Trading addition after rejection of books failed where no specific defect or gross profit unreliability was shown.

Rejection of books of account under section 145(3) could not, by itself, sustain a trading addition where the assessing officer failed to point out any specific defect in the books or to show that the declared gross profit rate was unreliable. The appellate authority's finding, as affirmed by the Tribunal, was that no illegality or perversity had been demonstrated in the factual appreciation. On that basis, the High Court found no substantial question of law and the trading addition was not justified.

---

---

Issues: Whether the trading addition could be sustained after rejection of the books of account under section 145(3) of the Income-tax Act, 1961, in the absence of any specific defect in the books or material showing that the declared gross profit rate was unreliable.

Analysis: The addition was based on rejection of the book results for want of quantitative details and for the decline in gross profit rate. However, the finding recorded by the appellate authority and affirmed by the Tribunal was that no specific defect in the books of account had been pointed out by the assessing officer. The record did not establish any illegality or perversity in that finding, and the challenge thus did not disclose any substantial question of law.

Conclusion: The trading addition was not justified, and the rejection of the revenue's appeal was sustained.

---