Sabyasachi Mukharji, J. - (1.) This appeal is directed against the judgment and order of the High Court of Allahabad dated 21st February 1971. It relates to the assessment under the Excess Profits Tax Act, 1940 (hereinafter called the 'Act'). The assessee was an unregistered firm carrying on business of manufacture and sale of Katechu. The chargeable accounting period was 1-4-1943 to 31-3-1944. There were two partners of the assessee firm, namely, L. Phoolchand and M/s. Biharilal Balkishan each having profits in proportion of 11 annas and 5 annas respectively. The work in connection with the extraction of Katechu was carried on in Nepal by L. Phoolchand and the sales of Katechu were effected by M/s. Biharilal Balkishan at their shops in Kanpur. The assessee firm did not maintain any books of account and the entire record of the business transaction was maintained in the books of M/s. Biharilal Balkishan in the account styled "Kalyanmal Phoolchand"'.
(2.) The assessee firm had taken a jungle on lease for this purpose and had extracted Katechu from October, 1940 to September, 1941. The sales of Katechu extracted were effected from 30th May, 1941 to 29th September, 1941. Thereafter another jungle was taken on lease in November, 1942 and Katechu were extracted from 23rd November, 1942 to 6th November, 1944. The sales in this case were effected between 26th July, 1943 to 4th April, 1944. The High Court divided the entire period of manufacture and sale as follows: 1. October 28, 1940 to March 31, 1941, falling in the financial year ending March, 31, 1941. Katechu was manufactured but there was no sale. 2. April 1, 1941 to September 29, 1941, falling in the financial year ending March 3l, 1942. Sales took place from May 30, 1941 to September 29, 1941. 3. November 23, 1942 to March 31, 1943, falling in the financial year ending March 31, 1943. Katechu was manufactured but there was no sale. 4. April 1, 1943 to March 31, 1944, falling in the financial year ending March 31, 1944, sales took place from July 26, 1943 to March 31, 1944. 5. April 1, 1944 to April 4, 1944, falling in the financial year ending March 31, 1945, sales were effected from April 1, 1944 to April 4, 1944, when the business was discontinued.
(3.) Therefore, while there was manufacturing activity there was no sale during the financial years ending 31st March, 1941 and 31st March, 1943. The dispute in this case is with regard to the set off of deficiency of profit relating to the periods 20th October, 1940 to 17th October, 1941 and 23rd November, 1942 to 31st March, 1943.;