Best judgment assessment allows turnover classification on accepted book patterns, but further purchase attribution needs factual support.

On a best judgment assessment after rejection of books, enhanced gross sales turnover may still be classified into tax-free, inter-State and taxable turnover by applying the sales pattern accepted from the books, because estimation does not alter the legal character of the turnover. The assessee can therefore claim statutory deductions and classifications on the enhanced sales figure. Enhanced purchases may also be bifurcated on the basis of accepted proportions, but any further attribution to purchases from registered dealers must rest on a factual foundation and cannot contradict findings already accepted by the fact-finding authority.

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Issues: (i) Whether the enhanced turnover of sales estimated on rejection of books could be bifurcated into tax-free, inter-State and taxable turnover on the basis of the pattern disclosed by the books of account; (ii) Whether the enhanced turnover of purchases could likewise be classified on the same basis, including attribution to purchases from registered dealers.

Issue (i): Whether the enhanced turnover of sales estimated on rejection of books could be bifurcated into tax-free, inter-State and taxable turnover on the basis of the pattern disclosed by the books of account.

Analysis: The enhancement was made on the gross turnover by way of estimate after rejection of the books, not merely on the actual amount of suppression. The legal character of the turnover did not change because it was estimated. The dealer was therefore not precluded from claiming the statutory deductions and classifications available under the Act in respect of the enhanced sales turnover. The Tribunal, as the final fact-finding authority, was entitled to apply the pattern of sales accepted from the books to the enhanced turnover.

Conclusion: The question was answered in the affirmative in favour of the assessee.

Issue (ii): Whether the enhanced turnover of purchases could likewise be classified on the same basis, including attribution to purchases from registered dealers.

Analysis: The enhancement of purchases could be worked out and classified on the basis of the proportion of purchases under relevant heads such as inter-State sales and goods covered by entries in Schedule B. However, the assessee had already been given the benefit of treating about half of the enhanced purchases as purchases from registered dealers under section 8, and that basis had been accepted by the Tribunal. There was no foundation for directing a further bifurcation of the remaining enhanced purchases on the footing that some part must again be attributable to registered dealers.

Conclusion: The question was answered partly in favour of the assessee and partly in favour of the Revenue; the further attribution of the balance enhanced purchases to registered dealers was not justified.

Final Conclusion: The reference was disposed of by upholding the bifurcation of the enhanced sales turnover and by limiting the purchases turnover bifurcation to the extent justified on the existing findings, with no order as to costs.

Ratio Decidendi: Where a best judgment assessment enhances gross turnover, the assessee may still claim statutory classification and deductions on the basis of the turnover pattern accepted from the books, but a further bifurcation must rest on an actual factual basis and cannot contradict the findings already accepted by the fact-finding authority.

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