Going by the principles of stricter interpretation laid by the Hon’ble Apex Court in ‘Commission of Customs Vs M/s Dilip Kumar And Co. & Ors’ reported in 9 SCC 1 (2018) in our considered view;

1. the books of assessee can only be rejected if the assessing officer is not satisfied about the correctness or completeness of assessee’s accounts and in no case the correctness or
completeness of other person’s accounts with whom the assessee had any transaction would empower the assessing officer to reject the books of the assessee.

2.The rejection can only be triggered or considered when accounts are found incorrect or incomplete, that is to say incorrectness or incompleteness of substantial accounts shall only form reasonable satisfaction for rejection of books. A single account with insignificant error or incorrectness or incompleteness would in no case sufficient to form basis for rejection of entire books of accounts.

3. The incorrectness or incompleteness should reasonably be brought on records and it should alone be capable of reasonableness to form rational basis for rejection of books.

4. There cannot be wholesale rejection of books for more than one assessment years on the basis of accounts of particular year, because such incorrectness and incompleteness of one set of books cannot be determinant factor for any other year.

Posted on: June 30th, 2023