section 145 Rejection of books of Accounts

[Bhavna Mehta]

can books of accounts be rejected if vouchers & supporting are not proper & only on that base, can best judgement be done? whether vouchers are regarded as part of Books of Accounts?

[Surender Gupta]

It is the gross nature of facts would help to decide the issue of rejecting books of account. Where few transaction are unverfiable and supporting are not proper, AO may make addition in respect of those only. But, again it is the whole background which would hep to decide the issue.

You may refer to this case: COMMISSIONER OF INCOME TAX-VIII Versus M/S PARADISE HOLIDAYS (2010 -TMI - 75924 - DELHI HIGH COURT) where HC has said in similar circumstances, AO may disallow that particular expenditure which is not supported by evidence.

AI Summary

Rejection of books of accounts limited to unsupported transactions; supporting vouchers determine scope of best judgment assessments.
Whether books of account may be rejected depends on the overall factual matrix; the assessing officer may make additions only in respect of unverifiable or unsupported transactions and may apply a best judgment assessment limited to those items, while properly supported portions of the accounts remain examinable. Authorities have approved disallowance of particular expenditures lacking evidence rather than wholesale rejection of records.