Search assessment, book rejection and donation deduction claims fail without proper records and supporting evidence

A search assessment under section 153A is not vitiated merely because the warrant lacks the directors' signatures if the authorisation covers the premises. Failure to maintain primary production and consumption records can justify rejection of books under section 145(3), and once the books are rejected, income may be estimated on a best-judgment basis. Claims of suppressed milk sales must be supported by records, and employee statements plus surrounding circumstances may corroborate the Revenue's case. A deduction under section 80G requires proof of the donation and eligibility; without receipts or supporting evidence, disallowance is proper.

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Issues: (i) Whether the search assessment under section 153A of the Income-tax Act, 1961 was invalid for want of a proper warrant of authorisation and whether the assessee's books could be rejected under section 145(3); (ii) whether the estimated addition made on account of alleged suppression of milk sales was sustainable; (iii) whether the disallowance of deduction under section 80G was justified.

Issue (i): Whether the search assessment under section 153A of the Income-tax Act, 1961 was invalid for want of a proper warrant of authorisation and whether the assessee's books could be rejected under section 145(3)

Analysis: The warrant of authorisation covered the assessee's premises, and the absence of the directors' signatures on the warrant did not invalidate the search proceedings. The assessee also failed to maintain the production and consumption records necessary to verify the business results. In these circumstances, rejection of the books of account was found justified.

Conclusion: The challenge to the validity of the assessment under section 153A failed, and rejection of the books under section 145(3) was upheld.

Issue (ii): Whether the estimated addition made on account of alleged suppression of milk sales was sustainable

Analysis: Once the books were rejected, estimation of income was a permissible consequence. The assessee did not substantiate the claimed milk sales with supporting records, and the employee statements together with surrounding circumstances were treated as supporting the Revenue's case. The appellate correction in the gross profit computation was accepted, and the revised addition was sustained.

Conclusion: The addition as restricted by the first appellate authority was sustained.

Issue (iii): Whether the disallowance of deduction under section 80G was justified

Analysis: The assessee failed to produce the requisite receipts and supporting evidence for the claimed donation deduction. In the absence of proof of eligibility and claim, the disallowance was held proper.

Conclusion: The disallowance under section 80G was upheld.

Final Conclusion: The assessee's appeals were rejected in entirety, and the Revenue's assessments and disallowances were sustained.

Ratio Decidendi: Where the assessee fails to maintain primary production records and to substantiate sales or deduction claims, rejection of books and consequent best-judgment estimation are sustainable, and a search assessment is not vitiated merely because the warrant was not signed by the assessee's directors.

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