Best judgment assessment under sales tax law can override correct accounts after statutory default, if the estimate is rational and bona fide.

Rejection of a dealer's books of account cannot stand where it rests on a finding contrary to the record, and accounts free from defect cannot be discarded on an unsupported stock discrepancy. Where, however, a registered dealer fails to comply with statutory notice requirements, section 12(4) of the Orissa Sales Tax Act, 1947 permits best judgment assessment even if the books are otherwise correct. The estimate must still be bona fide, rational, and based on materials before the authority, not arbitrary or capricious. On that footing, the best judgment assessment was upheld and the reference was answered against the assessee.

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Issues: (i) whether the Tribunal was justified in rejecting the dealer's books of account on the footing of an erroneous finding contrary to the record; and (ii) whether, despite the correctness of the accounts, assessment to the best of judgment under section 12(4) of the Orissa Sales Tax Act, 1947 was permissible.

Issue (i): Whether the Tribunal was justified in rejecting the dealer's books of account on the footing of an erroneous finding contrary to the record.

Analysis: Rejection of accounts cannot stand when it rests on a finding that is contrary to the materials on record. If the alleged discrepancy in stock and accounts was not supported by the inspection report, the premise for discarding the books fails. The question, therefore, turns on whether any defect in the accounts was actually established.

Conclusion: The Tribunal was not justified in rejecting the books of account, and the accounts were found to be free from defect.

Issue (ii): Whether, despite the correctness of the accounts, assessment to the best of judgment under section 12(4) of the Orissa Sales Tax Act, 1947 was permissible.

Analysis: Section 12(4) mandates best judgment assessment where the registered dealer fails to comply with the statutory notice requirements. That mode of assessment is distinct from assessment on the basis of books of account. Once the statutory default occurs, the assessee cannot insist on an account-based assessment merely because the accounts are otherwise maintained. The estimate, however, must be bona fide, rational, and not arbitrary, vindictive, or capricious, and must have a reasonable nexus with the materials before the authority.

Conclusion: Best judgment assessment was permissible and was not shown to be improper.

Final Conclusion: The reference was answered against the assessee, and the assessment sustained on the footing of best judgment could not be disturbed.

Ratio Decidendi: Where a taxing statute mandates best judgment assessment upon the dealer's statutory default, the assessing authority may disregard even otherwise correct accounts, provided the estimate is made bona fide on a rational basis and is not arbitrary or capricious.

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