Rejection of books of account requires disclosed factual basis; mere conjecture from survey findings is insufficient.

Rejection of books of account cannot rest on conjecture where survey findings do not disclose the source or particulars of the alleged adverse information. The assessee's books were rejected because the shop was found closed during survey and it was inferred that grain transactions had occurred at night, but the orders below did not explain the basis of that inference. In the absence of a disclosed factual foundation, a best judgment assessment was not justified. Alleged penalty proceedings, which did not survive, also could not validate the rejection. The books of account were therefore treated as acceptable.

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Issues: Whether the rejection of the assessee's books of account and the consequential best judgment assessment were justified on the basis of the survey findings and alleged undisclosed information.

Analysis: The books of account were rejected principally because the shop was found closed at the time of survey and it was inferred that grain transactions had taken place during the night. The orders below did not disclose the source of the information or the particulars of the alleged enquiry. In the absence of disclosure of the basis for the adverse inference, rejection of account books could not rest on mere conjecture or guesswork. The alleged penalty proceedings, which ultimately did not survive, also did not furnish a valid basis for rejection.

Conclusion: The rejection of the books of account was unjustified and the assessee's books were held to be acceptable.

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