Rejection of accounts requires more than absence of a stock register; best judgment assessment was not justified here.

Regularly maintained income-tax accounts cannot be rejected merely because no day-to-day stock register was kept if purchases and sales are supported by vouchers and the accounts are not shown to be inaccurate. Under the relevant provisos, rejection is justified only where the Income-tax Officer forms the opinion that income, profits and gains cannot properly be deduced from the accounts. On the facts recorded, the absence of a stock book raised only a valuation issue and did not by itself warrant best judgment assessment. The Tribunal was therefore wrong to uphold the assessments, and the answer was against the Revenue and in favour of the assessee.

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Issues: Whether the Income-tax Appellate Tribunal was right in holding that the Income-tax Officer could reject the assessee's accounts and complete the assessments under the proviso to section 13 of the Indian Income-tax Act, 1922, for assessment year 1961-62 and under the proviso to section 145(1) of the Income-tax Act, 1961, for assessment year 1962-63 on the ground that no day-to-day stock book was maintained.

Analysis: The assessment records showed that the purchases and sales were supported by vouchers and that the accounts were not found to be inaccurate. The objection accepted by the Income-tax Officer was confined to the absence of a stock register and, in substance, to the method of valuation of stock. Under the governing provisions, regularly maintained accounts must be accepted as the basis of computation unless the Income-tax Officer forms the opinion that the income, profits and gains cannot properly be deduced from them. Mere non-maintenance of a day-to-day stock book, without proof that the accounts are incorrect or that true income cannot be ascertained, does not justify rejection of the accounts and substitution of best judgment assessment.

Conclusion: The Tribunal was wrong in affirming the assessments made under the proviso to section 13 of the Indian Income-tax Act, 1922, and under the proviso to section 145(1) of the Income-tax Act, 1961; the answer was against the Revenue and in favour of the assessee.

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