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U/s 13, the question to be determined by the ITO is a question of fact
U/s 13, the question to be determined by the ITO is a question of fact
The assessee filed a return showing an income of Rs 78,350. ITO did not accept the trading accounts and made addition as profits were too low as compared to earlier years, and daily stock details were not shown. AAC deleted the addition. Tribunal and High Court upheld the addition. Supreme Court upheld the addition stating that u/s 13, the question to be determined by the ITO is a question of fact and dismissed the assessee's appeal. -010765
1. The assessee filed a return showing an income of Rs. 78,350 for the assessment year 1954-55.
2. The ITO did not accept the trading accounts on the ground that the profits disclosed in comparison with the earlier years were too low and there were no day-to-day stock details for the purpose of verification and there was small withdrawals for personal expenditure in the partners accounts, and made addition.
3. On appeal the AAC deleted the addition of Rs. 75,000, but as the closing stock of certain goods was under valued to the tune of Rs. 4,490, he only allowed a deduction of Rs. 70,510.
4. On revenues appeal, the Tribunal upheld the addition made in assessees income.
5. The High Court upheld the Tribunals order.
6. On appeal the Supreme Court held as under:
What we have to see is whether the finding of the Appellate Tribunal that the income, profits and gains cannot properly be deduced from the method of accounting employed by the appellant is based on any material. The Appellate Tribunal has given two reasons for its conclusions. The first reason is that the appellant was doing business in the main on wholesale basis and there should have been no difficulty in tallying quantities in respect of major items of trading account. This certainly is a relevant consideration. In the absence of such a tally, the next reason given is that the fall in the margin is all the more difficult to explain in view of the fact that the appellant also had a quota of imports worth about Rs. 8,00,000 which would have given them a handsome margin of profit. This again is a relevant fact and it is well-known that imported goods fetch a very handsome margin of profit. Accordingly, we hold that there is material in support of the impugned finding of the Appellate Tribunal.
We may point out that we are not concerned with the correctness of the conclusion and we are only concerned with the question whether there is any material in support of the finding of the Appellate Tribunal. In cases involving the applicability of the proviso to section 13, the question to be determined by the Income-tax Officer is a question of fact, namely, whether the income, profits and gains can or cannot be properly deduced from the method of accounting regularly adopted by the assessee. There is nothing special about this question of fact, and generally the only question of law that can possibly arise is whether there is any material for the finding. In our opinion the High Court was right in refusing to call for a statement of the case.In the result, the appeal fails and is dismissed with costs.
