Best judgment turnover estimation upheld after book rejection for large-scale suppression and unaccounted purchases.

Turnover may be estimated for the full year after rejection of books where inspection results, seized slips and an assessee's own admission show large-scale suppression and unaccounted purchases. The suppression related to seven months of the year and was substantial, and no material showed that the undisclosed dealings stopped after inspection. The fact-finding authority also found no valid basis to conclude that outside purchases were discontinued immediately after inspection. The annual estimate was therefore supported by the available materials and accorded with best judgment assessment principles; it was upheld as neither arbitrary nor illegal.

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Issues: Whether the estimate of turnover for the whole year, after rejection of the books on the basis of large-scale suppressions and admitted unaccounted purchases, was arbitrary or without rational basis.

Analysis: The accounts stood rejected on the strength of the inspection results, the seized slips, and the assessee's admission in the compounding application. The suppression detected related to seven months of the year and was substantial. In such circumstances, the turnover had to be estimated for the entire year, and the assessee produced no material to show that the suppressed dealings ceased after the inspection. The fact-finding authority also recorded that there was no valid ground to hold that the assessee discontinued the outside purchases immediately after inspection. The estimate was therefore supported by the materials available and was consistent with the principles governing best judgment assessment.

Conclusion: The estimate for the whole year was upheld and was not found to be arbitrary or illegal.

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