Kapur, J. -
(1.)In these six appeals the common question raised is whether the proviso to S. 13 of the Income-tax Act is applicable to the facts and circumstances of these cases. They are therefore disposed of by one judgment. Civil Appeal No. 218 of 1955 arises out of the assessment for the year 1943-1944. Civil Appeals Nos. 219 to 223 relate to the assessment years 1944-1945, 1946-47 and for the chargeable accounting periods from January 1943 to February 1944, and from February 1945 to February 1946. The appellant in each of the appeals is the assessee and the respondent is the Commissioner of Income-tax and Excess Profits Tax, Madras.
(2.)The appellant is a 'resident and ordinarily resident' in India and carried on extensive trade in Colombo in grains, fodder, gram and other food-stuffs for cattle and poultry. For the assessment year 1943-1944 the appellant showed a turnover of Rs. 17,74,825 and a gross profit of Rs. 63,217 which is about 3.5 per cent. For the two previous assessment years the appellant's gross profits were 9 per cent and 8 per cent respectively. The Income-tax Officer, by his order dated March 20, 1948, rejected the accounts and estimated the gross profit by adding back Rs. 2,38,831 to the returned income. Thus he raised the turnover to Rs. 20,00,000 and the gross income to Rs. 3,00,000 giving a profit of 15 per cent, on the estimated turnover. On appeal to the Appellate Assistant Commissioner, the order of the Income-tax Officer was confirmed. The Income-tax Appellate Tribunal on appeal by its order dated September 14, 1951, after pointing out various defects, rejected the account books but accepted the appellant's turnover and computed the profits at 15 per cent. on grains imported from India and 12 1/2 per cent. on grains purchased in Ceylon. It held that correct profit for the year under assessment could not be deduced from the books produced by the appellant. The Excess Profits tax for the chargeable accounting period from February 10, 1942 to January 16, 1943, was decided on the basis of the Income-tax assessment for the year 1943-44. On November 21, 1951, the appellant applied to the Tribunal for stating a case under S. 66 (1) on the following four questions:
(1) Whether under the circumstances of the case the Tribunal was justified in holding that Section 13 of the Indian Income-tax Act applies to the case.
(2) Whether the reasons set out by the Appellate Tribunal in paragraph 2 of its judgment are sufficient to invoke Section 13 of the Act.
(3) Whether the Tribunal, having disagreed with the department on the basis of the assessment had jurisdiction to apply Section 13 and make an assessment on an alleged estimate.
(4) Whether the Tribunal was justified in making an assessment on the basis of Section 13 without giving an adequate opportunity to the assessee to meet the materials upon which eventually the assessment was rested.
But the Tribunal, by its order dated February 12, 1950, held that no question of law arose and therefore declined to state a case and thus rejected the application. The appellant then applied to the High Court of Madras under S,. 66 (2) of the Act on the same four questions of law. This applications was dismissed by the High Court on February 26, 1953. Against this order the appellant applied for special leave to appeal and, by leave of this, Court amended the petition so as to make it an appeal against the order of the High Court as well as the order of the Tribunal dated September 14, 1951.
(3.)In the other appeals also the course of proceedings before the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal was the same. For the assessment years 1944-1945 and 1946-1947 the appellant disclosed a turnover of Rs. 10,35,748 and Rs. 5,98,728 respectively and the gross profits rates were 10.7 per cent. and 8.7 per cent. respectively. As the books of accounts in regard to these years also were rejected, the Income-tax Appellate Tribunal applied S. 13 and estimated the gross profit rates at 12 1/2 per cent, and 10 per cent for the respective years. The appellant applied to the Tribunal under S. 66 (1) of the Act for stating a case to the High Court for its decision on the following two points:
(1) Whether on the facts and in the circumstances of the case, the Department was right in acting under the proviso to section 13 of the Act in the absence of a finding that income, profits and gains cannot properly be deduced from the books produced or that no method of accounting has been regularly employed.
(2) Whether on the facts and in the circumstances of the case, the Department had sufficient materials before it to justify the rates of 12 1/2 per cent, and 10 per cent, gross profits on the total turnover on the ground that the rates worked out by the figures submitted by the assessee work out at a lesser figure.
The Tribunal dismissed the application on January 15, 1954. The appellant did not apply to the High Court under S. 66 (2) of the Income-tax Act but obtained special leave from this Court against the order of the Tribunal by which it applied the proviso to S. 13 of the Income-tax Act. All the six appeals were heard together and a common question arises whether the Income-tax Appellate Tribunal was justified in applying the proviso to S. 13 of the Income-tax Act.