Books of account rejection and profit estimation fail where accounts are verified, reconciled, and accounting treatment is consistent with standards.

Where the books of account were examined in remand and the recorded discrepancies were verified and reconciled, rejection of the books was unwarranted. The assessee's percentage completion method, together with provision for work done but not billed and anticipated costs, was found consistent with the facts and accounting standards. In the absence of any valid defect in the accounts, estimation of business profit at 8% of turnover could not be sustained. The assessee's returned computation, as accepted by the appellate authority, was upheld.

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Issues: Whether the Assessing Officer was justified in rejecting the books of account and estimating business profit at 8% of turnover, and whether the assessee's provision for expenses and accounting treatment were liable to be accepted.

Analysis: The accounts were examined in the remand proceedings and were found to be accurate, with the discrepancies raised by the Assessing Officer having been verified and reconciled. The assessee's method of accounting, including the percentage completion method and the provision made for work done but not billed and anticipated costs, was held to be consistent with the facts and the accounting standards. In the absence of any valid defect in the books, rejection of the accounts and estimation of income at 8% was held to be unwarranted.

Conclusion: The rejection of books of account and the consequent profit estimation were not sustainable; the assessee's returned computation as accepted by the appellate authority was upheld.

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