- (1.) HEARD learned counsel for the parties.
(2.) THE appeal was admitted in terms of the following questions : (i) Whether the non-maintenance of brand-wise record of sales of Deshi Ghee can be a ground for rejection of accounts under s. 145(3) particularly when the purchase and sales are duly vouched and audited and the stock is maintained? (ii) Whether in the facts and circumstances of the case, the Tribunal was justified in upholding the order of the assessing authority rejecting the accounts of the appellate under s. 145(3) of the Act of 1961 when the account books of the appellant maintained in the same style and fashion for preceding and succeeding assessment years have been accepted ? For the relevant asst. yr. 1990-91, the assessee filed the return disclosing the income of Rs. 4,10,160. During the course of assessment, the AO has noticed some defects in the books of accounts of assessee. Some discrepancies are with regard to the credit and debit entries passed on account of discount, damaged goods and the expenses incurred for inward carriage or transportation, etc. The assessee was asked to explain these discrepancies as well as for not maintaining the brand- wise/quality-wise record of the sales. The explanation was considered in detail by the AO and finally the AO was of the view that books results shown in the books, cannot be accepted and were accordingly rejected in view of provisions of sub-s. (2) of s. 145 of the IT Act and the sale was estimated at Rs.3, 37,00,000 by applying G.P. of 2 per cent as against 2.27 per cent, on total turnover of Rs. 2,07,76,233. That has been confirmed by the CIT(A) as well as by the Tribunal. Learned counsel for the petitioner Mr. Singhvi submits that when there is no defect pointed out in the purchase and sale, the provisions of sub-s. (2) of s. 145 of the IT Act has no application. In the preceding years also the books of account were maintained in the same way as were maintained in the year in hand and that was accepted, the books results, therefore, should not be rejected. Learned counsel for the respondent Shri Bhandawat submits that the assessee has not challenged the finding that there are discrepancies in the books of accounts. When there are discrepancies in the books of accounts and reasonable profits cannot be arrived by that system of accounting, book results can be rejected. After considering the rival submissions of learned counsel for the parties, we see no reason to interfere with the order of Tribunal. We are also of the view that the books results were rightly rejected by the AO. But we are also of the view that when books results are rejected there should be best judgment assessment whereby a reasonable income should be taxed. No basis has been shown why the sales are estimated as Rs. 3,37,00,000 as against Rs. 2,07,76,233.
(3.) CONSIDERING the submission and in the interest of justice, we uphold the view taken by the Tribunal so far as the rejection of the books of accounts is concerned, the provisions of sub-s. (2) of s. 145 of the IT Act are applicable, but we remit the matter back to the AO to give reasons in detail why the sale has been increased from Rs. 2,07,76,233 to Rs. 3,37,00,000 and to decide this issue afresh after giving opportunities of hearing to assessee. This appeal stands disposed of accordingly.;