1979 (10) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was legally justified in rejecting the account books of the assessee.
2. Whether the Tribunal was justified in upholding the addition of Rs. 25,000 to the returned income.

Summary:

Issue 1: Rejection of Account Books
The Tribunal rejected the account books of the assessee, M/s. Bharat Milk Products, on the grounds that purchases and cash sales were not verifiable, and no day-to-day production and manufacturing record had been maintained. The ITO invoked the proviso to s. 145(1) of the I.T. Act, 1961, due to these discrepancies. The Appellate Tribunal upheld this decision, noting that the assessee did not maintain any accounts for the first three assessment years (1962-63 to 1964-65) and the assessment for 1965-66 was still pending. The Tribunal found that the absence of day-to-day manufacturing or production records justified the rejection of the accounts. The court agreed, citing precedents like CIT v. McMillan & Co. and S. N. Namasivayam Chettiar v. CIT, which support the ITO's authority to reject accounts if the method of accounting is not regularly employed or if the income cannot be properly deduced.

Issue 2: Addition of Rs. 25,000 to Returned Income
The Tribunal upheld an addition of Rs. 25,000 to the returned income, based on the discrepancy in the yield of condensed milk compared to a comparable case. The AAC had initially calculated a shortage of 19,077 kgs., valuing it at Rs. 50,000. The Tribunal found that the price of the short yield should not be taken at the average selling price of Rs. 2.65 per kg but considered the possibility of inflated purchases. The court found no merit in the assessee's argument that the addition was based on conjectures and surmises, noting that the Tribunal's findings were based on material evidence and were factual determinations not subject to challenge in a reference. The court concluded that the quantum of the addition was justified and based on a reasonable estimation.

Conclusion:
Both questions were answered in the affirmative, in favor of the department and against the assessee. The department was awarded costs assessed at Rs. 200 and counsel's fee in the same amount.