Proviso-based computation for assessments must be intelligible and non-capricious; factual estimates do not raise legal questions.

Where an assessee's books are rejected as unreliable, the Income-tax Officer assessing under Section 23(3) must apply the proviso to Section 13 and compute income on such basis and in such manner as the officer determines; the officer may analyse available materials, including prior years' data, and make an intelligible, non-capricious estimate. Estimation is permitted so long as it is not dishonest, vindictive or capricious. A mere factual finding of unreliable books and an intelligible estimate do not, by themselves, present a question of law warranting a statement of case.

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Issues: Whether the Commissioner was obliged to state a case where the Income-tax Officer, having treated the assessee's books as unreliable, made an assessment under Section 23(3) based on a computation in terms of the proviso to Section 13; and whether such assessment raised any question of law.

Analysis: The assessment framework distinguishes assessment (Section 23) from computation (Section 13). Where books are rejected as unreliable an Income-tax Officer must, in assessing under Section 23(3), apply the proviso to Section 13 and compute income "upon such basis and in such manner as the Income-tax Officer may determine." An officer faced with misleading or defective books may analyse available material, with or without assistance from the assessee, and arrive at an estimate in an intelligible, non-capricious way. Precedents permit estimation based on relevant materials and prior years, and require that the officer not act dishonestly, vindictively or capriciously. A mere factual conclusion that the books are unreliable and an intelligible estimate made thereon do not, by themselves, constitute a question of law.

Conclusion: The matters raised are factual and do not involve any question of law warranting a reference by the Commissioner; the application for a statement of case is dismissed and the challenged assessment is not shown to raise a legal question.

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