Best judgment assessment must rest on relevant material, honest estimation and natural justice, not guesswork or punitive extrapolation.

A best judgment assessment under the Punjab Agricultural Produce Markets Rules is valid only when it is based on relevant material, honest estimation and fair procedure. The authority cannot extrapolate from a single discrepancy to the entire period without enquiring into actual business, possible concealment and the likely value of unentered transactions. Where books are rejected, the assessee must be confronted with material gathered from other sources and given an effective opportunity to respond. An estimate founded on guess-work alone, without rational basis or observance of natural justice, is arbitrary and unsustainable; the resulting demand also cannot stand.

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Issues: Whether the best judgment assessment made under rule 31(8) of the Punjab Agricultural Produce Markets (General) Rules, 1962 was arbitrary, punitive and contrary to the rules and the principles of natural justice.

Analysis: The authority was entitled to make a best judgment assessment, but such power had to be exercised honestly on the basis of reasonable and relevant material. The assessment could not rest on a mere isolated discrepancy found on one date and then be extended mechanically to the entire earlier period without enquiry into the actual business done, the extent of concealment, or the probable number and value of unentered transactions. Since the assessee's books had been rejected, the authority was required to gather material from other sources, disclose that material to the assessee, and afford an effective opportunity to meet it before finalising the assessment. An estimate founded on guess-work alone, without a rational basis and without observance of fairness, was held to be capricious and violative of natural justice.

Conclusion: The assessment order was arbitrary and invalid, and the notice of demand issued pursuant to it could not stand.

Ratio Decidendi: A best judgment assessment is valid only if it is based on relevant material, honest estimation and fair procedure; it becomes unsustainable where it is arbitrary, punitive, or made without a reasonable nexus to the available facts and without giving the assessee an effective opportunity to meet the material relied upon.

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