Estimated gross-profit additions fail when accepted books show no defects and profit estimation lacks a valid basis.

Estimated gross-profit additions cannot be sustained where books of account are properly maintained, accepted, and contain no identified defects. The notes state that cash deposits during demonetisation were explained, while the gross-profit estimate was based on an average of prior years despite differing turnover and business progression. A later year's higher turnover and gross-profit rate did not justify the estimate. As the books were not rejected before profit estimation, the gross-profit addition was deleted.

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Issues: Whether an addition based on estimated gross profit could be sustained where the books of account were accepted and no defects were found.

Analysis: The cash deposits during demonetisation were accepted as explained, and the books and records were properly maintained. The gross-profit estimate was derived by averaging results of three assessment years despite differences in turnover and business progression. The subsequent year's higher turnover and higher gross-profit rate did not support the adopted estimate. No defect was identified in the books and they were not rejected before estimating profit.

Conclusion: The estimated gross-profit addition was unsustainable and was deleted in favour of the assessee.

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