CHAGLA, C.J. :- The assessee has a tailoring shop in Bombay and he supplies miscellaneous stores to ships on a fairly large scale. We are concerned in this reference with the assessment year 1946-47. For this year the assessee returned a profit of Rs.57,344 on gross receipts of Rs.5,83,382 on the basis of his books of account. The Inccme-tax Officer took the view that the method of accounting adopted by the assessee did not make it possible for him to deduce the profits and gains of his business and therefore he computed the profits and gains upon a certain basis which he adopted. In other words, the Income-tax Officer acted under the power given to him by the proviso to S.13, Income-tax Act. The proviso to S.13 leaves it to the Income-tax Officer to compute the profits upon such basis and in such manner as ha may determine. Although the discretion is vested in the Income-tax Officer, the discretion cannot be exercised arbitrarily or capriciously )or dishonestly. He must exercise his judgment in such a manner as would make it possible for I him to ascertain the profits and gains of the assessee most approximating to the truth. As pointed out by the House of Lords in - Sun