M/S. NATIONAL PLASTICS INDUSTRIES vs. THE INCOME TAX OFFICER WARD 22(8) MUMBAI

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.404 OF 2005 M/s. National Plastics Industries, .. Appellant A-59, MIDC Industrial Area, Andheri (East), Mumbai- 400 093. versus The Income Tax Officer, .. Respondent Ward 22(8), Aaykar Bhavan, Mumbai-400 020. Mr. Vipul Shah for the appellant. Mr. R. Ashokan for the respondent. CORAM : SWATANTER KUMAR, C.J. & A.P. DESHPANDE, J.

DATE OF RESERVING THE JUDGMENT :        12TH  AUGUST, 2008 DATE OF PRONOUNCING THE JUDGMENT :  29TH  AUGUST, 2008 JUDGMENT (PER SWATANTER KUMAR, C.J.) Aggrieved from the order of the Commissioner of Income Tax (Appeals), the Assessee as well as Revenue Department had filed appeals being ITA 2000/M/1996 and ITA 2550/M/1996 in relation to the Assessment Year 1992-1993 respectively. Both these appeals were dismissed. The Assessee has questioned the correctness of the CNR No : HCBM020249422004 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:50:33

2 order impugned in the present appeal primarily on the ground that the Tribunal has erred in law in rejecting the book result of the appellant while invoking the provisions of section 145 of the Income Tax Act and confirming the addition of Rs. 45,27,208/- on account of alleged undisclosed gross profit. According to the Assessee, these questions of law arise for determination out of the finding of the Tribunal. Reliance was placed upon the judgment of the Supreme Court in Commissioner of Income­Tax, Bihar and Orissa v. S.P. Jain, (1973) 87 ITR 370(SC) that where the Appellate Tribunal had misunderstood the statutory language or has arrived at a finding on no evidence, proper construction of statutory language being the matter of law and where the Tribunal acts with material irregularity, the findings would be vitiated and the High Court would have jurisdiction to interfere in the findings of the Tribunal. 2. Dealing with the contentions raised before it, the Tribunal noticed that the Assessing Officer after rejecting the trading results as reflected in the Books of Account determined the sales of the Assessee and applied the gross profit rate of 25% as against 7% Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:50:33

3 shown by the Assessee and this led to addition of Rs.61,21,344/-. It was reduced by the Tribunal to Rs.45,00,000/- upon appeal. It also noticed the deficiencies pointed out by the Assessing Officer in the Books of Account stating the principle that certain amount of guess work may have to be applied in such cases, so far as exercise of power by Assessing Officer is bonafide. Once the authorities had come to the conclusion that books of account were not properly maintained and suffered from deficiencies, the Assessing Officer was justified in computing income on reasonable basis in appropriate manner. 3. It is relevant to refer to Dhondiram   Dalichand   v. Commissioner of Income­Tax, Poona, 1971 ITR 609, where the Division Bench of this court assessing facts of the case concluded that absence of qualitative tally about stocks of purchase and sale were sufficient material to enable the department to proceed to assess the profits of the assessee. The court observed that Income Tax Officer need not make explicit statement showing that method of accounting employed by assessee is such that profits made cannot be properly Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:50:33

4 deduced therefrom. It is sufficient if his order has the effect of impliedly recording such a finding. These observations are relevant in view of the finding of the Assessing Officer that in absence of stock register as also the quantitative details of the stock of finished goods it was not possible to verify correctness of stock shown by the assessee. 4. The question raised in this case is squarely covered by the judgment of the Supreme court in Commissioner   of   Income­tax   v. McMillan   and   Co., AIR 1958 SC 207 where the Supreme Court observed that if true income, profit and gains cannot be ascertained on the basis of assessee's method or where no method is regularly employed, the income must be computed upon such basis and in such manner as the Income Tax Officer may determine. 5. In   United   Commercial   Bank,   Calcutta   v.   Commissioner   of Income tax, W.B.­III, Calcutta, (1999) 8 SCC 338, the Supreme Court went to the extent of holding that under section 145 of the Act, in a case where accounts are correct and complete but the method Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:50:33

5 employed is such that in the opinion of the Income tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income tax officer may determine. 6. In the present case, besides noticing the deficiencies in the Books of Account, the Assessing Officer had also formed an opinion that there were instances of various leakages of revenue in the Books of Account and method of accounting applied was not proper. 7. In face of this conclusion, in our opinion, no question of law much less the substantial question of law arises for consideration. Appeal is dismissed. CHIEF JUSTICE A.P. DESHPANDE, J. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:50:33 Powered by TCPDF (www.tcpdf.org)