Income Estimation on Rejected Books Held to be a Finding of Fact, Not a Referable Question of Law

Where the Income-tax Officer rejected the books and made an assessment under section 23(3), the Tribunal's estimate of income on the basis of relevant material was treated as a finding of fact. The objection that section 13 should govern the computation failed because that provision applies only where regularly kept accounts are accepted as the basis of assessment. As the appellate authorities merely differed on the quantum of estimated income and no debatable question of law arose from the factual appreciation, no case was made out for reference under section 66(2).

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Issues: Whether the petitions under section 66(2) of the Indian Income-tax Act disclosed any question of law requiring the Tribunal to state a case, and whether the assessment of income under section 23(3) could be disturbed on the footing of section 13 of the Indian Income-tax Act.

Analysis: The Income-tax Officer had rejected the books and made the assessment under section 23(3), while the appellate authorities, on an appraisal of the accounts and surrounding circumstances, differed only on the quantum of estimated income. The contention based on section 13 proceeded on a misconception, because that provision concerns computation where regularly employed accounts are accepted as the basis, whereas the present assessment rested on rejection of the accounts and a determination under section 23(3). The Tribunal's reasons for estimating income at Rs. 40,000 were relevant and sufficient, and the resulting conclusion was one of fact. No debatable question of law arose from that factual appreciation.

Conclusion: No case was made out for a reference, and the petitions failed.

Final Conclusion: The assessment estimate stood undisturbed, and the applications were dismissed with costs.

Ratio Decidendi: Where income is assessed under section 23(3) after rejection of the accounts, the Tribunal's estimation of income on relevant material is a finding of fact and does not, without more, give rise to a referable question of law under section 66(2).

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