Tribunal discretion in adjournment and best judgment profit estimates did not raise a referable question of law.

Refusal to adjourn an appeal and proceed ex parte, being a matter of Tribunal discretion, does not by itself raise a referable question of law unless a genuine legal issue is shown. Likewise, a best judgment assessment based on rejection of unreliable accounts and application of a generally used profit rate is not arbitrary merely because the assessee disputes the estimate. On the stated facts, no question of law arose from either the ex parte disposal or the profit-rate estimation, so the reference application under section 256(2) failed.

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Issues: (i) Whether refusal by the Tribunal to adjourn the appeal and proceed ex parte gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961. (ii) Whether the Tribunal's estimation of profits by applying a rate of 10 to 12.5 per cent in a best judgment assessment was unsupported by material and raised a question of law.

Issue (i): Whether refusal by the Tribunal to adjourn the appeal and proceed ex parte gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The refusal to adjourn concerned the Tribunal's discretion. The assessee's application to set aside the ex parte order had also been rejected, indicating that the Tribunal was not satisfied that there was any sufficient cause for non-appearance. A challenge directed only to the manner in which that discretion was exercised did not disclose a question of law.

Conclusion: No referable question of law arose on the refusal to adjourn and ex parte disposal.

Issue (ii): Whether the Tribunal's estimation of profits by applying a rate of 10 to 12.5 per cent in a best judgment assessment was unsupported by material and raised a question of law.

Analysis: The assessee had not produced proper books of account, so the income-tax authorities were compelled to make a best judgment assessment. The receipts were accepted, and the profit rate applied was one generally used for contracts of that nature. In those circumstances, the rate adopted could not be described as arbitrary, and no question of law arose from the estimate.

Conclusion: No referable question of law arose from the profit rate applied in the best judgment assessment.

Final Conclusion: The application under section 256(2) failed, as neither the ex parte disposal nor the profit estimation disclosed a question of law fit to be referred.

Ratio Decidendi: Interference under section 256(2) is not warranted on issues that depend only on the Tribunal's discretion or on a fact-based best judgment estimate, unless a genuine question of law is shown.

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