Rejection of books under section 145(3) requires specific defects; estimated turnover addition deleted where accounts were not shown incomplete.

Books of account cannot be rejected under section 145(3) unless identifiable defects show that the accounts are not correct or complete. On the facts, no specific defect was established to justify rejection of the assessee's books or estimation of income at 1% of turnover, and the year under appeal was materially the same as later years in which the identical addition had already been deleted. The ITAT Mumbai therefore held that the books could not be rejected and deleted the estimated addition in favour of the assessee.

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Issues: (i) Whether the books of account could be rejected under section 145(3) of the Income-tax Act, 1961 and the addition of 1% of turnover sustained as bogus turnover.

Analysis: Rejection of books of account under section 145(3) requires identifiable defects showing that the accounts are not correct or complete. The material on record did not establish such specific defects in the assessee's books so as to justify rejection of the books and estimation of income at 1% of turnover. The identical addition in the assessee's later assessment years had already been deleted on the same reasoning, and the facts for the year under appeal were found to be materially the same.

Conclusion: The books of account could not be rejected under section 145(3), and the addition based on estimation of 1% of turnover was deleted in favour of the assessee.

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