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TMI Blog1975 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... me directors of the company. In the assessment year in question, i.e., 1966-67, the previous year ending on the 31st December, 1965, the assessee on the basis of a total turnover of Rs. 3,25,756 disclosed a gross profit of Rs. 49,290 calculated at the rate of about 15%. The Income-tax Officer found that the assessee did not maintain any day to day stock book, manufacturing accounts, raw material consumption accounts or production accounts. In the absence of the aforesaid, he held that it was not possible to arrive at the correct profits on the figure disclosed by the assessee. Applying section 145(1) of the Income-tax Act, 1961, he made an addition of Rs. 15,861 on estimate calculating gross profits at the rate of 20% of the total turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kept by the assessee. The Tribunal observed that as the sales were vouched, the possible leakage in the accounts could be in the manufacturing costs, where, in view of the turnover, there would not be much scope for such leakage. Considering all the facts and circumstances of the case, the Tribunal reduced the addition to Rs. 7,000. The question which has been referred to us from this order of the Tribunal is as follows : " Whether there was any evidence or material before the Tribunal on which it could sustain the addition of Rs. 7,000 ? " Mr. S. Bhattacharjee, learned counsel for the assessee, contended before us that there was no basis or material on which any addition could be made to the disclosed profits of the assessee in the inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the assessee in support of the purchase price paid for paddy were not accepted and were found to have been fabricated and no stock accounts were maintained separately for each variety of rice. The account books originally found in the business premises of the assessee by the income-tax inspector were not produced at the assessment. On the aforesaid facts the Income-tax Officer estimated the assessee's turnover at a much higher figure and also increased the rate of gross profits from 4.5% to 9%. In appeal the Appellate Assistant Commissioner upheld the estimate of turnover as also the rate of profits as found by the Income-tax Officer. Further appeal by the assessee to the Appellate Tribunal was dismissed. The High Court held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts shown was upheld. On reference, the High Court held that the further addition had been made by mere guess-work on the assumption of certain leakages for which there was no basis. The High Court opined that there was no material before the Tribunal to support the addition. Mr. Ajit Sengupta, learned counsel for the revenue, in reply cited three decisions in support of the order of the Tribunal. The first is a decision of the Supreme Court in the case of Commissioner of Income-tax v. K. Y. Pilliah & Sons [1967] 63 ITR 411 (SC). The assessee in that case had declared a certain amount as income from business, found to be based on gross profits calculated at the rate of 3.8% of the turnover. In the case of others carrying on similar busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Income-tax Officer to estimate the gross profit at a rate at which profit was earned in similar business by other merchants. We are unable to hold that the reasons recorded by the Tribunal in support of its order levying tax on profits computed on estimated turnover of Rs. 12 lakhs at the rate of 6.5% were ' irrelevant '. " Mr. Sengupta next cited another decision of the Supreme Court in the case of State of Kerala v. C. Velukutty [1966] 60 ITR 239, 243, 244 (SC) for the observations contained in the judgment of Subba Rao J. which ran as follows : " What is the scope of section 12(2)(b) of the Act ? The expression ' to the best of his judgment ' in the said clause is presumably borrowed from section 23(4) of the Income-tax Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities as in making the best judgment assessment the said authorities considered all the available materials and applied their mind and tried their best to come to a correct conclusion. So, too, a Division Bench of the Patna High Court in Doma Sahu Kishun Lal Sao v. State of Bihar [1951] 2 STC 37 (Pat) refused to interfere with the best judgment assessment of a Sales Tax Officer as he took every relevant material into consideration, namely, the situation of the shop, the rush of the customers and the stock in the shop and also the estimate made by the Assistant Commissioners in the previous quarters." Lastly, Mr. Sengupta cited a decision of the Supreme Court in the case of S. N. Namasivayam Chettiar v. Commissioner of Income-tax [196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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