Rejection of books on a technical defect does not by itself justify turnover enhancement without evidence of understatement.

Where books of account are rejected only on a technical ground, such as non-maintenance of a production and stock register, the disclosed taxable turnover ordinarily should be accepted unless there is material showing understatement. On the facts noted, the rejection of the books was upheld because the register was not maintained, but no abnormal circumstance justified enhancing the turnover. The enhancement was therefore set aside and the disclosed turnover was directed to be accepted.

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Issues: Whether, where the books of account are rejected only on a technical ground for non-maintenance of the production and stock register, the disclosed taxable turnover should be accepted or could still be enhanced.

Analysis: The books of account were rejected on the ground that the production and stock register had not been maintained. The reason for rejection was treated as technical, and no abnormal circumstance was found on the record to justify discarding the turnover disclosed by the applicant. In such a situation, the disclosed turnover normally merits acceptance and enhancement is not warranted in the absence of material indicating understatement.

Conclusion: The rejection of the books of account was upheld, but the enhancement of taxable turnover was set aside and the disclosed turnover was directed to be accepted.

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