Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts Where Assessing Officer did not record any finding that books of account maintained by appellant were incorrect rendering it impossible to deduce profit and despite that he rejected books of account and went on to complete assessment invoking principles of best , rejection of books of account was not justified [A.Y 1993-94] Where the Assessing Officer did not record any finding that the books of account maintained by the appellant were incorrect rendering it impossible to deduce the profit and despite that rejected the books of account and went on to complete the assessment invoking the principles of best and estimated net profit: Held that the assessment order did not indicate that the Assessing Officer had noticed any inconsistency or infirmity in the audit report. On the other hand, the Assessing Officer accepted the report relating to the preceding year. That otherwise showed that the accounts were correct and complete. The provisions of section 144 could be invoked in a case where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standard as notified in sub-section (2) of section 145 has not been regularly followed by the assessee. This not having been done by the Assessing Officer in the case at hand, he could not have proceeded to invoke the powers under section 144. Though the Tribunal did not notice any serious infirmity in the profit and loss account, yet it applied the doctrine of equity and good conscience in estimating the profit at the rate of 6 per cent merely on guess. In these circumstances, rejection of the books of account was not justified. In the instant case, the Assessing Officer adopted the profit and loss account for the preceding year and, yet, had a doubted the other part. This appeared to be a case of mere suspicion. Without recording a finding that the vouchers in regard to purchase of raw materials had been manipulated or otherwise were not acceptable, the Assessing Officer showed not have gone for best . It is…

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