M A RAUF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under Section 66 (2) of the Indian Income-tax Act, 1922. The Income-tax Appellate Tribunal, on being required by the High Court, has stated a case and referred it to the High Court and submitted for its opinion the following question of law : "Whether there is material to support the assessment of Rs. 39,114/- as taxable profits of the country liquor shops for the assessment year 1946-47?"

(2.) The assessee has also Excise business in respect of country spirit and out-still liquor. In the present case, we are concerned with the income of the assessee from his country spirit shops only. The Assessee is a licensed vendor in country spirit, which is purchased from the Government at fixed rates and sold by the assessee at controlled rates. The assessee purchases country liquor from Government on payment of charges called ''Duty and Cost" and licence fees. The annual licence fee is paid on the total consumption of liquor after deducting the Duty and Cost paid to Government.

(3.) In the year under assessment, which is 1946-47, corresponding to the accounting period from 1st of April, 1945 to 31st of March, 1946, the assessee returned a net income of Rs. 5,351/- from his Excise business. The Income-tax Officer did not accept the account-books produced by the assessee in respect of his Excise business, and, therefore, on the basis of the last year's assessment in 1945-46 made a best judgment assessment. On appeal, the order of the Income-tax Officer was set aside by the Appellate Assistant Commissioner, who asked him to make a fresh assessment. After remand, the Income-tax Officer held that the accounts produced by the assessee were not maintained during the regular course of business, and, therefore, refused to accept the same, and, made an estimate of the assessee's income from the Excise business. With reference to the sale of country liquor, with which we are concerned in the present reference, the Income-tax Officer estimated the net profit at Rs. 39,114/- in the following manner :