Rejection of accounts fails when alleged cash-book defects are explained by practical business realities and do not show unreliability.

Rejection of accounts and consequential estimated additions cannot be sustained where alleged cash-book defects and stock variation are explained by the business realities on record and do not establish unreliability of the accounts. The requirement to maintain a daily cash book under Rule 32(1)(i) of the Kerala General Sales Tax Rules must be applied in light of the actual operating arrangement of the business, especially where multiple units function at the same place with overlapping stock storage. On that factual basis, the assessment and connected orders were set aside and the matter was directed to proceed on the assessee's return.

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Issues: Whether the rejection of the assessee's accounts and the consequential addition to sales and purchases could be sustained on the basis of the alleged cash-book defects and stock variation.

Analysis: The assessment year was 1986-87 and the authorities rejected the books mainly because the cash book had been written only up to the date of inspection and because of a shortage in aluminium ingots and excess in aluminium vessels. The factual matrix also showed that the assessee's business was one of several units functioning at the same place, with overlapping stock-storage arrangements, and the appellate authorities had not given due weight to that practical difficulty. In such circumstances, the record did not justify treating the books as unreliable merely on the basis of the stated irregularities, nor did it support the large estimation made in the assessment order. The statutory requirement to maintain a daily cash book under Rule 32(1)(i) of the Kerala General Sales Tax Rules could not be applied in a manner divorced from the actual business realities found on record.

Conclusion: The rejection of accounts and the estimated additions were not sustainable.

Final Conclusion: The assessment and connected orders were set aside and the matter was directed to proceed on the basis of the return filed by the assessee.

Ratio Decidendi: A rejection of accounts and consequential estimation cannot be sustained where the alleged defects are explained by the practical business situation and the record does not establish unreliability of the accounts on a workable factual basis.

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