Reference on questions of law was warranted where the Tribunal ignored material factors in income estimation and book rejection.

The Tribunal's failure to address material aspects relied upon by the Income-tax Officer in rejecting the books and estimating income justified a reference under section 256(2) of the Income-tax Act, 1961. The missing consideration included the basis for estimating sales, production, labour charges, and comparison with income in the subsequent assessment year. On that footing, the questions framed by the petitioner were held to accurately reflect the controversy and to raise questions of law arising from the Tribunal's order, and a statement of the case was directed to be drawn up and referred to the High Court for opinion.

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Issues: Whether the Tribunal's order gave rise to questions of law warranting a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal had not adverted to the material aspects relied upon by the Income-tax Officer for rejecting the books and estimating income, including the basis for estimating sales, production, labour charges and the comparison with income in the subsequent assessment year. In these circumstances, the questions framed by the petitioner were found to truly reflect the controversy and to raise questions of law arising out of the Tribunal's order.

Conclusion: The original petition was allowed and the Tribunal was directed to draw up a statement of the case and refer the questions of law to the High Court for opinion.

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