- (1.) THIS order will govern Miscellaneous Civil Cases Nos. 87 an 88 of 1949.
(2.) THESE are two applications under Section 66 (I) of the Indian IT Act praying that the Tribunal should be required to state a case and to refer it to this Court under s. 66 (2) of the IT Act. The question of law which is said to arise in these cases is : Whether there was any material or evidence to discard the book version of profit in the circumstances of this case and to justify the application of the provisions of the proviso to s. 13 of the IT Act :" The question as framed shows that the applicant's contention is that there is no "evidence" or "material" to justify the application of the proviso to s. 13 of the Act. In other words, his contention is that the assessee is entitled to follow his own system of accounting and the proviso would apply (a) if no method of accounting is regularly employed or (b) if the method employed is such that profits and gains cannot properly be deduced therefrom.
(3.) THE contention of the assessee is that he has followed a regular system and that profits and gains can be deduced from his books. He urges that the application of the proviso to his case was thus arbitrary or, as he puts it, without "any material evidence". It is not to be expected that the IT authorities would have evidence as such to prove the futility of the accounts for deduction of profit and loss. What enables the officer concerned to resort to the proviso is his own inability to do so on the material placed before him. The system of accounting may be good or bad, but if profit and loss cannot be deduced properly therefrom the proviso to sec. 13 can be invoked. The enactment itself gives a certain latitude to the ITO by employing the words "in the opinion of the ITO". The opinion of the officer concerned is thus entitled to great weight, unless he acts arbitrarily. In every case there must be an exercise of judgment by the officer. Once the judgment has been exercised against the assessee, it cannot be assailed unless it can be demonstrated that the action was not "judicial" but "capricious". Thus, though the officer is not expected to lead evidence in refutation of the books his action should have some foundation. It is impossible to say as a matter of law what should be the "material" on which the officer would be entitled to apply the proviso to an assessee, regard being had to the infinite variety of cases likely to come up for decision. Ordinarily if there is any "material", that is to say, good ground for such action, the application of the proviso cannot be questioned. Further, the superior officers and the Appellate Tribunal at the end would be the venue for the correction of any capricious action. Once that statge has passed, this Court, which is not an appellate Court, cannot correct the error unless some question of law is therein involved.;