Rejection of accounts without sufficient factual basis cannot sustain an estimated assessment; turnover must follow the books shown.

Rejection of accounts based only on a solitary, small suppression detected in a single surprise inspection was held unsustainable, because the factual foundation for discarding the books was wholly insufficient. Payment of compounding fee did not cure that defect or justify estimation of turnover. The resulting estimated assessment was therefore vitiated by jurisdictional error. The orders of the authorities below were set aside, and assessment was directed to proceed on the turnover shown by the assessee.

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Issues: Whether rejection of accounts and resort to estimation of turnover were justified on the basis of a solitary small suppression detected in a surprise inspection, and whether the appellate authorities were right in sustaining the addition on that footing.

Analysis: The admitted factual position showed that the only concrete material for rejecting the accounts was a small suppression of turnover detected during a single surprise inspection over a limited period. The authorities below treated the subsequent compounding and payment of fee as closing the matter, but that could not by itself validate rejection of accounts where the factual foundation for such rejection was wholly insufficient. In a revision under section 41 of the Kerala General Sales Tax Act, 1963, the court held that when the material on record does not justify rejection of accounts, the resulting estimation is vitiated by a jurisdictional error going to the root of the assessment.

Conclusion: Rejection of accounts and the consequential estimate were unjustified and unsustainable; the orders of the authorities below were set aside and the assessment was directed to be made on the basis of the turnover shown by the assessee.

Ratio Decidendi: Rejection of accounts is impermissible where the factual foundation is wholly insufficient, and a consequential estimated assessment based on such rejection is vitiated by jurisdictional error.

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