Books of account cannot be disturbed without specific defects; estimated additions fail where records are not validly rejected.

Where an assessee maintains regular books of account with supporting vouchers, income must ordinarily be assessed on that basis under section 145(1) unless the books or the accounting system are validly rejected for specific and reasonable defects. In the absence of any identified unverifiable expenditure, demonstrable error, or recorded basis showing the accounts to be incomplete or unreliable, an income estimate cannot rest on conjecture. On those facts, the addition was not sustainable and the deletion of the addition was held to be in law.

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Issues: Whether the Revenue was justified in disturbing the income returned by the assessee and making additions without pointing out specific defects in the books of account maintained by the assessee.

Analysis: The assessee maintained regular books of account and supporting vouchers, and the income was required to be assessed on that basis under section 145(1) unless the books or the system of accounting were rejected on a proper and reasonable basis. No particular instance of unverifiable or incorrect expenditure was identified, nor were the books rejected on any demonstrable defect. An estimate of income could not be made merely on conjecture or without recorded reasons showing why the accounts were incomplete or unreliable.

Conclusion: The addition was not sustainable and the deletion of the addition was in law; the Revenue's appeal failed.

Final Conclusion: The assessee's returned income could not be disturbed in the absence of a valid rejection of the books of account or specific defects, and the Revenue's appeal was dismissed.

Ratio Decidendi: Where an assessee maintains regular books of account, income must be assessed on that basis unless the books or the accounting system are validly rejected for specific and reasonable defects.

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