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2007] 294 ITR 497 [2007] 160 TAXMAN 206 (DELHI) HIGH COURT OF DELHI Commissioner of Income-tax* v. Anand Kumar Deepak Kumar MADAN B. LOKUR AND VIPIN SANGHI, JJ. IT APPEAL NO. 50 OF 2006 AUGUST 25, 2006 Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of books of account - Whether merely because there were some discrepancies in pre-search period, it could not lead to any presumption that discrepancies would have continued in post-search period, particularly when Assessing Officer could not find any defect in books of account relevant to post-search period - Held, yes - Whether, therefore, rejection of books of account by Assessing Officer for post-search period was not warranted - Held, yes Ms. P.L. Bansal for the Appellant. K. Sampath, R.K. Raghwan and Manu K. Giri for the Respondent. ORDER 1. The revenue is aggrieved by an order dated 11-5-2004 passed by the Income-tax Appellate Tribunal, Delhi Bench 'A' in ITA No. 1035/Delhi/99 relevant for the assessment year 1995-96. 2. A search was carried out in the premises of the assessee on 9-8-2004. As a result of the search, some documents were recovered which led the Assessing Officer to believe that there were unaccounted sales to the extent of Rs. 19,89,807 between 1-4-2004 and 9-8-2004. On this basis, he assumed that the unaccounted sales for the entire accounting year are Rs. 55,86,766. 3. Feeling aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) and the Commissioner found that there were two distinct periods that were involved, namely, the period from 1-4-1994 to 9-8-2004 in which there was definite evidence regarding unaccounted sales and the second period was from 10-8-2004 to 31-3-2005 when even though the account books were examined, the Assessing Officer could not find any defect in them. On this basis, the Commissioner was of the view that mere rejection of the books of account, without any basis, for the post-search period was not warranted, particularly in the absence of any facts to show unaccounted sales and, therefore, the Assessing Officer had wrongly…

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