Rejected accounts permit best judgment assessment, and detailed reasons for rejection need not be disclosed before assessment.

When accounts are rejected as false, incomplete, or untrustworthy, section 13 of the Income-tax Act, 1922 permits the Income-tax Officer to compute income on such basis and in such manner as he determines, even if the available material is insufficient because the assessee's records cannot be relied on. The Act also does not require the officer to furnish detailed reasons or full particulars for rejecting the accounts before making the assessment under section 23(2); only the notice contemplated by the statute is required. On that basis, the assessment could lawfully proceed on best judgment and was sustained.

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Issues: (i) Whether, after rejecting the assessee's accounts as not genuine or untrustworthy, the Income-tax Officer could make an assessment on insufficient material under section 13 of the Income-tax Act, 1922. (ii) Whether, after such rejection, the Income-tax Officer was bound to give notice of dissatisfaction or disclose the exact grounds and details before making the assessment under section 23(2) of the Income-tax Act, 1922.

Issue (i): Whether, after rejecting the assessee's accounts as not genuine or untrustworthy, the Income-tax Officer could make an assessment on insufficient material under section 13 of the Income-tax Act, 1922.

Analysis: Once the accounts were found to be false, incomplete, or not genuine, the income, profits, and gains could not properly be deduced from them. In that situation, section 13 authorized computation on such basis and in such manner as the Income-tax Officer determined. A taxpayer who did not present honest accounts could not insist that the assessment be confined to the defective material produced by him.

Conclusion: The Income-tax Officer could lawfully make the assessment on the basis he considered appropriate, even though the material was insufficient because the accounts had been rejected.

Issue (ii): Whether, after such rejection, the Income-tax Officer was bound to give notice of dissatisfaction or disclose the exact grounds and details before making the assessment under section 23(2) of the Income-tax Act, 1922.

Analysis: The Act did not impose any obligation to supply the assessee with the full particulars of the reasons for rejecting the accounts. While particulars might ordinarily be desirable in a case of mere incompleteness, where the finding was that the accounts were cooked and dishonest, neither law nor fairness required disclosure of all the reasons for the officer's conclusion. The assessee had also been given opportunities to explain the return.

Conclusion: No such further notice or disclosure of detailed grounds was legally required.

Final Conclusion: The references were answered in favour of the Revenue, and the assessments were sustained.

Ratio Decidendi: Where accounts are rejected as not genuine, section 13 permits best judgment assessment on such basis as the assessing authority determines, and the Act does not require disclosure of detailed reasons for rejection beyond the notice contemplated by section 23(2).

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