Best judgment assessment must be reasonable and non-capricious, though it may exceed exact escaped turnover if materially justified.

In a best judgment assessment under section 12(8) of the Orissa Sales Tax Act, the assessing authority is not confined to the exact escaped turnover or suppression detected; once accounts are rejected, a reasonable estimate may extend beyond the precise quantified suppression, provided it has a rational nexus to the material on record. The estimate must still be honest, reasonable and non-capricious. On the facts discussed, the fixed percentage enhancements applied to gross and taxable turnover were treated as excessive and lacking sufficient basis, and were therefore unsustainable.

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Issues: (i) Whether, in an assessment under section 12(8) of the Orissa Sales Tax Act, 1947, the assessing officer is bound to restrict enhancement only to the escaped turnover or suppressions found; (ii) Whether the enhancement of gross and taxable turnovers by fixed percentages was arbitrary and unwarranted.

Issue (i): Whether, in an assessment under section 12(8) of the Orissa Sales Tax Act, 1947, the assessing officer is bound to restrict enhancement only to the escaped turnover or suppressions found.

Analysis: A best judgment assessment is not confined to the precise amount of suppression detected. Once the accounts are rejected, the assessing officer must make a reasonable estimate on available material, and the estimate need only bear a rational nexus to the suppression found. The assessment is not invalid merely because it exceeds the exact escaped turnover.

Conclusion: The assessing officer is not bound to limit the enhancement in the escaped turnover to the suppressions found.

Issue (ii): Whether the enhancement of gross and taxable turnovers by fixed percentages was arbitrary and unwarranted.

Analysis: Although a best judgment assessment necessarily involves some guesswork, the estimate must still be honest, reasonable, and non-capricious. On the facts, the fixed percentage additions made for both years were not shown to have a sufficient rational basis and were treated as excessive and lacking proper nexus with the material on record.

Conclusion: The enhancement of the gross and taxable turnovers by 20 per cent for 1964-65 and by 5 per cent for 1965-66 was arbitrary and unwarranted.

Final Conclusion: The reference was answered by upholding the principle that assessment under section 12(8) is not confined to the exact escaped turnover, while holding that the percentage-based enhancements on the facts were unsustainable and required fresh determination by the Tribunal.

Ratio Decidendi: In a best judgment assessment, the assessing authority may estimate turnover beyond the exact suppression detected, but the estimate must still be reasonable and supported by a rational nexus to the material on record and must not be capricious or arbitrary.

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