Books of account cannot be rejected on suspicion alone; Revenue must prove taxable purchases or imports before fastening liability.

Tax liability and rejection of books of account cannot rest on loose papers, estimates or suspicion unless the Revenue proves the foundational facts showing taxable purchases or imports. Here, the Court found no material establishing actual import from outside the State or purchases from unregistered dealers, and the assessee's business explanation for estimates sent with goods and final bills based on goods retained was not displaced. Because the first appellate authority had accepted the declared purchases and books on the absence of cogent contrary evidence, the Tribunal erred in interfering on apprehension and unexplained discrepancies alone. The Tribunal's order was therefore unsustainable and the appellate order in favour of the assessee was restored.

---

---

Issues: Whether the Tribunal was justified in restoring the assessment and rejecting the books of account on the basis of loose papers and estimates seized from a purchaser's , and in fastening tax liability without material showing purchases from outside the State or from unregistered dealers.

Analysis: The revision was decided on the footing that the Revenue had not established any actual import from outside the State or purchases from unregistered dealers. The Court noted that the assessee's case was that estimates were sent with goods and final bills were prepared on the basis of goods actually retained by the purchaser, while the taxing authorities did not record any finding displacing this business explanation. The first appellate authority had found no cogent material to reject the declared purchases and books of account, and the Tribunal interfered mainly on apprehension and perceived discrepancies without satisfactorily addressing the factual foundation required for upsetting those findings. In the absence of proof that the turnover represented unaccounted imports or taxable unregistered purchases, the adverse inference could not be sustained.

Conclusion: The Tribunal's order was unsustainable, and the questions were answered in favour of the assessee and against the Revenue.

Final Conclusion: The revision succeeded, the impugned order was set aside, and the appellate order in favour of the assessee was restored.

Ratio Decidendi: Tax liability and rejection of books of account cannot be sustained merely on suspicion or loose papers unless the Revenue proves the foundational facts showing taxable purchases or imports.

---