Rejection of unreliable books of account permits reasonable income estimation using comparable profits and past performance.

Where the books of account are found unreliable and incapable of providing a proper basis for deduction of business profits, the income-tax authorities may reject the accounts and compute income by reasonable estimation on relevant materials such as comparable profits and past performance. The detailed reasons recorded for rejecting the books were accepted, and the assessment based on estimated income was upheld as justified.

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Issues: Whether there was material before the Assistant Commissioner to justify the conclusion that the assessee's business profits could not properly be deduced from the accounts maintained by him.

Analysis: The accounts were found to be unreliable and incapable of forming a proper basis for computation of income. The Income-tax Officer had stated detailed reasons for rejecting the books, and those reasons were accepted. In consequence, the revenue authorities were required to estimate the income on the basis of comparable profits and past performance, and the estimate made was held to be justified.

Conclusion: The question was answered in the affirmative, and the finding was in favour of the Revenue.

Final Conclusion: The reference was answered by upholding the assessment based on estimation after rejection of the accounts.

Ratio Decidendi: Where the books of account are found unreliable and incapable of forming a proper basis for deduction of profits, the income-tax authorities may determine income by reasonable estimation on relevant materials.

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