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Assessment of profits for a firm engaged in the cloth business for the assessment year 1943-44. Analysis: The judgment pertains to an application under Section 66(2) of the Indian Income Tax Act concerning the assessment year 1943-44 for a firm involved in the cloth business. The Income Tax Officer did not accept the profits returned by the assessee due to incomplete and unreliable inventories and improper accounting for purchases in relation to sales and closing stock. The department accepted the profit percentage on wholesale cloth sales but estimated the profit on retail sales at 15% based on comparable cases of other merchants in the locality, as the assessee's accounts were deemed unacceptable. The decision of the Income Tax Officer was upheld on appeal by the Appellate Assistant Commissioner and the Appellate Tribunal. The main contention of the assessee was that the comparable cases used to determine the profit percentage were not disclosed to them. However, the court held that the assessee's failure to maintain proper accounts led to the department's estimation based on comparable cases. The court emphasized that the assessee was entitled to basic information regarding the basis of the estimate but not detailed business information of the other merchants used for comparison. Therefore, the application for reference under Section 66(2) was dismissed, with costs imposed on the Income Tax Commissioner. In conclusion, the judgment highlights the importance of maintaining accurate accounts for proper income tax assessment. It underscores that when an assessee fails to provide reliable accounts, the department may resort to estimation based on comparable cases. The court clarified that while the assessee is entitled to basic information regarding the estimation basis, detailed business information of other merchants used for comparison is not mandatory to be disclosed.
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