Income-tax assessment on legal evidence: notice, further hearing, and factual findings left no referable question of law.

An assessment was treated as made under section 23(3) because the assessee had notice and an opportunity to explain disputed wastage, followed by further hearing on remand. The Income-tax Officer could require additional evidence on specific points and assess the material, including direct and indirect evidence, under the wider powers read with section 37. The findings were characterised as factual findings based on legal evidence rather than conjecture, so no referable question of law arose under section 66.

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Issues: Whether the Income-tax Officer, in making the assessment, acted under section 23(3) of the Income-tax Act, 1922 on the evidence before him, or whether the case attracted section 23(4) for default, and whether any question of law arose for reference.

Analysis: The assessment was upheld as one made after the assessee had been given notice and an opportunity to explain the disputed wastage and after further hearing on remand. The Income-tax Officer was entitled to require further evidence from the assessee on specified points and to evaluate the direct and indirect material placed before him. Section 23 was read with the wider powers under section 37, and the assessment was treated as one made on proper evidence rather than on default. Both judges held that the findings of the income-tax authorities were findings of fact based on legal evidence and not conjecture, and therefore no referable question of law arose under section 66.

Conclusion: The assessment under section 23(3) stood, and the application was dismissed because no question of law arose.

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