Books rejection requires specific defects; mere gross profit variation cannot sustain an estimated addition under percentage completion method.

Books of account cannot be rejected, and a gross profit addition cannot be sustained, where no specific defect is found in the accounts, there is no allegation of inflated or unsupported , and no evidence of suppression in sales or properties sold. The assessee's consistent use of the percentage completion method, with revenue recognised by including estimated profit in work-in-progress and followed in earlier years, supported the reliability of the accounts. A mere difference in gross profit rate from earlier years, without contrary material or a specific factual basis, was insufficient to justify rejection of accounts or an estimated addition.

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Issues: Whether the books of account could be rejected and a gross profit addition sustained in the absence of specific defects, where the assessee had consistently followed the percentage completion method of accounting.

Analysis: The record showed no specific defect in the books, no allegation of inflated or unsupported expenditure, and no finding of suppression in the sales or properties sold. The assessee had consistently recognised revenue by including estimated profit in work-in-progress under the percentage completion method, and the Revenue did not bring any contrary material to displace the factual findings that the method had been followed in earlier years as well. In such circumstances, rejection of accounts merely because the gross profit rate differed from earlier years was not justified, and the estimated addition sustained without any specific basis could not stand.

Conclusion: The rejection of books of account was unjustified and the gross profit addition was not sustainable; the issue was decided in favour of the assessee.

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