1982 (2) TMI 9 - HC - Income Tax

Summary

Issues involved:
The rejection of assessee's accounts under section 145(2) of the Income Tax Act, 1961 and the sustainability of additions made by the Tribunal.

Relevant details for the first issue:
The assessee, assessed as a Hindu Undivided Family (HUF), was engaged in coal mining business in Madhya Pradesh during the assessment year 1964-65. The Tribunal rejected the assessee's books under section 145(2) and conducted a best judgment assessment under section 144. The Tribunal cited reasons for rejection including lack of quantitative tally, unclear payment details to subcontractors, and reliance on improper payment methods. The Tribunal failed to consider that the accounts were checked by governmental authorities as required by mining regulations, which could prevent manipulation. Additionally, the Tribunal made errors in considering non-existent facts regarding payments to subcontractors. The Court found these errors vitiated the Tribunal's decision and ordered a reconsideration of the matter.

Relevant details for the second issue:
The Court held that the Tribunal was not correct in law in rejecting the assessee's accounts under section 145(2). Consequently, the additions made by the Tribunal were deemed unsustainable. The Court directed the Tribunal to re-examine the issue of additions in light of the reassessment of the rejection of the assessee's accounts. No costs were awarded for the reference.

This judgment highlights the importance of considering all relevant facts and avoiding errors in factual findings when assessing the rejection of accounts under section 145(2) of the Income Tax Act, 1961.