JUDGMENT Tarlok Singh Chauhan, Judge. The present appeal under Section 260-A of the Income Tax Act, 1961, (for short ‘Act’) has been preferred by the Revenue against the order of ITAT, Chandigarh Bench ‘B’, Chandigarh, passed in ITA No.186/Chandi/2008 dated 29.08.2008, Assessment Year 2003-04. 2. The facts, in brief, may be noticed. The assessee is a partnership firm engaged in the business of manufacture and sale of wheat products. For the A.Y. 2003-04, it filed a return showing income of Rs.34,71,660/-and claimed the entire amount as deduction under Section 80IB thereby returning the total income at Nil. This was the fifth year of deduction under Section 80IB. In the course of assessment proceedings, the Assessing Officer (hereinafter referred to as ‘A.O.’) noticed certain discrepancies in the accounts and also sought to verify the correctness of balances shown in the accounts of about 325 creditors and debtors by issuing inquiry letters to them. While account confirmations were received in respect of about 95 such parties, the letters issued to 143 other parties were returned unserved as the parties could not be found at the addresses given. In other cases, the letters issued did not come back, but no confirmations were received from the parties. Considering all the facts, a special audit under Section 142(2A) was ordered with the approval of the Commissioner. 3. The report of the special audit was received in September, 2006, pointing out several discrepancies in the books of accounts. The major discrepancies noted by the auditors were as under:- a) Depreciation actually allowable to the assessee was only Rs.9.05 lacs as against Rs.18.08 lacs claimed in the return. b) Some of the unsecured loans taken during the year had not been confirmed by the creditors. c) The debit and credit balances in the accounts of various parties were subject to confirmation except in a few cases. d) Expenses debited in respect of various items such as consumable stores, travelling, labour welfare, postage, building repairs, truck expenses and rebate and discount were not verifiable in the absence of proper vouchers. e) Six purchase bills showing total purchases of Rs.2.68 lacs were not entered in the cash book. f) In some cases excess purchases were recorded in the purchase register as compared to the purchase bills. e) Six purchase bills showing total purchases of Rs.2.68 lacs were not entered in the cash book. f) In some cases excess purchases were recorded in the purchase register as compared to the purchase bills. g) With regard to the quantitative accounts of raw materials it was found that raw material stock of 6300 quintals valued at Rs.39,75,300/-had not been included in the closing stock and thereby the profit had been understated by Rs.39,75,300/-. Further, in respect of some other local purchases of raw material, the closing stock was over stated by 3.94 quintals. h) Purchases aggregating to about Rs.6.5 lacs were entered in the books but no purchase bills were found. i) In respect of sales, the quantity recorded in the sales register was different from that in the sale bills in 21 instances. In certain other instances of sales, the amount of sales had been shown less by an amount of Rs.21,466/-. j) No brand wise stock register was maintained. 4. Since most of the accounts of debtors and creditors were not confirmed, stock records were not properly maintained, and in view of the findings of the special auditors, and further taking into consideration the fact that the profits declared and expenses shown were not consistent with figures of other years, the A.O. rejected the books of accounts as unreliable. He also found that in the immediate succeeding assessment year 2004-05, where the assessee was eligible for deduction under Section 80IB at only 25% of profits, the G.P. rate had been disclosed at 6.32% as against about 8% declared in the current year. Applying the profit rate of 6.32% to the sales of Rs.15.69 crores declared during the year, the A.O. completed the assessment under Section 143(3) on 11.11.2006 and found that the reasonable profits should be estimated at a figure lower than the profits declared by a sum of Rs.26,39,958/-. This amount of income was taxed as income from undisclosed sources. 5. The assessee filed appeal before the CIT(A) who vide her order dated 20.12.2007 in Appeal No.IT/296/2006-07/SML allowed the same and held that no concrete basis had been given by the A.O. for rejecting the books of accounts and, therefore, the profit declared by the assessee could not be disturbed. 6. In the appeal filed by the Revenue, the ITAT vide order under consideration had agreed with the CIT (A) and dismissed the appeal. 6. In the appeal filed by the Revenue, the ITAT vide order under consideration had agreed with the CIT (A) and dismissed the appeal. In its decision, the ITAT had noticed that Section 145(3) of the Act empowers the A.O. to reject the accounts maintained by the assessee if he was not satisfied about their correctness or completeness. However, the ITAT observed that the A.O. has merely doubted the trading results declared by the assessee and infact there is no finding by the A.O. as to how the accounts maintained were incomplete or incorrect. It was held by the ITAT that variation in profit rate and the level of expenses in different years was not sufficient reason to hold that the accounts were defective. It was also noted that a special audit had been conducted under Section 142(2A), but it was observed that the A.O. has made no reference to any adverse remarks of the Auditor in the assessment order. It was also held that non maintenance of stock records was not shown to adversely affect the correctness or completeness of the accounts. Thus, the ITAT held that there was no justification on the part of the A.O. for invoking Section 145(3) and rejecting the books of accounts in this case and further it was held that the assessee was eligible for deduction under Section 80IB on the income declared by it in the return. 7. On 12.03.2009, this Court admitted the appeal on the following substantial questions of law:- 1. Whether the Assessing Officer could invoke the provisions of Section 145(3) of the Income-Tax Act in the facts and circumstances of the case? 2. Whether the order of the Tribunal is perverse and hence is liable to be set-aside? 8. Since the substantial questions of law are interconnected and interrelated, we dispose of the same through common reasoning. 9. Whether the Assessing Officer could invoke the provisions of Section 145(3) of the Income-Tax Act in the facts and circumstances of the case? 2. Whether the order of the Tribunal is perverse and hence is liable to be set-aside? 