COMMISSIONER OF INCOME TAX Vs. CHHAGANLAL SHANKARLAL

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax. The question of law referred is :

(2.) THE assessee is a registered firm carrying on business in utensils and yarn. The case is with regard to assessment year 1964-65. In the assessment year 1964-65, the assessee filed a return showing an income of Rs. 25,925. The assessment, however, was completed on a total income of Rs. 42,546. Additions were made mainly to the yarn account and the utensils account. The Income-tax Officer was of the opinion that the gross profit rate in the utensils account was low and that there were defects in the account books. He estimated the profits at 10 per cent. in respect of utensils as against the rate of 9 per cent. disclosed by the assessee. This resulted in an addition of Rs. 5,649. In the yarn account also the Income-tax Officer estimated the profits at 7 per cent. resulting in an addition of Rs. 10,074. The assessee preferred an appeal to the Appellate Assistant Commissioner, who dismissed the assessee's appeal.

(3.) THE Explanation to Section 271(1)(c) may be quoted :