Reopening and best judgment estimation require a legally sufficient factual basis, not mere suspicion or conjecture.

Reopening of a completed assessment under section 35 was held unjustified where the alleged stock omission was explained by disputed transactions, transit shortage, damage, and missing delivery records, leaving no sufficient material to infer escapement of turnover. Rejection of accounts and best judgment estimation were also found unsustainable because they rested on suspicion and adverse inference rather than concrete defects, reliable corroboration, or a demonstrable suppression pattern. The assessment could not be sustained on either ground, and the return already filed had to be accepted.

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Issues: (i) Whether the reopening of the completed assessment under section 35 was justified on the facts disclosed; (ii) whether rejection of the assessee's accounts and resort to best judgment estimation of turnover were legally sustainable.

Issue (i): Whether the reopening of the completed assessment under section 35 was justified on the facts disclosed.

Analysis: The reopening was founded on the alleged omission of stock and on inferences drawn from the surrounding circumstances. The material showed that the stock position was connected with disputed transactions, shortage and damage during transit, and loss of delivery records, all of which had been explained by the assessee. The authorities treated those explanations with suspicion and demanded corroboration without adequate basis. On the record, the court found no sufficient foundation to infer escapement of turnover so as to justify reopening.

Conclusion: The reopening under section 35 was unjustified and could not stand.

Issue (ii): Whether rejection of the assessee's accounts and resort to best judgment estimation of turnover were legally sustainable.

Analysis: The rejection of accounts and the resulting estimation were based largely on adverse inferences rather than on concrete defects, incriminating material, or a demonstrable pattern of suppression. The shortages and losses were supported by the assessee's explanations and the contemporaneous circumstances, including transit claims and disputed civil proceedings. The court held that estimation on mere suspicion, without reliable corroborative or circumstantial support, was erroneous in law.

Conclusion: The rejection of accounts and the best judgment estimation were unsustainable.

Final Conclusion: The assessments could not be sustained on either reopening or estimated addition, and the matter had to proceed on the basis of the return already filed by the assessee.

Ratio Decidendi: Reopening of a completed tax assessment and best judgment estimation cannot rest on mere suspicion or conjecture; there must be a legally sufficient foundation, supported by material, for rejecting accounts or inferring escapement of turnover.

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