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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.404 OF 2005
M/s. National Plastics Industries, .. Appellant
A-59, MIDC Industrial Area,
Andheri (East),
Mumbai- 400 093.
versus
The Income Tax Officer, .. Respondent
Ward 22(8),
Aaykar Bhavan,
Mumbai-400 020.
Mr. Vipul Shah for the appellant.
Mr. R. Ashokan for the respondent.
CORAM : SWATANTER KUMAR, C.J. &
A.P. DESHPANDE, J.
DATE OF RESERVING THE JUDGMENT : 12TH AUGUST, 2008
DATE OF PRONOUNCING THE JUDGMENT : 29TH AUGUST, 2008
JUDGMENT (PER SWATANTER KUMAR, C.J.)
Aggrieved from the order of the Commissioner of Income
Tax (Appeals), the Assessee as well as Revenue Department had
filed appeals being ITA 2000/M/1996 and ITA 2550/M/1996 in relation
to the Assessment Year 1992-1993 respectively. Both these appeals
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were dismissed. The Assessee has questioned the correctness of the
order impugned in the present appeal primarily on the ground that the
Tribunal has erred in law in rejecting the book result of the appellant
while invoking the provisions of section 145 of the Income Tax Act
and confirming the addition of Rs. 45,27,208/- on account of alleged
undisclosed gross profit. According to the Assessee, these questions
of law arise for determination out of the finding of the Tribunal.
Reliance was placed upon the judgment of the Supreme Court in
Commissioner of Income-Tax, Bihar and Orissa v. S.P. Jain, (1973) 87
ITR 370(SC) that where the Appellate Tribunal had misunderstood the
statutory language or has arrived at a finding on no evidence, proper
construction of statutory language being the matter of law and where
the Tribunal acts with material irregularity, the findings would be
vitiated and the High Court would have jurisdiction to interfere in the
findings of the Tribunal.
2. Dealing with the contentions raised before it, the Tribunal
noticed that the Assessing Officer after rejecting the trading results as
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reflected in the Books of Account determined the sales of the
Assessee and applied the gross profit rate of 25% as against 7%
shown by the Assessee and this led to addition of Rs.61,21,344/-. It
was reduced by the Tribunal to Rs.45,00,000/- upon appeal. It also
noticed the deficiencies pointed out by the Assessing Officer in the
Books of Account stating the principle that certain amount of guess
work may have to be applied in such cases, so far as exercise of
power by Assessing Officer is bonafide. Once the authorities had
come to the conclusion that books of account were not properly
maintained and suffered from deficiencies, the Assessing Officer was
justified in computing income on reasonable basis in appropriate
manner.
3. It is relevant to refer to Dhondiram Dalichand v.
Commissioner of Income-Tax, Poona, 1971 ITR 609, where the Division
Bench of this court assessing facts of the case concluded that
absence of qualitative tally about stocks of purchase and sale were
sufficient material to enable the department to proceed to assess the
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profits of the assessee. The court observed that Income Tax Officer
need not make explicit statement showing that method of accounting
employed by assessee is such that profits made cannot be properly
deduced therefrom. It is sufficient if his order has the effect of
impliedly recording such a finding. These observations are relevant in
view of the finding of the Assessing Officer that in absence of stock
register as also the quantitative details of the stock of finished goods it
was not possible to verify correctness of stock shown by the
assessee.
4. The question raised in this case is squarely covered by the
judgment of the Supreme court in Commissioner of Income-tax v.
McMillan and Co., AIR 1958 SC 207 where the Supreme Court
observed that if true income, profit and gains cannot be ascertained
on the basis of assessee’
s method or where no method is regularly
employed, the income must be computed upon such basis and in
such manner as the Income Tax Officer may determine.
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5. In United Commercial Bank, Calcutta v. Commissioner of
Income tax, W.B.-III, Calcutta, (1999) 8 SCC 338, the Supreme Court
went to the extent of holding that under section 145 of the Act, in a
case where accounts are correct and complete but the method
employed is such that in the opinion of the Income tax Officer, the
income cannot be properly deduced therefrom, the computation shall
be made in such manner and on such basis as the Income tax officer
may determine.
6. In the present case, besides noticing the deficiencies in the
Books of Account, the Assessing Officer had also formed an opinion
that there were instances of various leakages of revenue in the Books
of Account and method of accounting applied was not proper.
7. In face of this conclusion, in our opinion, no question of law
much less the substantial question of law arises for consideration.
Appeal is dismissed.
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CHIEF JUSTICE
A.P. DESHPANDE, J.
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