JAGAN NATH GURBACHAN SINGH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN all the above -mentioned appeals, either the assessee or the Revenue has taken two substantive grounds. The first being application of proviso to section 145(1) in cases where the Assessing Officer has observed that the assessee has shown low yield in the process of manufacturing and processing raw cotton. The second ground taken in all the appeals, relates to the reasonableness of yield percentage to be fixed in the professing and ginning of cotton. The individual cases were discussed with the learned counsel, who have appeared and the suggestions came from majority of the counsel for having a uniform decision and uniform yardstick on the above -mentioned issues. We are of the opinion that in the taxation systems there should be absolute transparency as well as uniformity. We are of the opinion that the assessees should be heard in advance on various yardsticks of investigations and various methods of investigations so that he is in a position to make satisfactory and intelligent understanding of the issue that may arise subsequently before the tax authority.

(2.) THE learned counsel argued the cases and apprised us with the material available as well as legal position regarding invocation of proviso to section 145(1) of the Income -tax Act, 1961. The learned Departmental Representative also filed paper book after collecting the information from the Assessing Officer regarding the question of yield and process of ginning of cotton. The learned counsel argued that the assessees are maintaining stock details in stock registers, which is showing daily position of stocks. It was argued that this stock register is showing the position of Narma ginned and the cotton obtained after the ginning process. It was argued before us that the Assessing Officer has not pointed out any defect whatsoever in the books of account and, therefore, proviso to section 145(1) of the Act does not apply under the facts and the circumstances of the cases mentioned above. It was argued that the proviso to section 145(1) comes into play in case the accounts are found not to be correct or complete to the satisfaction of the ITO and the method of accounting employed by the assessee is such that in the opinion of the ITO income cannot be properly deduced. Reliance was placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of Tara Singh & Co. v. CIT, [1980] 18 CTR (P&H) 90/ : [1981] 127 ITR 819. The learned counsel prayed that the findings of Punjab Trading Co. Ltd. v. CIT is applicable only if correct profits cannot be deducted. It was further argued that this case has been discussed in the case of Jhandu Mal Tara Chand Rice Mills v. CIT : [1969] 73 ITR 192 (P&H) wherein it has been held that keeping of a day -to -day register could not help in determining of correct profits of the business. The learned counsels further pleaded that even if the proviso to section 145(1) is to be applied, the Assessing Officer has to act judicially and not arbitrarily.

(3.) WE are conscious of the fact that the important issue is to be decided and, therefore, we have heard the arguments of the learned counsels. The learned counsel Shri Ashwani Kalia, pleaded that there cannot be any uniformity on yield percentage and the only best interpretation will be the result shown by the books of account of the assessee and in case there are no major defect in the books of account, the yield shown by the assessee should be accepted.