Best judgment turnover estimates must have a rational nexus to material on record, not mere guesswork.

In a best judgment assessment, turnover may be estimated after rejection of accounts, but the estimate must rest on relevant material and bear a reasonable nexus to the disclosed suppression and surrounding circumstances. An assessment founded on mere guesswork, caprice, or arbitrariness is not sustainable. On the facts noted, the turnover enhancement was found to lack a rational basis and adequate supporting material, and the Tribunal's reduction did not cure that defect. The enhancement was therefore treated as arbitrary and unsupported by the record, with the issue answered in favour of the assessee.

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Issues: Whether the enhancement of turnover after rejection of the assessee's accounts was arbitrary and without rational basis.

Analysis: In a best judgment assessment, some element of estimate is permissible, but the estimate must rest on relevant material and maintain a reasonable nexus with the disclosed suppression and surrounding circumstances. An assessment based on mere guesswork, caprice, or arbitrariness is not sustainable. On the facts found, the Tribunal's reduction of the enhancement did not cure the absence of a rational basis, and the enhancement remained unsupported by adequate material on record.

Conclusion: The enhancement of turnover was arbitrary and without nexus to the materials on record. The question was answered in the affirmative, in favour of the assessee.

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