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TMI Blog2001 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... es tax law?" The facts relating to question No. 1 are that the assessee is a dealer in marble. The Assessing Officer having found that the trading accounts are not backed up with quantitative and qualitative stock details and that there is a considerable fall in gross profit rate invoked the provisions of section 145(1). The assessee refuted the charge in so far as that the state of affairs as regards maintenance of accounts being the same as in earlier years and the same having been accepted by the Department, there was no justification to invoke the provisions of section 145(1). The Assessing Officer, however, not being convinced with this explanation made a trading addition of Rs.3,34,960 by increasing the gross profit rate. The Commissioner of Income-tax (Appeals) though upheld the invocation of section 145(1), sustained an addition of Rs.34,000 only and deleted the balance on the ground that it was on the higher side. The Tribunal on further appeal upheld that section 145(1) has rightly been invoked but did not sustain the additions retained by the Commissioner of Income-tax (Appeals). It was held that while the Commissioner of Income-tax (Appeals) has found that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the provisions of sub-section (2) be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Thus, for the purpose of computing the income on the basis of method of accounting adopted by the assessee it is confined to maintenance of accounts on cash basis or mercantile system of accounting, i.e., to say, on accrual basis. No other system, even if employed regularly by the assessee is acceptable for computing the income as per the provisions of the Income-tax Act. However, this provision ipso facto does not mean that rejection of books of account of an assessee must yield to different conclusion in the computation of income than returned by the assessee on the basis of accounts made by him employing any other method of accounting. Be that as it may, the provision which was in force in the accounting period relevant to the assessment year in question envisaged that where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of the Assessing Officer, the income cannot properly be deduced thereform, then the computation shall be made upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The result would depend on the other principles of computing the income. Therefore, we hold that merely changing the basis or method of arriving at the end result of working out the computation of taxable income under the Income-tax Act, necessarily does not result in devising profits or gains from business or other sources different from one returned by the assessee, where he has returned his income and different from the result reached by the assessee as per the method of accounting employed by him, by adopting a different basis by the assessing authority. On the merits of the case, we find that the Income-tax Officer while recording a finding that the trading version declared by the assessee is unacceptable and the same is rejected by rejecting the explanation of the assessee for decrease in the gross profit rate disclosed in the books of account, has made additions to the tune of Rs.3,34,960 by adopting a higher gross profit rate on the turnover disclosed by the assessee. The Commissioner of Income-tax (Appeals) accepted the explanation furnished by the assessee for the reduced return of gross profit rate in his books of account substantially but was not satisfied about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer had made the impugned additions. But the learned Commissioner of Income-tax (Appeals) did not find them to be unreasonable yet he has not given any justification for coming to the conclusion that sustaining an addition of Rs.34,000 would be justified." Thus, the finding has been reached on the ground that in the absence of recording any finding by the Commissioner of Income-tax (Appeals) that a expenses incurred on any account appear to be unreasonable or excessive, the additions sustained merely on suspicion of pilferage or leakage were not justified. This conclusion, in our opinion, is a finding of fact keeping in view that the additions in the profits and gains returned by the assessee are not a necessary concomitant of an order made under section 145(1) or 145(2). Likewise, the appeal of the Revenue before the Tribunal has been rejected on the ground of having invoked the provisions of section 145 by adopting a methodology of his own. The Assessing Officer by rejecting the explanation furnished by him for returning the income at the reduced gross profit rate has made additions on estimate basis. The Commissioner of Income-tax (Appeals) while substantially accepti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 43B shall not be overriding proviso to section 43B(a) as in force, during all relevant time read with the first proviso and Explanation 2 are to be read together harmoniously so as not to make the provisions of section 43B unduly harsh and clarified the scope and ambit of the proviso to section 43B which makes it abundantly clear that nothing contained in clause (a) shall be applicable in respect of the previous year in which liability to pay such sum was incurred as aforesaid and is actually paid by the assessee on or before the due date for furnishing the return of income under sub-section (1) of section 139. This matter also received attention of this court in two recent decisions rendered in CIT v. Shree Laxmi Industrial Co. (D.B. Income-tax Reference No. 14 of 1994, decided on April 18, 2001) and CIT v. Mahaveer Polymers (D.B. Income-tax Reference No. 3 of 1994, decided on April 18, 2001). This court has opined: "First proviso in fact provides an exception to the general provision that even where tax which has become payable during the previous year relevant to the assessment year in question is not paid within the previous year, but is paid before return under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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