Best judgment assessment must disclose the basis for turnover estimation or it risks being struck down as arbitrary.

Tax authorities exercising best judgment powers must make a fair estimate on relevant material and disclose the basis of the turnover fixed, so the assessee and appellate authorities can examine the reasoning. An assessment order that merely records defaults and states the assessed figure without explaining the materials or logic relied on is arbitrary and shows non-compliance with the statutory duty to assess fairly. On that ground, the best judgment assessments were set aside and fresh assessments were directed.

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Issues: Whether the best judgment assessments could be sustained when the assessment orders did not disclose the basis for the turnover fixed and appeared arbitrary.

Analysis: Taxing authorities exercising best judgment powers perform quasi-judicial functions and must make a fair estimate on relevant material. The assessment order must disclose the basis of the estimate so that the order can be examined by higher authorities and the assessee can know the grounds on which liability was fixed. Where the order merely records defaults and states the assessed figure without revealing the reasoning or materials relied upon, it fails to show that the statutory duty has been properly discharged and becomes vulnerable as arbitrary.

Conclusion: The assessments were set aside and fresh assessments were directed because the orders did not disclose the basis of the best judgment assessment and were vitiated by arbitrariness.

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