Rejection of books of account unsupported where bank payments and invoices shift onus to revenue, so estimation quashed.

Assessing Officer's rejection of books of account and application of an income-estimation was unsupported where the assessee produced purchase invoices, bank payments and ledgers; on that showing the onus shifted to Revenue to verify suppliers, and the AO failed to undertake adequate physical or detailed enquiries into supplier genuineness or relied solely on non-responses and inactive GST status. Applying an estimated net profit after rejecting records without deeper inquiry was held improper and the appellate deletion of the addition was sustained, granting relief to the assessee.

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Issues: (i) Whether the Assessing Officer was justified in rejecting the assessee's books of account and estimating income at 8% of turnover under Section 145(3) of the Income-tax Act, 1961 where the assessee produced purchase bills, bank statements and ledger entries but notices issued under Section 133(6) to sellers returned limited responses.

Analysis: The Tribunal examined whether the AO's action of treating purchases as bogus and applying an estimated net profit percentage was supported by adequate inquiry. The record shows the assessee furnished purchase invoices, bank payments and ledger copies substantiating transactions. Notices under Section 133(6) were sent to suppliers but only some replied; the AO relied on non-response and inactive GST status of certain suppliers without conducting further physical or detailed enquiries into the suppliers' genuineness or vehicle capacity issues relied upon. The appellate authority considered precedents illustrating that where assessee produces bank evidence and documents, onus shifts to revenue and the AO must undertake deeper inquiries before rejecting books and making large estimated additions.

Conclusion: The appellate order deleting the addition was upheld. The addition made by applying an 8% estimation after rejecting books of account was not sustained due to lack of adequate inquiry by the AO; the Revenue's appeal is dismissed and relief granted to the assessee.

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