Low gross profit alone cannot justify rejection of accounts or a best judgment assessment without evidence of suppression.

Accounts could not be rejected merely because the dealer failed to maintain the prescribed production-cum-stock account in Form XXX, showed low gross profit, or had some pencil entries in the books. In the absence of evidence of inflated purchases, suppressed sales, or stock discrepancies, the authorities lacked a rational basis to discard the accounts or resort to best judgment assessment. Best judgment cannot rest on suspicion alone and must be supported by adequate material affecting the correctness of turnover. The Madras HC therefore held that rejection of accounts and the consequent best judgment assessment were unjustified, and the assessee succeeded.

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Issues: Whether the accounts maintained by the dealer could be rejected for alleged non-compliance with rule 26(14) and low gross profit, and whether a best judgment assessment was warranted.

Analysis: The dealer had not maintained the prescribed production-cum-stock account in form XXX, but the Court found that the surrounding circumstances did not justify rejection of the accounts merely because the gross profit was low or because certain pencil entries appeared in the books. No inflation of purchases, suppression of sales, or stock discrepancy was established. A best judgment assessment must rest on a rational basis and cannot proceed on suspicion alone. On the facts, the authorities had no adequate material to discard the accounts or to estimate turnover on a best judgment basis.

Conclusion: The rejection of accounts and the consequent best judgment assessment were unjustified and unsustainable, and the assessee succeeded.

Final Conclusion: The revision was allowed and the assessment orders were set aside.

Ratio Decidendi: Low gross profit by itself, without supporting material of suppression, inflation, or other accounting defects affecting true turnover, is not a sufficient basis to reject accounts or make a best judgment assessment.

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