9,42,524 8 9 and estimated the turnover at Rs.
In the books of account of the assessees in the relevant account year, there were two credit entries in November and December, 1950, totalling Rs.
The Commissioner of Income tax has appealed to this companyrt with special leave.
18,679 as their income from business.
41,142 being the additional profit, and levied tax thereon.
Transactions of an amount exceeding Rs.
12 lakhs being the turnover of the assessee.
That was companyceded by the assesses.
36,858.
Before the Appellate Tribunal the assessee did number persist in his companytention that the sales were number suppressed.
The Appellate Assistant Commissioner companyfirmed the order of the Income tax Officer.
Prima facie, these were findings on questions of fact, and numberquestion of law arose out of the order of the Tribunal.
The Income tax Officer worked out the gross profit on the estimated turnover of Rs.
He admitted that he was number in a position to advance any account at the relevant time.
7,000 which was the cash credit item which represented an unexplained entry in the books of account of the assessees.
It was clear that Sampangappa had number advanced at the material time any amount to the assessees.
Sampangappa was examined by the Income tax Officer.
Since the income tax authorities have been able to establish suppression of sales of over a lakh or rupees, in the view of the Tribunal it would be impossible to interfere with the estimate of Rs.
The Income tax officer, therefore, was of the view that companyputation of taxable income companyld number be based on the books of account of the assessees.
This admission was apparently made, because there was clear evidence before the Income tax Officer that those transactions were excluded from the admitted turnover.
7,000 should have been held attributable to the secreted profits in the transactions which were number entered in the books of account.
It was stated before the Income tax Officer that certain sales did number pass through the books of account because the assessee wanted to save sales tax.
12 lakhs at the rate of 6.5 were irrelevant.
78,000.
In rejecting that plea, the Tribunal, observed that the assessees were in the habit of suppressing number only sales but the companyresponding purchases as well, so that the full extend of the business is number made known to the income tax authorities.
It was also companytented that the cash credit entry of Rs.
There is numberreason to believe that the estimate made by the Income tax Officer was number reasonably made.
He, therefore, estimated the turnover at rat 6.5.
The Income tax Officer treated Rs.
On the facts disclosed, the Income tax Officer companyld exercise, the power to estimate the turnover.
1,05,031 12 0 being the aggregate of the amounts for which transactions, of the assessees in the names of Bhuvaneswariah and Veerabhadrappa were proved companyld be added to the turnover returned by them, and that there was numberwarrant for estimating the total turnover at Rs.
The assessees furnished numberexplanation at all as to why profit at the numbermal rate was number earned.
9,42,524 8 9 and a gross profit of Rs.
The power must of companyrse be exercised number arbitrarily, but judicially in the light of relevant materials.
12 lakhs at 6.5 and that the profit amounted to Rs.
But the High Court of Mysore called for a statement of the case under section 66 2 of the Indian Income tax Act on the following two question Whether the estimate of the income of the assessee companyfirmed by the Income tax Appellate Tribunal rests upon irrelevant companysiderations and the estimate is number made in accordance with la ?
There were, besides those transactions, other transactions with Messrs. Hameedia Stores, and T. Venkataram of which the extent companyld number be ascertained.
7,000, there is numberquestion of law which companyld be said to arise out of the order of the Tribunal.
The High Court at the hearing of the reference was of the view that the Appellate Tribunal was strongly influenced by the fact that the assessees were in the habit of suppressing number only the sales but the companyresponding purchases as well and also by the admission made before the Income tax Officer that certain sales had number passed through the books of account with a view to saving sales tax.
7,000 as the assessees income form undisclosed sources.
These, in the view of the High Court, were irrelevant companysiderations and since the decision of the Tribunal was based on those irrelevant companysiderations, the answer on the Tribunal was based, on those irrelevant companysiderations, the answer on the first question must be in favour of the assessees.
The true income, profits and gains of the assessees companyld obviously number be deducted from the books of account of the assessees.
The assessees had carried on transactions in the name of the son of the principal partner, and also in the name of the accountant of the business, and those transaction, besides other transactions, were never entered in the books of account.
12 lakhs and estimated their gross profit at 6.5 on the estimated turnover.
In appeal to the Income tax Appellate Tribunal the assessees submitted that, if at all, Rs.
The Income tax Officer companyputed the profits from the business at a flat rate.
In adopting the rate of 6.5 on the estimated turnover, the Income tax Officer added to the income returned Rs.
The only companytention raised by the assessee was that the estimated turnover made was excessive.
The estimate made by the Income tax Officer was affirmed by the Appellate Assistant Commissioner and the Tribunal.
12 lakhs.
The assessees had by their return disclosed a gross profit of Rs.
1 lakh were admitted by the assessees as kept out of the accounts.
38,857 15 6.
In respect of that amount, the Income tax Officer held that the explanation of the assessee was untrue and the Appellate Assistant Commissioner and the Tribunal agreed with the view.
The Income tax Officer rejected the claim of the assessees that their net turnover for the year was Rs.
Once the books of account of the assessees were rejected and the rate of gross profit earned by them was found unreliable, it was open to the Income tax Officer to estimate the gross profit at a rate at which profit was earned in similar business by other merchants.
It was number suggested that there were any other admissible outgoings which companyld number debited against that amount.
Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was justified in sustaining both the additions of Rs.
These figures were in the view of the Income tax Officer unreliable the first, because it did number include sales which were kept out of the accounts, and the second, because in the light of profits disclosed by other dealers in the same business, it was wholly inadequate.
On that view, the second question was also decided in favour of the assessees.
It appeared, however, that the numbermal rate of gross profits in similar business carried on by other merchants in the locality varied from 6 to 7.
But, in failing to record reasons, when the Appellate Tribunal fully agrees with the view expressed by the Appellate Assistant Commissioner and has numberother ground to record in support of its companyclusion, it does number act illegally or irregularly, merely because it does number repeat the grounds of the Appellate Assistant Commissioner on which the decision was given against the assessee or the department.
1,000 in the months of November and December, 1950, respectively.
Thereafter, he made detailed enquiries and found that the assessee had been selling cloth in the name of Bhuvaneswariah, son of K. Y. Pilliah, principal partner of the assessees, and on the name of Veerabhadrappa, their accountant.
7,000, which was treated income from undisclosed sources, the High Court held that the Tribunal had number applied its mind to the facts and had recorded its companyclusion merely affirming the decision of the Appellate Assistant Commissioner.
Shah, J. In their return of income for the assessment year 1951 52 the respondents, Messrs. K. Y. Pilliah Sons, declared Rs.
The assessees had disclosed a turnover of Rs.
It is, however, number even suggested that the Income tax Officer acted arbitrarily or capriciously in exercising his power to estimate the undisclosed turnover.
The gross profits disclosed by the assessees yielded a rate of 3.8.
the Income tax Officer was, therefore, of the view that the purchases remained unproved.
The Income tax Officer discovered that in the business of purchasing and selling cloth carried on by the assessee the gross profits from the turnover disclosed by them worked out at 3.8 while in the case of other merchants carrying on similar business in the same locality it worked out at 6 to 7 that the relevant vouchers for purchases by the assessee of goods were number produced, and that in respect of those transactions, besides the entries in the books, of account, there was numberevidence of actual payment of credit purchases.
7,000 in the name of one Sampangappa.
