Proviso to section 145(1) requires a prior finding of incorrect or incomplete accounts before rejecting expenses.

The proviso to section 145(1) cannot be invoked merely because accounts or vouchers are unavailable at the appellate stage; a prior finding that the assessee's accounts are incorrect or incomplete is required, especially where supporting documents were available for assessment verification. The Tribunal noted that the reasonableness of expenses could be examined only after determining whether the claimed expenses were proved and whether the statutory precondition for rejecting the accounts was met. On the existing record, the addition was not sustainable, and the matter was restored for fresh assessment in accordance with law.

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Issues: Whether the proviso to section 145(1) of the Income-tax Act, 1961 could be invoked and the addition sustained without a prior finding that the assessee's accounts were incorrect or incomplete, and where the relevant supporting documents were available for verification at the assessment stage.

Analysis: The Tribunal held that the absence of accounts or vouchers at the appellate stage by itself did not justify application of the proviso to section 145(1) when the relevant documents were available for examination during assessment. Before considering the reasonableness of the expenses, it had first to be determined whether the assessee had in fact proved the expenses claimed and whether the statutory precondition for rejecting the accounts was satisfied.

Conclusion: The addition could not be sustained on the existing record, and the matter was set aside and restored to the Income-tax Officer for a fresh assessment in accordance with law.

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