Irregular assessment procedure and best judgment taxation stand when supported by material and rational nexus.

A competent taxing authority's use of a consolidated assessment instead of separate annual assessments was treated as an irregular exercise of jurisdiction, not a nullity. The remand for fresh assessment was therefore valid, and expiry of the original limitation period did not bar assessments made pursuant to remand. The text also explains that best judgment reassessments will stand where they are supported by materials such as suppressed purchases and non-production of books, and where the estimate has a rational nexus with those materials. An assessment is not vitiated merely because some guesswork is involved or because one reference to prior assessments is imperfect, provided the substance is not arbitrary or capricious.

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Issues: (i) Whether the initial consolidated assessment for four years was without jurisdiction and, if not, whether the Tribunal could remand the matter for fresh assessment after the expiry of limitation; (ii) Whether the subsequent separate assessments made after remand, treated as best judgment assessments, were arbitrary or unsustainable for want of materials.

Issue (i): Whether the initial consolidated assessment for four years was without jurisdiction and, if not, whether the Tribunal could remand the matter for fresh assessment after the expiry of limitation.

Analysis: The charging authority undoubtedly had jurisdiction to assess the dealer, but it erred by making a consolidated assessment when annual assessments were contemplated by law. That error was held to be an irregular assumption of jurisdiction, not a complete absence of jurisdiction or a nullity. The Tribunal's direction for fresh assessments was therefore treated as a valid remand. Once the matter was remanded, the plea that the limitation period had expired did not assist the dealer, because limitation applicable to original suo motu action did not govern assessments made pursuant to remand.

Conclusion: The initial consolidated assessment was not void for want of jurisdiction, and the remand for fresh assessment was upheld against the assessee.

Issue (ii): Whether the subsequent separate assessments made after remand, treated as best judgment assessments, were arbitrary or unsustainable for want of materials.

Analysis: The reassessments were made separately for the relevant years and were supported by materials showing suppressed purchases and the dealer's failure to produce books of account or otherwise explain the transactions. In a best judgment assessment, some estimate or guesswork is inevitable, but it must rest on a rational basis and have a reasonable nexus with the materials before the authority. On the facts, the estimating process was not shown to be vindictive, capricious, or wholly arbitrary. The erroneous reference to previous assessments for one year did not vitiate the substance of the assessment, which was otherwise grounded in the available materials.

Conclusion: The subsequent assessments were sustained as valid best judgment assessments and were not set aside.

Final Conclusion: The challenge to both the original assessment process and the reassessments failed, and the application was dismissed in favour of the revenue.

Ratio Decidendi: An assessment made by a competent authority in an incorrect procedural mode is an irregularity, not a nullity, and a best judgment assessment will be sustained if it is based on relevant materials and bears a reasonable nexus to the discovered facts.

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