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Judgment
Satyanarayana Rao, J.—This application u/s 66(2) of the Indian Income Tax Act relates to the assessment year 1943-44, accounting year
ending with March 1943. The assessee is a firm carrying on business in cloth. It manufactures and also sells dyed cloths. During the assessment
year the assessee returned a profit of Rs. 4200 in respect of his business on a turnover of Rs. 6,09,649. This return of the profits was not accepted
by the Income Tax Officer on the ground that the inventories produced by him in respect of the cloth dyed were incomplete and unreliable and that
the purchases made were not properly accounted for either under sales or under the closing stock.
Out of the turnover of six lakhs odd, Rs. 2,52,007 related to sales of cloth in terms of bales or wholesale business and the profit in respect of it
returned by the assesses came to about 8 per cent. on the turnover or Rs. 21,000. This was accepted by the department but in respect of the retail
sales of Rs. 3,57,643 the profit worked out only at 6 per cent. on the turnover and as the accounts were not acceptable the department proceeded
to estimate the profits on the basis of the comparable cases of profits made by other merchants in the locality and in the district which range
between 15 to 20 per cent. The result was the Income Tax Officer arrived at the result that 15 per cent. profit on the turnover of the retail sales
was reasonable in the circumstances. This decision of the Income Tax Officer was accepted on appeal by the Appellate Assistant Commissioner
and on further appeal also by the Appellate Tribunal.
The main complaint of the assessee before us in respect of his application for directing the Appellate Tribunal to make a reference is that these
comparable cases which were taken as a standard for arriving at a profit of 15 per cent. on the retail sales were not put to the assessee. Stated in
that form the objection is not well-founded for it is clear from the order of the Income Tax Officer that he did in fact put to the assessee that the
accounts of dealers in cloth who merely bought and sold the goods without dyeing disclosed a gross profit ranging between 15 to 20 per cent. In
the case of one merchant the Income Tax Officer pointed out to the assessee who also dyed the cloths and sold them that the profit was 17 1/2
per cent. The further complaint, however, is that the out turn of those merchants and the magnitude of the business and whether the contracts under
which the goods were purchased were forward contracts or ready contracts--all those details should have been furnished to the assessee and as
this was not done, the estimate made by the department should not be accepted. We are, however, unable to accept this contention. It must be
remembered that the situation was the creation of the assessee''s own as he did not maintain his accounts properly to reflect faithfully the profits
which he had earned in the business. The result was the department had to reject the accounts and to arrive at the profits on the basis of an
estimate, taking the comparable cases into consideration. The assessee cannot expect the department to disclose not only the basis on which they
proceeded to make the assessment but also to give further details regarding the comparable cases. If an investigation of that kind were permitted,
there will be no end to the enquiry and the assessment could never be made. The assessee no doubt was entitled to get such of the information
regarding the comparable cases as could possibly be disclosed by the department with a view to apprise him of the basis on which the estimate
was made. We do not think that he is entitled to detailed information regarding the business of those assessees whore profits were taken as the
standard of comparison. The application, therefore, for reference u/s 66(2) must be dismissed with costs of the Income Tax Commissioner, which
we fix at Rs. 150/-.