Ad hoc additions to purchases and liabilities cannot stand without rejecting books of account and avoiding double taxation.

Ad hoc additions to purchases, expenses and current liabilities were unsustainable where the books of account were not rejected under section 145(3) of the Income-tax Act, 1961. The tribunal noted that the liabilities included opening balances, creditors arising from purchases already subjected to addition, and other business or statutory dues, so the same amounts could not be taxed again on a presumptive basis. As the assessment made percentage-based additions without first displacing the books, and the liabilities had already been reflected in the accounts, the additions lacked a lawful foundation. The additions relating to current liabilities and creditors were therefore deleted.

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Issues: Whether ad hoc additions made to purchases, expenses, and current liabilities could be sustained when the books of account were not rejected and the same liabilities were already reflected in the accounts.

Analysis: The assessment made ad hoc additions of 25% of purchases, 10% of expenses, and 25% of current liabilities without rejecting the books of account under section 145(3) of the Income-tax Act, 1961. The addition relating to current liabilities also covered creditors arising from purchases that had already been subjected to addition, resulting in duplication. The liabilities included opening balances and other business or statutory dues, which could not be brought again to tax merely on a presumptive basis. In these circumstances, the additions lacked a sustainable basis.

Conclusion: The ad hoc additions were not justified and the additions relating to current liabilities and creditors were liable to be deleted.

Ratio Decidendi: Presumptive additions to purchases, expenses, or liabilities cannot be sustained without rejection of books of account, and the same amount cannot be taxed twice under different provisions.

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