Best judgment assessment requires scrutiny of account reliability; mere procedural non-compliance does not justify rejection of books.

Accounts cannot be rejected for best judgment assessment merely because books, vouchers or bills do not fully comply with account-keeping rules; the assessing authority must examine whether the records are otherwise reliable before discarding them. The article also notes that a best judgment estimate may involve guesswork, but the method must be honest, fair and based on relevant material. Using working expenses as a basis for turnover estimation and fixing feeding charges at a flat rate was treated as a matter of practical assessment judgment, not inherently arbitrary. The assessment was therefore required to be reconsidered after proper scrutiny of the accounts.

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Issues: (i) Whether the accounts of the dealer could be rejected and a best judgment assessment made solely because the books, vouchers and bills were not maintained in full conformity with the statutory rules; (ii) Whether the formula adopted for estimating turnover by multiplying working expenses and fixing feeding charges at a flat amount was arbitrary.

Issue (i): Whether the accounts of the dealer could be rejected and a best judgment assessment made solely because the books, vouchers and bills were not maintained in full conformity with the statutory rules.

Analysis: Section 12(3) of the Mysore Sales Tax Act, 1957, authorised best judgment assessment only where the return appeared to be incorrect or incomplete. Section 26 regulated the maintenance of accounts, and section 27 required bills and counterfoils in specified cases, but no provision expressly authorised rejection of accounts merely because every voucher or bill was not available in the prescribed form. The assessment order showed that the accounts were rejected on that sole basis, without any real examination of whether they were otherwise reliable.

Conclusion: The rejection of accounts on that sole ground was unlawful and arbitrary, and the finding against the assessee could not stand.

Issue (ii): Whether the formula adopted for estimating turnover by multiplying working expenses and fixing feeding charges at a flat amount was arbitrary.

Analysis: In a best judgment assessment, some estimate and guesswork are inevitable, but the estimate must be honest, fair and founded on relevant material. The adopted method of using working expenses as a basis and applying a multiple was not shown to be capricious merely because it involved estimation. Likewise, fixing feeding charges at a monthly figure for servants was treated as a matter within the assessing officer's practical judgment and experience, not as a per se illegal method.

Conclusion: The estimating formula itself was not held to be arbitrary or capricious.

Final Conclusion: The matter required reconsideration because the accounts had been discarded without proper scrutiny on an erroneous legal footing, and the assessment was therefore sent back for fresh decision in accordance with law.

Ratio Decidendi: Accounts cannot be rejected for best judgment assessment merely for non-compliance with account-keeping rules unless the assessing authority applies its mind to their reliability and bases its conclusion on relevant considerations.

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