Best judgment assessment needs objective material; an unexplained turnover addition and related penalty cannot stand.

A best judgment assessment must still rest on reasonable objective material; where the enhancement in taxable turnover is based only on suspicion, irregularities, or an unexplained estimate, it is arbitrary and unsustainable. The turnover addition of Rs. 51,523.88 was therefore rejected because the orders did not disclose any rational basis for the figure. A penalty dependent on that enhancement cannot survive once the underlying addition fails, so the connected penalty of Rs. 2,000 was also unsustainable. The result was in favour of the assessee.

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Issues: (i) Whether the increase of Rs. 51,523.88 in the taxable turnover was justified; (ii) Whether the penalty of Rs. 2,000 was justified.

Issue (i): Whether the increase of Rs. 51,523.88 in the taxable turnover was justified.

Analysis: The assessment was made on a best judgment basis, but the increase in turnover had to rest on some reasonable objective material. The recorded irregularities and unaccounted transactions created suspicion, but the orders did not disclose how the figure of Rs. 51,523.88 was worked out. In the absence of material showing a rational basis for the addition, the enhancement was treated as arbitrary.

Conclusion: The increase in taxable turnover was not justified and the finding was against the department and in favour of the assessee.

Issue (ii): Whether the penalty of Rs. 2,000 was justified.

Analysis: The penalty was dependent on the enhancement in turnover. Once the addition to turnover could not be sustained, the basis for the penalty also failed.

Conclusion: The penalty was not justified and the finding was in favour of the assessee.

Final Conclusion: The reference was answered by rejecting the turnover enhancement and the connected penalty, with no order as to costs.

Ratio Decidendi: A best judgment assessment must be supported by reasonable objective data and cannot rest merely on suspicion or an unexplained estimate; a penalty founded on an unsustainable addition cannot survive.

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