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TMI Blog1974 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... t facts relating to this reference may briefly be stated. The assessee is a private limited company carrying on business of execution of contracts. For the assessment year 1960-61, the total income of the assessee, as revised by the Appellate Assistant Commissioner, was Rs. 63,436. The facts regarding the assessee's accounts and the assessments made on it as stated in the Tribunal's order in I.T.A. No. 14561 of 1963-64 (for assessment year 1957-58), which was followed and applied in I.T.A. No. 14564 of 1963-64 in relation to the assessment year 1960-61 may conveniently be stated at this stage. The assessee commenced business in January, 1956, and closed its books on June 30, 1956, and on the same date in the succeeding years. The work und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Commissioner's estimates in respect of others. From the said total income of Rs. 63,436 as determined under the proviso to section 13 of the Act for the assessment year 1960-61 after deducting the amount of tax payable, the distributable surplus worked out to Rs. 34,890. As, according to the Income-tax Officer, the assessee should have declared 65% of the distributable surplus, i.e., Rs. 22,679, as dividends during the 12 months following the expiry of the previous year and as no dividend was declared during that period, the Income-tax Officer initiated proceeding under section 23A of the Act. In those proceedings the assessee contended that for the purpose of section 23A the commercial profits were to be considered and not the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order of the Appellate Assistant Commissioner. The Tribunal found that there was material before the Income-tax Officer to come to the conclusion that the real income was not disclosed. The Tribunal held as follows: " The Income-tax Officer has pointed out defects in the books and arrived at the assessee's profits on materials available. There is no reason to hold that such a determination is entirely unrelated to reality. In fact, decisions have held that such additions represent real income and that the assessee, in a subsequent order, can take advantage of the Income-tax Officer's determination, if necessary (See Kuppuswami Mudaliar v. Commissioner of Income-tax [1964] 51 ITR 757 (Mad)). Moreover, the present case seems to us to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. According to the learned counsel, the assessee's books of account was maintained on the basis of the completed contract and there was nothing wrong about the method of accounting maintained by the assessee. Counsel relied on the case of Commissioner of Income-tax v. Gangadhar Banerjee Co. (P.) Ltd. [1965] 57 ITR 176 (SC). It has to be noted that in this reference we are not at all concerned with the question as to whether the proviso to section 13 of the Act was properly applied for the assessment year 1960-61. This is not an appeal or a reference arising out of the assessment order for the said year. Therefore, we cannot in this reference embark upon an enquiry as to whether the method of maintaining of the assessee's accounts was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted and the proviso to section 13 was applied for the purpose of calculation of the estimated profits. This was done as the company had not disclosed the correct profits. If it can be shown that any artificial and notional or fictional income was included in the calculation for any reason or failure on the part of the assessee then certainly there would have been some force in the contention of the assessee and the assessed income or the estimated profits could not be said to be the commercial or real profits of the business for the purpose of making an order under section 23A of the Act. But where such artificial and notional or fictional income does not enter into the calculation and on that ground the estimates cannot be challenged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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