HIRABAI D DESAI AND SONS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) -

(2.) IN this case the INcome Tax Commissioner raised a question which he was directed by this Court to raise under section 66(3) of the INdian INcome Tax Act, the question being "whether the INcome Tax Officer was, under the circumstances of the case, free to adopt the basis and manner of computing the income of the assessee, which he did not adopt". The assessee holds a license from the government to sell liquor at a shop in Ahmedabad and the question is how she ought to be assessed in respect of the income of that liquor shop. The basis on which the accounts are kept is to enter the amount of liquor purchase, which can be easily checked as all liquor is purchased from the Government depot, and then to calculate the amount sold, not by the cash received, but by charging the market price for the day for the amount by which the stock of liquor was diminished that day. There is no fixed market price, and it becomes a question of fact, not always easy to answer, what was the price on any particular day. That method would not indicate the true income if the liquor had been sold at short measure, and it is suggested that the practice is not uncommon. The INcome-tax Officer refused to accept that method of accounting, and I am not prepared to say that the INcome Tax Officer was not entitled to reject that basis.