Best judgment estimation in reassessment upheld where third-party material had probative value and natural justice was not breached.

Under reassessment under the Bombay Sales Tax Act, 1953, third-party books and angadia records could be used as probative material where the assessee had notice and an opportunity to respond, and the absence of cross-examination on these facts did not amount to a denial of natural justice. Where returns and books were found unreliable, the authority could make a best judgment estimate of suppressed turnover, provided the estimate rested on relevant material and had a reasonable nexus to that material. The estimate based on detected suppression and external records was therefore treated as permissible.

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Issues: (i) Whether the reassessment was vitiated for breach of natural justice by not recording statements of the third parties and not allowing cross-examination; (ii) whether the estimate of suppressed sales higher than the detected suppression was legally sustainable.

Issue (i): Whether the reassessment was vitiated for breach of natural justice by not recording statements of the third parties and not allowing cross-examination.

Analysis: The statutory scheme under sections 14 and 15 of the Bombay Sales Tax Act, 1953, read with the prescribed procedure and forms, required notice and an opportunity to produce evidence and show cause. The materials from the third-party books and the angadia records were made available to the assessee and were used as probative material. In reassessment proceedings, the authority was not bound by technical rules of evidence, and the absence of cross-examination did not, on these facts, amount to a denial of natural justice.

Conclusion: The objection based on violation of natural justice was rejected and the finding was in favour of the Revenue.

Issue (ii): Whether the estimate of suppressed sales higher than the detected suppression was legally sustainable.

Analysis: Once the returns and books were found unreliable, the authority could make a best judgment estimate, but the estimate had to rest on some material and bear a reasonable nexus to that material. The Tribunal relied on the detected suppression, the regular and concealed transactions reflected in the external records, and the comparative ratio adopted for the two years. This was not a pure guess, and the estimate was treated as a permissible inference from the available material.

Conclusion: The estimate of suppressed sales was upheld and the finding was in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee on both questions, and the reassessment based on the available material was sustained.

Ratio Decidendi: In reassessment under the Bombay Sales Tax Act, 1953, the authority may rely on material having probative value, and if the returns and books are found unreliable, a best judgment estimate of suppressed turnover is valid when it is based on relevant material and has a reasonable nexus to that material.

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