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Issues Involved: Application u/s 256(2) of the Income-tax Act, 1961 requesting the Appellate Tribunal to refer questions of law regarding the correctness of reducing the multiplier of licence fee and net rate of profit, and the deviation from the accepted formula for estimating profit of a liquor contractor.
Issue 1: Correctness of Multiplier of Licence Fee and Net Rate of Profit: The respondent-assessee returned a taxable income of Rs. 1,80,000, but the assessment was completed on an income of Rs. 4,54,612 based on best judgment. The Commissioner of Income-tax reduced the assessed income to Rs. 2,34,000, considering sales around two times the licence fee and applying a rate of 3.25 per cent. of net profit. The Income-tax Appellate Tribunal, in its order, considered comparable cases and the verifiability of licence fee and purchase charges. It estimated sales and applied a rate of profit, taking into account the audited accounts and prevailing trading conditions. The Tribunal's decision was based on facts and circumstances of the case, not raising a question of law. Issue 2: Deviation from Accepted Formula for Estimating Profit: The Tribunal's decision to deviate from its own formula for estimating profit of the liquor contractor was challenged. However, the Tribunal's approach was found to be based on past and subsequent events in the assessee's case, prevailing trading conditions, and average rate of profit of similar traders in the area. The Tribunal's exercise of best judgment was considered valid, as long as it had nexus with the material on record and was not arbitrary or capricious. The decision did not give rise to any question of law and was concluded by findings of fact. In conclusion, the application u/s 256(2) of the Income-tax Act was rejected as the Tribunal's order was based on factual considerations and did not raise any question of law. The decision was upheld, and costs were assessed at Rs. 200.
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