The court clarified that following an accepted method of accounting and maintaining consistent accounts does not ensure their correctness or completeness. The Assessing Officer can make an assessment in the manner provided in section 144 if not satisfied with the accounts' correctness or completeness.

1. This income tax appeal, under section 260A of the Income-tax Act, 1961, was admitted on the questions of law as follows :

"(i) Whether the Income-tax Appellate Tribunal was justified in reversing the categorical finding of the first appellate authority that the books have not been rejected under section 145 of the Act in the present case and in the absence of such rejection, the book result can not be substituted ?

(ii) Whether the term 'profit and gains' used in section 80HH and section 80-I of the Income-tax Act, 1961, with reference to an eligible industrial undertaking have the same meaning as the term 'income' whereas the statute uses both the terms independently in different provisions of the Act ?"

2. On question No. 1, it is submitted that the books of account of the assessee were not rejected, nor were they found to be inaccurate, incorrect or incomplete, and, thus, the Assessing Officer was not justified in adding Rs. 5 lakhs, only on the ground that the profit rate shown by the assessee was much lower than the previous year. It is submitted that the appellate authority found, after it was held by the Assessing Officer, that the regular books of account have been maintained, and purchase and sales are fully vouched, and quality details were also maintained and produced before the Assessing Officer, and on such findings the books of account could not be disbelieved. The observation of the Assessing Officer that the appellant was trying to suppress his real profit, was not supported by any material, the appellate authority held that, in the instant case, the books of account are properly maintained and unless the books are rejected, the estimation could not be made. He found that the Assessing Officer has nowhere found any defect in the books of account of the appellant, therefore, lump sum addition of Rs. 5 lakhs cannot be sustained.

3. The Income-tax Appellate Tribunal allowed the second appeal with the findings that the assessee-company derives income from crushing of oil seeds through oil mill, and solvent plant and also by trading of its products. The Assessing Officer observed that in view of the crushing of different kind of oil seeds and oil cakes proper comparison cannot be visualised in the business of the assessee-company. The assessee-company deals in purchase of various oil seeds, out of which certain oil seeds give more and better yield rate, whereas the lower quality of the oil seeds and oil cakes give lower yield rate, which cannot be compared with others. Tracing the history of the profits, the Assessing Officer found that despite the continuous profits, the profit rate started decreasing from 19.84 per cent. in the assessment year 1990-91 to 11.18 per cent. in the assessment year 1993-94. In view of these factors, and specially the fact that the assessee had maintained the books of account properly, the books of account of the assessee were rightly not rejected by the Assessing Officer but the addition of Rs. 5 lakhs, on the unexplained reduction of profit rate was justified.

4. Learned counsel appearing for the appellant-assessee submits that the books of account were not rejected by the Assessing Officer. He had simply raised doubt over it, without any material or findings with regard to proper maintenance of books of account. He submits that no error was detected in the books of account, and they were accepted by the Assessing Officer, and, thus, there could be no reason for addition of Rs. 5 lakhs. The reduction in the profit rate in the absence of any defect in accounts, cannot be a ground to made addition in income. He has relied on the judgment of this court in CIT v. Maharaja Shree Umed Mills Ltd. [1991] 192 ITR 565 (Raj) , in which it was held in paragraph 3 as follows (page 566) :

"The assessee was asked to give reasons for the abrupt fall in the gross profit rate to which a reply was given that it was due to increase in expenditure on salaries and wages, fuel consumption and stores co