Unsubstantiated trading addition fails where accounts are rejected without proper enquiry or rational basis.

Where accounts are treated as unreliable, any addition to trading results must rest on proper enquiry and a rational basis. A bare lump-sum estimate, made without ascertaining the exact nature or extent of alleged suppression of profits and without concrete findings to support the estimate, cannot be sustained. The ad hoc addition to the trading results was therefore deleted, and relief was granted to the assessee.

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Issues: Whether the addition of Rs. 6,000 to the trading results by application of the proviso to section 145(1) of the Income-tax Act was justified.

Analysis: The assessee's accounts were treated by the revenue authorities as not reflecting the true business position, but no deeper enquiry was made to ascertain the exact nature and extent of any suppression of profits. A vague lump sum addition was made without a proper basis, notwithstanding the disclosed gross profit rate and the absence of any concrete finding supporting the estimate.

Conclusion: The ad hoc addition of Rs. 6,000 was unsustainable and was deleted, with relief granted to the assessee.

Ratio Decidendi: Where accounts are found unreliable, any addition to trading results must be supported by a proper enquiry and a rational basis, and a bare lump sum estimate without foundation cannot be sustained.

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