Sufficiency of accounts for profit computation under tax law remains a matter of statutory judgment, not a question of law

The proviso to Section 13 places the sufficiency of accounts for deducing profits within the Income-tax Officer's judgment where the books do not permit proper computation. The officer need not prove inadequacy by ordinary evidence if there is material supporting the conclusion that the stock account or book results are defective. On that basis, the rejection of book profits and the finding that the accounts were unfit for proper profit computation were treated as matters of statutory judgment, not a question of law, unless the decision is arbitrary or capricious.

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Issues: Whether any question of law arose for reference under Section 66 in relation to the Income-tax Officer's invocation of the proviso to Section 13 on the ground that the books did not permit proper deduction of profits.

Analysis: The proviso to Section 13 leaves the matter to the judgment of the Income-tax Officer where the accounts are such that profits and gains cannot properly be deduced. The officer is not required to lead evidence in the ordinary sense to prove the inadequacy of the books; it is enough if there is some material or foundation for the conclusion reached. The appellate authorities had accepted that the stock account was defective and that the book results could not properly be relied upon. On that footing, the sufficiency of the accounts and the choice to reject the book profits were matters within the special competence of the statutory authorities and did not raise a question of law.

Conclusion: No question of law arose, and the refusal to direct a reference was justified.

Final Conclusion: The applications for reference failed because the authorities' finding that the accounts were not fit for proper profit computation was supported by material and was not open to interference as a legal question.

Ratio Decidendi: Where the statute leaves the matter to the opinion of the income-tax authority, the adequacy of accounts for deducing profits is primarily a question of judgment based on material, and it gives rise to a question of law only if the decision is arbitrary or capricious.

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