All the purchases and sales made by the assesse were accounted for through vouchers and bills and a stock register which was maintained on tally accounting software. The books were audited and payments made as well as sales consideration was received through banking channels. Further, no allegations that the books were incomplete or incorrect were made by the Department and any allegations that were made were negated during deviation and remand proceedings.

In the Appeal proceedings before the Tribunal, it was held that before rejecting the book results, the Department is duty bound to find patent, latent and glaring defects in the books of account, which was not done and reliance was only placed on a statement made by the managing director which was later retracted and did no relate to booking the bogus expenditure. Even otherwise, once the books of account of the assessee were rejected, the profit had to be estimated on the basis of the proper material available. The gross profit ratio of one year could not be applied to another year for determining the profit of some of the transactions of another year. The Department was not entitled to make a pure guess in making assessment based on a mere suspicion. Thus, the rejection of the books of account by the CIT(A) was not in accordance with law. (AY.2012-13 to 2017-18)