Income-tax findings may rest on probative material, even without strict Evidence Act proof, if the record supports the inference.

In income-tax proceedings, findings may be sustained on relevant material with probative value even if the material is not strictly admissible under the Evidence Act. The Income-tax Officer is not confined to technical rules of proof and may rely on auditor's reports and statutory accounts when drawing inferences during assessment. On the facts, the Tribunal was entitled to rely on auditors' reports and related corporate accounts after the assessee's books were destroyed by fire, and its allowance of the deductions was not shown to be unsupported by evidence. The Tribunal's refusal to refer the question of law was therefore upheld.

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Issues: (i) Whether a finding by an income-tax authority can be said to be unsupported by any evidence when it is based on material which may not be strictly admissible under the Evidence Act; (ii) Whether, on the facts, the Tribunal's allowance of the deductions could be said to be without evidence.

Issue (i): When exercising powers under sections 142(2) and 143(3) of the Income-tax Act, 1961, the Income-tax Officer is not confined to strict rules of proof applicable under the Indian Evidence Act, 1872. The authority may act on relevant material gathered in assessment proceedings, including material having probative value though not formally admissible as evidence in a court. Auditor's reports and statutory accounts may therefore constitute material on which an inference can properly be drawn in income-tax proceedings.

Conclusion: A finding is not unsupported by evidence merely because it rests on relevant material rather than strict evidence under the Evidence Act.

Issue (ii): The assessee's books of account had been destroyed by fire, but the statutory auditors' reports made under section 227(2) of the Companies Act, 1956, read with section 227(3)(b) and section 227(3)(c), indicated that proper books had been kept and that the balance-sheets and profit and loss accounts were in agreement with them. In the circumstances, the Tribunal was entitled to rely on this material and to infer that the claimed deductions were supported by the books, even though the adjustments were reflected in a later year. The evidence in income-tax proceedings may consist of material other than evidence admissible under the Evidence Act.

Conclusion: The Tribunal's decision was based on evidence in the income-tax sense and was not shown to be unsupported by any evidence.

Final Conclusion: The applications for reference failed, and the Tribunal's refusal to refer the question of law was upheld.

Ratio Decidendi: In income-tax proceedings, a finding is sustainable if it is founded on relevant material with probative value, even though such material may not amount to strict evidence under the Indian Evidence Act, 1872.

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