Book rejection cannot rest on absence of a manufacturing account where the business model makes such records impracticable.

Where a business purchases raw material and gets goods manufactured through contractors, a separate manufacturing account is not necessarily required. Account books that were accepted in preceding and succeeding assessment years, and in which no specific defect was shown, cannot be rejected merely because no manufacturing account was maintained. On that reasoning, rejection of the books on this ground was unsustainable, and the assessee succeeded. The broader principle stated is that book rejection must rest on demonstrable unreliability, not on the absence of an account not suited to the nature of the business.

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Issues: Whether the assessee's account books could be rejected on the ground that no manufacturing account was maintained.

Analysis: The assessee carried on business by purchasing raw material and getting goods manufactured through contractors. In such a business model, maintenance of a separate manufacturing account was neither necessary nor practicable. The account books had been accepted in the preceding and succeeding assessment years, no defect was pointed out in them, and the department had not shown any basis for treating the books as unreliable on this score. The rejection of account books could not, therefore, rest on the absence of a manufacturing account.

Conclusion: The rejection of the account books on this ground was unsustainable and was set aside in favour of the assessee.

Final Conclusion: The revision succeeded, the Tribunal's order was set aside, and the matter was sent back for fresh decision on the limited question whether the diary belonged to the assessee or to the alleged agent.

Ratio Decidendi: Where the nature of business does not require a manufacturing account and the books are otherwise regular and accepted in surrounding assessment years, rejection of account books cannot be justified merely for want of such an account.

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