8. Since the substantial questions of law are interconnected and interrelated, we dispose of the same through common reasoning. 9. The learned counsel for the appellant has strenuously argued that the findings recorded by the ITAT that the A.O. has rejected the books of accounts only because the profits declared in the current year were higher in the subsequent year and the expenses shown were not proportionate to those shown in other years, were factually incorrect because in paragraph-5 of the assessment order, it had been specifically brought out that a large numbers of accounts of debtors and creditors could not be confirmed either by the parties or by the assessee inspite of several opportunities. It is further contended that in paragraph-5(II) of the order, the major discrepancy had been pointed out by the Special Auditor whereby he had recorded that raw material of 6300 quintals valued at Rs.39.7 lacs had not been recorded in the closing stock. Therefore, in light of these observations of the A.O., the findings returned by the ITAT were clearly erroneous. It is further claimed that it was the duty of the A.O. to invoke the provisions of Section 145 and compute the correct profit after rejecting the accounts of the assessee. In the present case, the A.O. had brought out several discrepancies in the assessment order which showed that the accounts as filed by the assessee did not reflect the correct profit. 10. On the other hand, Shri Atul Jhingan, learned counsel for the respondent has supported the order passed by the ITAT as being strictly in conformity with law. 11. We have considered the rival submissions of the learned counsel for the parties carefully and meticulously. In this case, the dispute regarding scaling down of deduction under Section 80IB emanates from the action of the Assessing Officer under Section 145(3) whereby the accounts of the assessee have been rejected. Section 145(3) of the Act reads as under:- “Method of accounting. 145. In this case, the dispute regarding scaling down of deduction under Section 80IB emanates from the action of the Assessing Officer under Section 145(3) whereby the accounts of the assessee have been rejected. Section 145(3) of the Act reads as under:- “Method of accounting. 145. (1) Income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assesees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.” 12. A perusal of the aforesaid Section would reveal that an Assessing Officer can reject the accounts maintained by the assessee if he is not satisfied about their correctness or completeness. Similarly, the Assessing Officer can reject the method of accounting followed by the assessee if the same is not in accordance with the provisions of sub sections (1) and (2) of Section 145. However, in both the situations, the Assessing Officer is required to make the assessment in the manner provided under Section 144 of the Act. Meaning thereby, that the Assessing Officer is authorized to make assessment of total income of the assessee on the basis of “best judgment” and, at the same time, disregard the income declared in the return. Therefore, the existence of infirmities and discrepancies in the accounts maintained by the assessee was a pre-requisite for invoking the provisions of Section 145 ibid. However, what appears in the present case is that the Assessing Officer had merely doubted trading results declared by the assessee. There were no findings as to how the accounts maintained by the assessee were either incomplete or incorrect. 13. However, what appears in the present case is that the Assessing Officer had merely doubted trading results declared by the assessee. There were no findings as to how the accounts maintained by the assessee were either incomplete or incorrect. 13. The Assessing Officer in order to hold the accounts as being incomplete and incorrect advanced the logic that there was a variation in the G.P. rate and level of expenses in comparison to the subsequent year. As per him, the G.P. rate declared in the subsequent assessment year of 2004-05 was 6.3% as against 8.0% declared in the relevant year. It was for this reason that Assessing Officer presumed that the gross profit declared in the relevant year was not correct. The reason advanced was that in the relevant year the assessee was eligible for exemption under Section 80IB @ 100% of its profits, whereas, it was not so in the next assessment year of 2004-05. There appears to be an inherent fallacy in the aforesaid reasoning because for the assessment year 2005-06 wherein the assessee was also not eligible for 100% exemption under Section 80IB, the G.P. rate declared was 8.48%. Therefore, to say that higher G.P. rate declared in the relevant year at 8% was incorrect merely on the basis of low rate declared for the assessment year 2004-05, was merely based on conjectures and surmises. 14. The Assessing Officer had also obtained report of the Special Auditor appointed under Section 142(2A) dated 11.09.2006 wherein there is no reference made by the Assessing Officer with respect to any adverse remarks of the Special Auditor. Infact, the entire discussion in the assessment order does not even point out to any remark or finding of the Special Auditor which may reflect adversely on the accounts maintained by the assessee. Therefore, prima facie, the absence of any adverse remarks by the Special Auditor definitely supports the case of the assessee. The entire action of the A.O. appears to be based more on suspicion than on ground reality. In such circumstances, the accounts of the assessee could have been got reinvestigated but the same could not have been rejected. 15. Therefore, prima facie, the absence of any adverse remarks by the Special Auditor definitely supports the case of the assessee. The entire action of the A.O. appears to be based more on suspicion than on ground reality. In such circumstances, the accounts of the assessee could have been got reinvestigated but the same could not have been rejected. 15. The findings recorded by the CIT (A) and the ITAT are based on true appreciation of facts and correct appreciation of the provisions of law and there is nothing on record to suggest or even infer that the said findings are in any manner perverse. A finding on a question of fact is open to attack only in case the same is erroneous in law or where the said finding can be termed to be perverse. In this case, both the aforesaid ingredients are lacking. The substantial questions of law are answered accordingly. 16. Resultantly, there is no merit in the appeal and the same is dismissed leaving the parties to bear their own costs.