Best judgment assessment requires recorded defects in return and accounts; stock gaps and low profit alone are insufficient.

Best judgment assessment under section 12(2) of the Tamil Nadu General Sales Tax Act, 1959 requires a recorded finding that the return is incomplete or incorrect, after enquiry and opportunity to the dealer, and the accounts must be lawfully displaced before resorting to estimate-based addition. Mere absence of separate stock accounts or low gross profit, without findings of inflated purchases, suppressed sales, wrong classification, or other unexplained transactions, is insufficient to justify rejection of the return or sustain an addition on guesswork. The assessment orders were set aside and the matter was remanded for fresh assessment after giving the assessees an opportunity to explain the alleged defects.

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Issues: Whether the assessing authority could resort to best judgment assessment under section 12(2) of the Tamil Nadu General Sales Tax Act, 1959 without recording a finding that the return was incomplete or incorrect and without rejecting the accounts, and whether the addition made to the taxable turnover could be sustained on the basis of non-maintenance of separate stock accounts and low gross profit.

Analysis: Best judgment assessment under section 12(2) is permissible only where no return is filed or where the return submitted appears to be incomplete or incorrect, after the required enquiry and opportunity to the dealer. A mere omission to maintain stock register, without more, does not by itself justify rejection of the return. Likewise, low gross profit or trade loss, in the absence of any finding of inflated purchases, suppressed sales, wrong classification, or unexplained transactions, does not establish suppression. Here, no positive finding was recorded that the return was incomplete or incorrect, the accounts were not specifically rejected, and the addition was made on guesswork and conjectures without testing the material available, including opening and closing stocks. The explanations offered by the assessees were also not considered.

Conclusion: The resort to best judgment assessment was not justified, and the addition to turnover could not be sustained.

Final Conclusion: The assessment orders were set aside and the matter was remanded to the assessing authority for fresh assessment in accordance with law after giving the assessees an opportunity to explain the alleged defects.

Ratio Decidendi: Best judgment assessment cannot be invoked unless the return is found, on recorded reasons, to be incomplete or incorrect and the accounts are lawfully displaced; mere defects such as absence of stock records or low profit, without supporting findings, are insufficient.

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