Books of account cannot be rejected merely for non-production during survey absent mala fides or substantive defects.

Non-production of books of account at the time of survey does not, by itself, justify rejection of the books unless mala fides or other substantive defects are shown. Where the books were later produced and no reasoned basis was recorded for disbelieving them, adverse inference could not be drawn merely from the survey circumstances. The rejection of the books was therefore unsustainable, and the assessee was entitled to acceptance of the books and a de novo assessment.

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Issues: Whether the assessee's books of account could be rejected merely because they were not produced at the time of survey, and whether the assessment based on such rejection could be sustained.

Analysis: The books were not available at the business premises during the survey, but there was no finding of mala fide on the part of the assessee in not producing them. The later production of the books was followed by their rejection without any reasoned basis. The governing principle is that non-production of books at the time of survey, by itself, does not justify rejection of the books unless mala fides or other defects are established. In the absence of such a finding, adverse inference could not be drawn merely from the survey situation.

Conclusion: The rejection of the books of account was unsustainable, and the assessee was entitled to acceptance of its books and a de novo assessment.

Ratio Decidendi: Books of account cannot be rejected merely for non-production at survey unless the authority records mala fide or other substantive defects justifying an adverse inference.

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