LAWS(APH)-1961-12-16

ROYAL MEDICAL HALL Vs. COMMISSIONER OF INCOME TAX

Decided On December 21, 1961
ROYAL MEDICAL HALL Appellant
V/S
COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

(1.) AS required by this Court, the Tribunal Hyderabad Bench, has drawn a consolidated statement of the case, agreed to by the parties, and referred it under S. 66(2) of the Indian IT Act on the following question :

(2.) THE reference relates to the asst. yrs. 1952 -53, 1953 -54 and 1954 -55, the relevant accounting period being the years 1951, 1952 and 1953 ending on 30th Sept., of each year. The assessee is a partnership concern carrying on the business of chemists and druggists including dispensing of medicines at Hyderabad. It has a medical store and deals in medicines on retail as well as wholesale basis. For the period under reference, the assessee's books disclosed a turnover of Rs. 2.58, 3.16 and 3. 78 lakhs on which the gross profit return was 7.8, 5.6 and 4.5% respectively. The ITO did not accept the gross profits returned and for the various defects discovered in the method employed by the assessee as shown in his order, he was of the opinion that the true income and profits cannot be deduced from the account books. He, therefore, invoked the proviso to S. 13 and after considering the assessee's reasons for the low rate of gross profits, estimated the gross profits for the three years in question at 12, 10 and 10% respectively. The AAC reduced the gross profit rates to 10, 8.5 and 8.5% respectively after a careful consideration of comparable cases and also the reasons given by the parties. When the matter came before the Appellate Tribunal, there was a difference of opinion between the Judicial Member and the Accountant Member. While the former held that the application of the proviso to S. 13 was not justified, the Accountant Member held otherwise and confirmed the order of the AAC. The matter was then referred, according to the provisions of the IT Act, to the President of the Tribunal who agreed with the Accountant Member and upheld the order of the AAC.

(3.) THE matter now, as per reference, for consideration is whether, under the circumstances of the case, the proviso to S. 13 of the Act could be invoked. Sec. 13 reads thus :