Rejection of books of account requires more than survey non-production or a minor explained discrepancy

Books of account cannot be rejected merely because the cash book was not produced during survey, unless mala fide withholding is shown; where a bona fide reason exists and no mala fide finding is recorded, rejection is not justified. A minor discrepancy between the books and the return, especially when part of it is explained in writing and the balance is attributed to a totalling mistake, is also insufficient on its own to discard the book version. On these facts, the assessee's accounts ought to have been accepted and the earlier order required modification accordingly.

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Issues: (i) Whether the books of account could be rejected merely because the cash book was not produced at the time of survey; (ii) whether the small difference between the books and the return justified rejection of the books.

Issue (i): Whether the books of account could be rejected merely because the cash book was not produced at the time of survey.

Analysis: Non-production of a book at the time of survey may justify adverse consequences where mala fide withholding is shown, but it does not by itself warrant rejection of the books when a bona fide reason for non-production exists and no finding of mala fide has been recorded.

Conclusion: The books of account could not be rejected on this ground.

Issue (ii): Whether the small difference between the books and the return justified rejection of the books.

Analysis: The discrepancy was minor, part of it had been explained in writing, and the balance was attributed to a totalling mistake. Such a difference was not sufficient, on the facts, to discard the book version.

Conclusion: The discrepancy did not justify rejection of the books.

Final Conclusion: The assessee's book version ought to have been accepted and the matter was sent back for modification of the earlier order in accordance with that finding.

Ratio Decidendi: Books of account cannot be rejected solely for non-production at survey unless mala fide withholding is shown, and a minor explained discrepancy between books and returns is insufficient by itself to discard the account books.

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