Book-based income computation prevails; net accretion additions and third-party material were rejected for fresh consideration.

ITAT Mumbai held that, where the assessee's books of account were accepted, income had to be computed on that basis and rejection of book results could not be sustained. Additions made by the net accretion method, including those linked to assets and shareholdings, were deleted once the books governed the computation. Third-party material collected behind the assessee's back could not be relied on without effective opportunity of rebuttal, so the alleged undisclosed investments required reconsideration with opportunity to the assessee and, if needed, remand proceedings. Interest expenditure, other expenses, and connected disallowances were consequential to the book-based computation.

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Issues: Whether the income was to be computed on the basis of the assessee's books of account and, as a consequence, whether additions made by adopting the net accretion method, disallowances based on third-party material, and related expense claims were to be revised.

Analysis: The appeal followed an earlier coordinate-bench decision on the same assessment year and on identical issues. The books of account had been admitted and, in that backdrop, rejection of the book results could not be sustained. Additions founded on net accretion to assets and shareholdings were deleted once income was directed to be computed from the books. The material collected from various companies behind the assessee's back could not be used without affording an effective opportunity of rebuttal. The issue of alleged undisclosed investments was therefore required to be examined with reference to the books of account, with opportunity to the assessee and remand proceedings if necessary. Interest expenditure, other expenses, and the consequential grounds were also to follow the computation on the basis of books.

Conclusion: The assessee succeeded on the substantive computation issues; the income was to be recomputed on the basis of the books of account, the additions based on net accretion and third-party material were deleted or set aside for fresh consideration, and the related disallowances were allowed to the extent consequential.

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