Best judgment assessment permits rejection of unreliable books and use of comparable trade rates as corroborative material.

Unreliable or non-genuine account books need not be accepted where they do not reflect the true business results, and income may be computed by estimation under Section 23(3) of the Income-tax Act, 1922 rather than under Section 13. The text also notes that comparable profit rates of similar traders may be used as corroborative material when assessing income, provided the authority has examined the assessee's own dealings and surrounding circumstances and no real prejudice is shown. The commentary emphasizes that best judgment assessment is permissible when the books are untrustworthy and that reference to local trade data does not by itself invalidate the estimate.

---

---

Issues: (i) Whether the assessment under Section 23(3) of the Income-tax Act, 1922 was invalid because the assessees' account books ought to have been accepted and the income computed under Section 13; (ii) Whether reliance on the profit rates of similar traders in the locality, without separate disclosure, vitiated the assessment.

Issue (i): Whether the assessment under Section 23(3) of the Income-tax Act, 1922 was invalid because the assessees' account books ought to have been accepted and the income computed under Section 13.

Analysis: The assessees' past returns had been consistently unreliable and had been enhanced on earlier occasions without challenge. The books produced for the year in question were found not to represent a true state of affairs. Where the accounts are not genuine or do not correctly reflect business results, the income cannot be properly deduced from them, and the assessing authority is entitled to make a computation under Section 23(3) by applying the statutory method of estimation.

Conclusion: The assessment under Section 23(3) was valid and the assessees were not entitled to insist upon acceptance of the account books under Section 13.

Issue (ii): Whether reliance on the profit rates of similar traders in the locality, without separate disclosure, vitiated the assessment.

Analysis: The assessing authority used local trade rates only as corroborative material after examining the assessees' own dealings and the surrounding circumstances. The record also showed that the assessees had admitted before the authorities that similar trades in the locality yielded higher profits, and no real prejudice was demonstrated. Mere reference to comparable local business rates, in these circumstances, did not invalidate the estimation.

Conclusion: The assessment was not vitiated by the use of comparable trade rates, and no prejudice to the assessees was established.

Final Conclusion: The assessment was sustained, and the application was dismissed.

Ratio Decidendi: Where account books are found to be unreliable or not truly reflective of business results, the assessing authority may reject them and determine income by a best judgment computation under the Act, including by using comparable trade data as corroborative material where no prejudice is shown.

---