Best judgment turnover estimates need evidentiary support; arbitrary rejection of material and related penalties cannot stand.

Turnover cannot be fixed on a best judgment basis by ignoring affidavits, spot inspection material, and departmental reports that support a lower estimate. An assessment estimate must rest on some evidentiary foundation and cannot be based on surmise, conjecture, or an arbitrary figure; where relevant material is disregarded without cogent reasons, the process offends natural justice. On the facts noted, the turnover fixation was held arbitrary and unsustainable, and the penalties founded on that assessment also could not stand. The orders were quashed, and assessment was to proceed on the inspector's estimate without penalty.

---

---

Issues: Whether the turnover could be fixed on a best judgment basis by ignoring affidavits, local enquiry reports, and other material on record, and whether the penalties imposed were sustainable.

Analysis: The assessment was made on best judgment basis after rejecting the assessee's affidavits and the report of departmental inspectors, both of which supported reduction sale and indicated a turnover far below the figure adopted by the assessing authority. The rejection was made without cogent reasons and without proper consideration of the material collected on spot. An estimate of turnover in such circumstances must have some evidentiary foundation and cannot rest on surmise, conjecture, or an arbitrary self-conceived figure. Since the authority disregarded relevant material and proceeded without fair consideration, the assessment offended the principles of natural justice. The penalties, being founded on the same arbitrary assessment, also could not stand.

Conclusion: The fixation of turnover at Rs. 2 lakhs was arbitrary and unsustainable, and the penalties imposed were not justified. The orders were quashed and the assessee was entitled to assessment on the basis of the inspector's estimate, with no penalty.

---