LALA SARJU PRASAD Vs. STATE OF U P:

JUDGEMENT

(1.) IN compliance with our order dated the of February 11, 1942 the Commissioner of INcome-tax, Central and United Provinces, has stated a case and referred a question of law for our decision. We indicated that question of law in our order, and the same question has been referred to us for decision by the learned Commissioner. The question is as follows :

(2.) IT was under these circumstances that we directed the Commissioner to state a case, but now that all the facts have come out on a perusal of the various orders of the Income-tax authorities, we think that the question of law in the circumstances of the present case ought to be answered in the affirmative.

(3.) WHEN the Income-tax Officer was submitting report, the assessee did not co-operate with him but wanted to withdraw the appeal and therefore the Income-tax Officer on the April 11, 1935 submitted a more or less colourless report saying that no explanation has been offered regarding deposits in personal accounts. The Assistant Commissioner then on the of December 17, 1936 considered the appeal on the merits. He also looked into the accounts of the various branches and in the end he agreed with the method of calculation adopted by the Income-tax Officer to a certain extent. He said that the income determined by the Income-tax Officer was Rs. 32,489/- but this income was made up not only of the profits shown in the various shops but also included certain income calculated by the application of flat rates on the turnover. He was of the opinion that that was not a proper method of calculating the profits and he, therefore, deducted the amount which was obtained by the application of flat rates. The latter income was Rs. 11,884/-. From Rs. 32,419/- he deducted Rs. 11,884/- and a sum of Rs. 171/- as bad debt and found the income of the assessee to be Rs. 20,434/- but where the Income-tax Officer had calculated the profits in certain instances on the basis of flat rate, the Assistant Commissioner was of the opinion that the income could be determined by a reference to the books of account themselves, and it was not necessary to adopt any flat rate at all. Certain income was shown as capital deposits and the Assistant Commissioner held the view that these deposits were really profits and therefore a sum of Rs. 31,408/- ought to be added to Rs. 20,434/-. The total income was determined at Rs. 51,842/-.