Best judgment assessment must rest on rational material; arbitrary turnover estimates without basis cannot stand.

A best judgment assessment may be made where books of account are rejected, but the estimate must be supported by material with a rational nexus to the turnover determined. An arbitrary enhancement of gross turnover, without disclosed basis or sustaining reasons in the assessment order or on appeal, is not legally sustainable. On the facts noted, the gross turnover estimate was unsupported and the assessment was set aside, with a direction for fresh assessment in accordance with law after giving the assessee a reasonable opportunity of being heard.

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Issues: Whether the best judgment assessment of gross turnover at Rs. 16 lakhs, without disclosed material or nexus to the rejected accounts, was arbitrary and liable to be set aside with a direction for fresh assessment.

Analysis: The assessment authority may make a best judgment assessment where the books of account are rejected, but the estimate cannot be a wholly arbitrary figure. The estimate must rest on some material having a rational nexus with the turnover ultimately determined. Here, no basis was disclosed for enhancing the gross turnover to Rs. 16 lakhs, and neither the appellate nor the revisional authority supplied any sustaining reason.

Conclusion: The assessment was held unsustainable and was set aside, with a direction to make a fresh assessment according to law after giving the assessee a reasonable opportunity of being heard.

Ratio Decidendi: A best judgment assessment is valid only if the estimate is supported by material bearing a rational nexus to the turnover determined, and an arbitrary estimate without disclosed basis cannot stand.

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