Law:

Section:

Section 145, read with section 256, of the Income-tax Act, 1961 - Method of accounting - Estimation of profit - Assessment years 1964-65 and 1965-66 - Assessee manufactured sweets and other eatables and also sold confectionery articles which he purchased on wholesale from another merchant-Tribunal rejecting assessee's books of account acting under section 145 and, on basis of data available, adopted flat rate for calculating profit - Whether, question relating to flat rate was pure question of fact and thus, no question of law arose from Tribunal's order - Held, yes FACTS The assessee was carrying on business of manufacturing sweets and another eastables and selling confectionery articles which he purchased on wholesale from another merchant. He submitted his return for the year 1965-66, showing gross turnover in the sum of Rs. 2,34,576. According to the assessee the gross profit rate of the confectionery manufactured by him was 17.5 per cent and for the one that was purchased by him it was 8.5 per cent, yielding an average profit of 11.2 per cent. The ITO, not finding the books of account entirely, reliable estimated the turnover at Rs. 2,50,000 and calculated the average rate of profit at 17.5 per cent and taxed the assessee accordingly. The AAC reduced the gross turnover to Rs. 2,44,000 and reduced the average rate to 15 per cent profit. The Tribunal for the purposes of calculation firstly, reduced the total gross turnover to Rs. 2,40,000 and treating the portion relating to the confectionery manufactured by the assessee at Rs. 75,000, the profit rate assessed by the Tribunal was 20 per cent. Regarding the sale of the confectionery which was purchased by the assessee and sold by him, the turnover was taken at Rs. 1,65,000 and the rate applied to it was 10 per cent resulting in an average at 13.1 per cent. Similar rates of profit were applied by the Tribunal for the assessment year 1964-65. The Tribunal declined to make reference under section 256(1). On application under section 256(2) : HELD Undisputably, the assessee placed before the taxation authorities its own account books and they were not found reliable and, therefore, the ITO, the AAC and the…

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