HIGH COURT OF DELHI

Commissioner of Income-tax v. Zohra Emporium

Section 145 of the Income-tax Act, 1961 – Method of accounting – Rejection of accounts (Unaccounted purchases etc.) – Assessment year 1996-97 – Assessee filed a return declaring its total income – Assessing Officer verified closing stock of assessee on test check basis and applied test check ratio to entire purchase and sales of year – Thereafter, Assessing Officer rejected assessee’s books of account by invoking section 145(2) and brought to tax sum in respect of unaccounted purchases, unaccounted sales and embroidery charges – Commissioner (Appeals) held that Assessing Officer made addition based on assumptions and presumptions – He granted substantial relief to assessee – Tribunal deleted addition by holding that rejection of books of account of assessee was only on basis of surmises and assumed discrepancies in closing stock which had been reasonably explained by assessee – Commissioner (Appeals) as well as Tribunal were guided by peculiar nature of transactions involved where assessee purchased raw and semi-finished products and, thereafter, sent them for embroidery and other work before finished products were made available for sale – Whether since no fresh ground had been made out by revenue to show why Tribunal’s reasoning was unsustainable in law, deletion of addition was justified – Held, yes [Para 5] [In favour of assessee]