Rejection of account books justified where unverifiable records, unexplained stock discrepancies, and obstructive survey conduct supported adverse inference.

Account books may be rejected where they are not verifiable and the surrounding circumstances, taken together, support a reasonable inference that they do not reflect the true state of affairs. The absence of the required manufacturing account and stock registers, coupled with a substantial unexplained discrepancy between the return version and the book version of stock and turnover, constituted relevant material. The assessee's obstructive conduct during survey, including refusal to facilitate inspection and verification, also justified an adverse inference. The post-assessment survey was not treated as an independent basis, but the cumulative material was sufficient to reject the books.

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Issues: Whether there was relevant material for rejecting the assessee's account books for the assessment year in question.

Analysis: The account books were found to be not verifiable. The assessee had not maintained the manufacturing account required by the rules and had not produced the stock register for manufactured goods or raw material. There was also a substantial unexplained discrepancy between the return version and the book version of stock and turnover. The assessee's conduct during survey, including refusal to facilitate inspection and verification, justified an adverse inference. The survey conducted after the assessment year was not relied upon as an independent basis, but only the surrounding circumstances and the assessee's conduct were considered cumulatively. In such proceedings, the authority may draw reasonable inferences from conduct and surrounding facts even though the Evidence Act does not apply.

Conclusion: Relevant material existed for rejecting the assessee's account books, and the question was answered against the assessee.

Ratio Decidendi: Account books may be rejected where, taken cumulatively, they are not verifiable and surrounding circumstances, including unexplained discrepancies and obstructive conduct during survey, justify a reasonable inference that the books do not reflect the true state of affairs.

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