Reasonable estimation after rejection of books limits trading and unexplained expenditure additions, with interest recomputed on final income.

Defects in books of account may justify rejection, but any trading addition must still be made on a reasonable estimate of the facts; here the addition was reduced because the assessee was in the first year of wholesale business and sales had increased. An addition for unexplained marriage expenditure was also partly scaled down, as the explanation was not fully accepted but part of the withdrawals and marriage gifts was considered credible. The difference in the account with Variety Glass Emporium was left for reconsideration by the Assessing Officer, and interest was required to be recomputed on the income finally determined.

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Issues: (i) whether the trading addition was liable to be sustained in full after rejection of the books of account; (ii) whether the addition on account of unexplained marriage expenditure was liable to be sustained in full; (iii) whether the addition arising from the account difference with Variety Glass Emporium was liable to be restored to the Assessing Officer; and (iv) whether interest was required to be recomputed on the final determined income.

Issue (i): whether the trading addition was liable to be sustained in full after rejection of the books of account.

Analysis: Defects in the books of account justified rejection of the books, but the surrounding facts, including the assessee's first year of wholesale business and increased sales, showed that the trading addition made was on the higher side.

Conclusion: The addition was reduced from Rs. 20,110 to Rs. 10,000, partly in favour of the assessee.

Issue (ii): whether the addition on account of unexplained marriage expenditure was liable to be sustained in full.

Analysis: The explanation regarding later payments for marriage expenses was not fully acceptable, yet it was reasonable to accept part of the withdrawal of Rs. 45,000 and to accept the claim regarding marriage gifts.

Conclusion: The addition was reduced to Rs. 30,000, partly in favour of the assessee.

Issue (iii): whether the addition arising from the account difference with Variety Glass Emporium was liable to be restored to the Assessing Officer.

Analysis: The appellate authority had restored the matter for proper examination and had given cogent reasons for doing so.

Conclusion: The order restoring the matter to the Assessing Officer was upheld, against the assessee.

Issue (iv): whether interest was required to be recomputed on the final determined income.

Analysis: Interest had to follow the income finally determined in the appeal.

Conclusion: The Assessing Officer was directed to recalculate the interest after final determination of income, in favour of the assessee to that limited extent.

Final Conclusion: The assessment was modified by reducing two additions, sustaining one restoration for reconsideration, and directing recomputation of interest, resulting in partial relief to the assessee.

Ratio Decidendi: Where books of account contain defects, rejection may be justified, but the trading addition and related unexplained expenditure additions must still be estimated reasonably on the facts and surrounding circumstances.

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