Books rejection failed where regulated beer trading prices and consistent profits did not justify higher income estimation.

Where a wholesale beer trader operated under State-regulated sale prices and its declared net profit was consistent with past years, rejection of the books and estimation of income at a higher profit rate were found unjustified. The stated suspicion that sales were inflated to suppress profit was treated as illogical on the facts, and the declared profit was to be assessed after considering partner's remuneration and interest as part of business income. The ITAT Agra therefore declined to sustain the enhanced profit estimate and deleted the addition in favour of the assessee.

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Issues: Whether the rejection of books of account and estimation of income at a higher profit rate was justified in the case of a wholesale beer trader operating under regulated prices.

Analysis: The assessee was engaged in wholesale trading of beer, where sale prices were regulated by the State, and its declared profit was consistent with past years. The declared net profit had to be assessed after considering partner's remuneration and interest, which form part of business income. In these circumstances, the recorded reason that sales were inflated to suppress profit was found to be illogical, and the basis for rejecting the books and enhancing the profit rate was not accepted.

Conclusion: The rejection of books of account and the estimation of income were held to be unjustified, and the addition was deleted in favour of the assessee.

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