Low gross profit alone cannot justify rejection of books of account or invocation of the accounting proviso.

Low gross profit, without evidence of false entries, inflated purchases, suppressed sales, or a defective accounting method, is insufficient to justify rejection of books of account. The Court stated that the proviso to section 13 can be invoked only when there is material showing that the accounting system is unsatisfactory or the entries are unreliable. On the facts recorded, the accounts were not shown to be untrustworthy, so rejection of the books and application of the proviso were not justified, and the issue was answered in favour of the assessee.

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Issues: Whether the rejection of the assessee's books of account and the application of the proviso to section 13 of the Income-tax Act were justified on the facts proved.

Analysis: The accounts were not shown to contain false entries, inflated purchases, or suppressed sales. The only substantial basis for rejecting the books was that the gross profits disclosed were low and compared unfavourably with those of other dealers. Low gross profit, by itself, does not establish that the assessee's method of accounting is defective or that the book results cannot be accepted. Before invoking the proviso to section 13, there must be material showing that the accounting system is unsatisfactory or that the entries are unreliable. On the material before it, the Court found no adequate basis for treating the assessee's accounts as untrustworthy.

Conclusion: The rejection of the books of account and the application of the proviso to section 13 were not justified. The question was answered in the negative and in favour of the assessee.

Ratio Decidendi: Low gross profit, without evidence that the accounts are false or the method of accounting is defective, is insufficient to justify rejection of the books or invocation of the proviso to section 13.

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