The Constituency Presiding Officer (aka Returning Officer) has the power to reject any ballot and said rejection may only be challenged by an election petition (a form of judicial process). The legal justification for this lies in Rule 48, Schedule 1 of the Representation of the People Act 1983 (link) which reads:
“The decision of the returning officer on any question arising in respect of a ballot paper shall be final, but shall be subject to review on an election petition.”
It is thus conceivable that a Returning Officer has the power to disqualify a ballot paper by rendering a final verdict on the question of whether or not to do so.
The law states that every ballot deemed valid must be counted. Note that the actual count is performed by a counting assistant (who is legally a clerk of the Returning Officer) and overseen by agents of each candidate (who may object to decisions made by the Returning Officer or their clerks). If an objection is not adequately heard, this can be challenged by means of an election petition.
The ascertainment is required to be done by Rule 18 of the schedule and Act mentioned above, which states in pertinent part that:
the result shall be ascertained by counting the votes given to each candidate and the candidate to whom the majority of votes have been given shall be declared to have been elected
The declaration of a winner is also required by Rule 50 of the same schedule and Act mentioned above, which requires the Returning Officer (by using the word “shall”) to “declare to be elected the candidate to whom the majority of votes has been given” and “give public notice of his name and of the total number of votes given for each candidate together with the number of rejected ballot papers under each head shown in the statement of rejected ballot papers”.
Conclusion: The Returning Officer is required to count valid ballots according to law and to ascertain candidates as a result of said count, with there being no discretion in the process, save for the power to render final decisions on questions concerning ballot papers (subject to judicial review).