( 1 ) THE assessee is a firm engaged in business of dyeing, printing and selling cloth. The present reference arises out of the assessment for the year 1947-48. The assessee purchased mill cloth such as Koras and Mulls and handloom cloth and got them dyed and printed and sold them. The company also purchased dyes and chemicals, dyed them in their own Karkhana by engaging coolies and sold the dyed cloth in the market. They also purchased dyed cloth in the market, got them printed and sold them. Besides these, the assessee firm bought and sold ready made dyed and printed cloth, besides selling mill and handloom cloth undyed and unprinted.

( 2 ) A return for the account year Vyaya ending with 22-3-1947 was submitted by the assessee which showed an income of Rs. 30,859. 00 from the business, Rs. 840. 00 from other sources. The assessee was called upon to produce his account books and he produced a Day Book and a ledger. In the statement enclosed to the return, a sum of Rs. 30,676. 00 was shown as the gross profit on a turn over of Rs. 1,69,728. 00 working out to 18 per cent.

( 3 ) THE Income-tax Officer rejected the accounts submitted by the assessee for the following among other groun

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