9911796707
TMI Blog1979 (2) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... r involved in this appeal is 1976-77 with the year ended 3rd Nov., 1975 as the relevant previous year. The return filed by the assessee showed an income of Rs. 31,430. It was accompanied by a trading and profit and loss account. The ITO started with the net profit shown in the said account and made several additions. One such addition was a sum of Rs. 8,000. The assessee had debited a sum of Rs. 36,676. On account of breakage being 5per cent of the total purchase. The ITO observed that all the expenses under this head were not vouched and verifiable and so he disallowed the aforesaid sum of Rs. 8,000. The ITO made the assessment on a total income of Rs. 40,630 by his order dt. 22nd Sept., 1976. 3. The assessee appealed to the AAC and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus the AAC established that the items which became unsaleable due to breakage were not included in the closing stock of Rs. 70,000. Hence, he reasoned that those items automatically got reduced physically from the closing stock and so never formed a part of the monetary value of Rs. 70,000. If that be so then there was obviously no justification to claim the breakage of Rs. 36,767 again in the profit and loss account. The AAC, therefore, thought the ITO erred in disallowing only a sum of Rs. 8,000 out of Rs. 36,767 debited to the profit and loss account instead of disallowing the whole amount. He accordingly issued a notice of enhancement to the assessee. The assessee replied that the profit shown by it was quite reasonable and so no fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO in the course of assessment proceedings. He contended that the additions sustained by the AAC resulted in a gross profit of about 16.5 per cent which was quite reasonable in this line of business. 6. We have considered the contentions of both the parties as well as the facts on record. In our opinion, the reasoning given by the AAC is unassailable. Admittedly, the assessee did not maintain any stock registers of the items dealt in by it. Even an inventory of closing stock was denied. Thus it has not been shown that the unsaleable items were included in the figure of Rs. 70,000. On the contrary, the AAC has shown beyond all reasonable doubts, that those unsaleable items could not have formed a part of the sum of Rs. 70,000 shown as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential even for the single entry system. The hazira filed by the assessee before the ITO showed that it did not maintain a cash book. The value of the closing stock taken in the trading account was obviously arbitrary and without any basis. Thus the accounts produced by the assessee were neither correct nor complete. Hence this case came squarely within the proviso to s. 145(1). Hence, the ITO was bound to compute the income on a basis and in a manner determined by himself according to the best of his judgment, vide the cases of CIT vs. Kameswar Singh(1) and CIT vs. Krishnaswami Mudaliar. The ITO did not do so. Instead he started with the profit and loss account filed by the assessee even though it was patently incorrect. Having started ..... X X X X Extracts X X X X X X X X Extracts X X X X
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