COMMISSIONER OF INCOME TAX Vs. N M ASSOCIATES

JUDGEMENT

(1.) THE question referred to us is :

(2.) THE following facts will highlight the grievance. The assessee is in the business of building and construction. It is an unregistered firm. It takes contracts for construction. During the asst. year 1984 85, the assessing authority found that there were no accounts much less proper accounts maintained by the assessee. In the returns, initially a loss of Rs. 21,557 was shown and thereafter by another return, a loss of Rs. 24,935 was shown. The assessee firm used to take small contracts as well as big contracts. At the relevant time, there were some small contracts which were completed more or less in a year or some times spilled over an year, while there was one big contract worth Rs. 30 lakhs for construction of a hotel, which was to continue from year to year and was not completed in one year. Before the assessment authority, the assessee gave in writing that it was not possible for them to complete the account books and that they were trying everything to complete the same. The assessing authority observed on that that this letter was written in the month of November and, therefore, it was clear that the assessee had not completed the accounts even upto November, 1985, for the asst. year 1984 85. A deposition was also taken by the assessing authority, who found that there were no day to day maintenance of accounts and, therefore, the assessing authority came to the conclusion that the profits from the return could not be ascertained. He, therefore, recorded the following finding :

(3.) THE case herein is even worse. There are no proper contract accounts whatsoever. Therefore, there was no way in knowing as to what were the receipts and the spendings on the part of the assessee. Therefore, if the CIT(A) adopted the method of yearly accounting in pursuance of his powers under S. 144 of the Act then there was nothing wrong. The Tribunal has clearly gone wrong in ignoring the fact that in this case there was no accounting at all and the method suggested by it can stand justified only if there were proper accounts maintained by the assessee.