Rejection of account books requires reliable adverse material, not just lower gross profit or higher wastage.

Account books cannot be rejected merely because gross profit falls or wastage is higher, unless the variation is substantial and supported by positive material showing the records are unreliable. Where the books are regularly maintained and supported by stock particulars, and the bought notes and stock records are not shown to be false or defective, the assessee's explanation may be accepted. On those facts, rejection of accounts was not warranted and the addition based on that rejection was deleted in favour of the assessee.

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Issues: Whether the assessee's account books could be rejected on the ground of fall in gross profit and higher wastage, and whether the addition made on that basis was justified.

Analysis: The account books were regularly maintained and supported by stock particulars. The variation in gross profit and wastage was not found to be of such magnitude as to justify rejection of the accounts. In the absence of positive material showing that the bought notes and stock records were unreliable, the assessee's explanation was accepted.

Conclusion: The rejection of accounts was not warranted and the deletion of the addition was ly upheld in favour of the assessee.

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