Mercantile accounting as a finding of fact: timber sales were taxable and flat-rate profit estimation was upheld.

A finding that an assessee kept accounts on the mercantile system is treated as a finding of fact unless it is shown to be unsupported by evidence or perverse; on the stated materials, the books and audit supported that conclusion, and no question of law arose. Timber sales credited during the accounting year were properly included in taxable profits where the sales had occurred earlier and were later recorded to avoid inclusion in that year. A flat-rate estimate of profits was also upheld because the same method had been applied in earlier years without objection. The application therefore disclosed only factual disputes and no referable question of law.

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Issues: (i) Whether the finding that the assessee kept his accounts on the mercantile system was unsupported by evidence or otherwise gave rise to a question of law; (ii) whether credit entries of timber sales shown in the accounting year could be excluded from taxable profits and whether estimation of profits at a flat rate was legally open to challenge.

Issue (i): Whether the finding that the assessee kept his accounts on the mercantile system was unsupported by evidence or otherwise gave rise to a question of law.

Analysis: The finding as to the method of accounting was treated as a finding of fact. A question of law would arise only if the inference were such that the finding could not reasonably be based on evidence. On the materials referred to, the books and audit supported the conclusion that the assessee did not invariably follow the asserted practice of entering sales only on partial payment, and the absence of a profit and loss account or stock book did not by itself negative the mercantile system.

Conclusion: The finding was upheld as one of fact based on evidence, and no question of law arose.

Issue (ii): Whether credit entries of timber sales shown in the accounting year could be excluded from taxable profits and whether estimation of profits at a flat rate was legally open to challenge.

Analysis: The sales in question were found to have taken place before April and to have been shown later to avoid inclusion in the accounting year. In those circumstances the amount was properly brought into the year's profits. As the same flat rate had been applied in earlier years without objection, the method of estimating profits at a flat rate was justified and did not disclose any illegality or arbitrariness.

Conclusion: The challenge to the inclusion of the sales and to the flat-rate estimate failed.

Final Conclusion: The application raised only factual disputes, disclosed no referable question of law, and was dismissed with costs.

Ratio Decidendi: A finding on the assessee's method of accounting remains one of fact unless it is shown to be unsupported by any evidence or perverse; where the factual basis is established, no question of law arises merely because a different inference is suggested.

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