable due to unverifiable sales or expenses was insufficiently supported. The absence of a stock register, cash memos, and supporting vouchers, combined with low profits, justified the rejection of account books under section 145(2) for accurate assessment. The Tribunal's decision was deemed legally sound based on factual evaluation, leading to the rejection of the application with costs. In conclusion, the High Court upheld the Tribunal's decision to reject the account books under section 145(2) for best judgment assessment, emphasizing the importance of verifiable records and supporting documentation for accurate income assessment.
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