R.N. Misra, C.J.
1. The Cuttack Bench of the Income-tax Appellate Tribunal has stated this ease pursuant to an order of this court under Section 256(2) of the I.T. Act, 1961 (hereinafter referred to as ' the Act'), and has referred the following question for opinion of the court:
' Whether, on the facts and in the circumstances of the case, the revenue is justified in rejecting the books of account of the assessee and proceed to estimate the sales as also the rate of gross profit '
2. The year of assessment is 1974-75, ending with the accounting period October 25, 1973. The assessee deals in handloom and mill-made cloth. It disclosed a gross profit of Rs. 73,570 on a total turnover of Rs. 12,90,690 in handloom cloth which worked out to about 6 per cent, (of the turnover). In regard to sale of Rs. 3,05,000 worth of mill-made cloth, it returned a loss of Rs. 185. The ITO, in the absence of properly maintained books of account and particularly on account of the non-maintenance of day-to-day stock particulars, rejected the assessee's book results and estimated the sales of handloom cloth at Rs. 13 lakhs and that of mill-made cloth at Rs. 3,10,000. On the basis of the past record, the assessing officer applied a gross profit of 6J per cent, in handloom account and 5 per cent, in mill-made cloth account. Thereby the gross profits were found to be Rs. 92,713 as against Rs. 73,570.
3. The rejection of accounts was upheld in appeal by the AAC as also the Tribunal. The Tribunal, however, reduced the estimates.
4. The small addition in the turnover is not seriously disputed before us by Mr. Mohanty for the assessee. It is, however, contended that there was no justification for estimating gross profits from handloom business by an addition of 1/4 per cent, and in discarding the book results in regard to mill-made cloth account. The assessee's stand that he intended to close down the mill-made cloth section and, therefore, was prepared to dispose of the stock even at no profit, Mr. Mohanty contends, should have been accepted.
5. There is no dispute before us that in the past years, the assessee itself had shown more than 5 per cent, of gross profits in mill-made cloth andabout 7 per cent, in handloom cloth. That the assessee wanted to close down his mill-made cloth section was not borne out by any document and the ITO did not accept this explanation. The factual assertion of the assessee was negatived by the Tribunal which was the final forum of fact. In the absence of that reason it was open to the ITO to discard the book results of loss and to fall back upon past records. Since the assessment of gross profit is within reasonable limits, supported by records of the assessee itself in respect of other years, we do not think, the assessee is justified in challenging the action of the revenue.
6. There may be some force in the assessee's contention that day-to-day stock tallying becomes difficult to be maintained where the specifications of the textile goods are too many and it would be impracticable to ask for day-to-day stock tallying ; but as, independent of this, we have come to the conclusion that the assessee's book results could be rejected for not disclosing any profit at all, we need not go into that aspect. In our opinion, the question referred to the court must be answered against the assessee by saying:
On the facts and in the circumstances of the case, the revenue was justified in rejecting the books of account of the assessee and proceeding to estimate the sales as also the rate of gross profit.
7. There would be no order for costs.
J.K. Mohanty, J.
8. I agree.