Books Rejection and Expense Disallowance: lack of supporting evidence defeated the claim of business deduction.

The books of account were rejected under section 145(3) because the assessee did not produce supporting material for the claimed business expenditure, including purchase and sales records, delivery particulars, stock details, or other corroborative evidence. The record also indicated that several expenses were personal or otherwise non-business in character, and the books did not show the indicia of a genuine running business. As the assessee failed to discharge the burden of proving that the expenditure was incurred wholly and exclusively for business purposes under section 37(1), the disallowance of a portion of the claimed expenses was upheld.

---

---

Issues: Whether the rejection of the books of account and the resulting disallowance of a portion of the claimed business expenses under section 37(1) of the Income-tax Act, 1961 was justified.

Analysis: The assessee failed to produce supporting evidence for the claimed expenditure, including purchase and sales documents, delivery particulars, stock details, and corroborative material showing that the expenses were incurred wholly and exclusively for business purposes. The findings also recorded that several expenses had a personal or non-business character, and that the books lacked the indicia of a genuine running business. In these circumstances, the books were rightly rejected under section 145(3), and the assessee did not discharge the burden of proving the allowability of the expenditure under section 37(1).

Conclusion: The disallowance was upheld and the assessee's challenge failed.

---