Best judgment assessment needs proof of unreliable books; mahimai collections remained taxable trading profit.

Regularly maintained books of account cannot be rejected for best judgment assessment unless the revenue shows that they are incorrect or incomplete, or that income cannot properly be deduced from them; low gross profit, absence of a weight-wise stock register, or missing customer addresses are only corroborative factors and not sufficient by themselves. On the facts discussed, there was no finding of suppressed sales, exaggerated purchases, or omitted transactions, so rejection of the accounts was unjustified. Amounts credited to a mahimai account and later transferred to a designated charitable account were treated as collections toward trade expenses and remained taxable trading profit, despite the internal transfer.

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Issues: (i) Whether the rejection of the assessee's trading results and the adoption of a best judgment assessment were justified in the absence of a finding of suppressed turnover; (ii) Whether collections credited to the mahimai account and transferred to God's account represented taxable trading profit.

Issue (i): Whether the rejection of the assessee's trading results and the adoption of a best judgment assessment were justified in the absence of a finding of suppressed turnover.

Analysis: Section 145 of the Income-tax Act, 1961 applies according to whether the assessee has regularly employed a method of accounting, whether the accounts are correct and complete, and whether income can be properly deduced therefrom. Where the accounts are not correct or complete, the Income-tax Officer may assess to the best of judgment. The absence of suppression of turnover is not by itself if other material shows that the accounts are unreliable. At the same time, low gross profit, absence of a weight-wise stock register, and absence of customer addresses are not, by themselves, enough to reject accounts unless they show that the accounts are incorrect or incomplete. On the facts, there was no finding of exaggerated purchases, suppressed sales, or any omitted transaction, and the assessee's method of accounting was regular.

Conclusion: The rejection of the accounts was not justified and the first question was answered in favour of the assessee.

Issue (ii): Whether collections credited to the mahimai account and transferred to God's account represented taxable trading profit.

Analysis: The amounts collected were found to be collections towards incidental trade expenses and not sums held under any legal obligation for charitable application. Mere transfer to a separate account or to a designated charitable head did not alter their character for income-tax purposes.

Conclusion: The amount was assessable as trading profit and the second question was answered against the assessee.

Final Conclusion: The reference was disposed of by granting relief on the accounting-rejection issue while sustaining inclusion of the mahimai collections in the taxable income.

Ratio Decidendi: Books of account regularly maintained cannot be rejected for best judgment assessment unless the taxing authority establishes that they are not correct or complete, or that the income cannot properly be deduced from them; absence of a stock register or low gross profit, without more, is only a corroborative circumstance and not a sufficient ground by itself.

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