Books of account cannot be rejected for return mismatch alone when no defect is found in the records.

Books of account cannot be rejected, and suppressed sales cannot be estimated, merely because the turnover shown in the return is lower than the turnover recorded in the books when no independent defect in the accounts is found. The higher gross and net turnover reflected in the books, coupled with an accepted explanation that the return discrepancy arose from an accountant's mistake, did not support an inference of suppression. On that basis, best judgment estimation of sales was held unwarranted, and the rejection of books and estimated suppressed sales were set aside in favour of the assessee.

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Issues: Whether the books of account could be rejected and suppressed sales estimated merely because the turnover shown in the return was lower than the turnover reflected in the books of account.

Analysis: The books showed higher gross and net turnover than the returns. No defect in the books of account was pointed out. The explanation that a lesser turnover had been disclosed in the returns because of an accountant's mistake was accepted, and the discrepancy did not justify an inference of suppression of turnover. In such circumstances, rejection of the books and best judgment estimation of sales was unwarranted.

Conclusion: The rejection of books of account and the estimate of suppressed sales at Rs. 35 lacs were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: Where the turnover disclosed in the books of account is higher than the turnover shown in the return, and no independent defect in the books is found, the books of account cannot be rejected nor can suppressed sales be estimated solely on that discrepancy.

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