Books of account cannot be rejected on generalized consumption rates where manufacturing variation explains differing chlorate usage.

A mere absence of a daily mixture account, or reliance on generalized chlorate-consumption standards, does not by itself justify rejection of match-manufacturing books. The court noted that consumption varied with the size and type of matches, that chemical test lots showed non-uniform production, and that average figures for the relevant years did not materially support an inference of excess consumption. On those facts, the books were not shown to be unreliable or incapable of reflecting true profits, so the addition and invocation of the proviso to section 13 were not justified.

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Issues: (i) Whether there was material to justify an addition on the ground that the assessee's books did not show the correct consumption of chlorate in the manufacture of matches. (ii) Whether, if the first issue was answered in favour of the assessee, there were materials to justify rejection of the book results and invocation of the proviso to section 13.

Issue (i): Whether there was material to justify an addition on the ground that the assessee's books did not show the correct consumption of chlorate in the manufacture of matches.

Analysis: The average consumption figures for the relevant years did not materially differ so as to support an inference of excessive consumption. The absence of a daily mixture account did not establish that the books were unreliable, particularly when the manual manufacture of matches itself involved inherent variations in consumption. Chemical analysis of test lots showed that the actual consumption differed according to the size and type of matches and that the production was not uniform. The Tribunal's reliance on a fixed standard of consumption was not supported by the real nature of the manufacturing process.

Conclusion: The issue was answered in favour of the assessee; there was no material justifying the addition on the footing of incorrect chlorate consumption.

Issue (ii): Whether, if the first issue was answered in favour of the assessee, there were materials to justify rejection of the book results and invocation of the proviso to section 13.

Analysis: The Tribunal had relied on assumptions drawn from later years and on the absence of a daily mixture account, but those factors did not establish that the accounts failed to reflect true income. The nature of production in the assessment years differed materially from later years, and periodic departmental checks had not revealed complaints about consumption. On the materials available, the books could not be treated as incapable of reflecting the true profits of the business.

Conclusion: The issue was answered in favour of the assessee; the proviso to section 13 could not be invoked.

Final Conclusion: The reference was answered in favour of the assessee, and the book results of the match manufacturing business were held not liable to rejection on the facts found.

Ratio Decidendi: A mere absence of a particular account or reliance on generalized consumption rates does not justify rejection of accounts or invocation of the proviso to section 13 unless the material shows that the books are incapable of reflecting the true income of the assessee.

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