Best judgment assessment permits rational turnover estimation from suppressed records, but deduction claims must be expressly decided.

In a best judgment assessment, rejected books may be supported by cogent material showing suppression, and electricity consumption may be used only as a corroborative factor for estimating taxable turnover. The court accepted extrapolation from detected suppression over a three-month period to the full financial year, holding that a rational estimate with a reasonable nexus to discovered facts is permissible. However, where the assessee raised a specific claim for deduction on sales to a registered dealer, the Tribunal was bound to decide it expressly; its omission was an error in law. The turnover enhancement was upheld, while the deduction issue required reconsideration.

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Issues: (i) Whether the Tribunal had relied on irrelevant considerations while sustaining enhancement of taxable turnover based on electricity consumption as a corroborative factor; (ii) Whether, in a best judgment assessment, figures for a three-month period could be extrapolated to the whole financial year on the basis of detected suppression; (iii) Whether the Tribunal erred in omitting to decide the assessee's claim for deduction on sales made to a registered dealer.

Issue (i): Whether the Tribunal had relied on irrelevant considerations while sustaining enhancement of taxable turnover based on electricity consumption as a corroborative factor.

Analysis: The addition was sustained on the basis of seized registers showing suppression of purchases and sales. Electricity consumption was not treated as the sole basis for rejection of the accounts, but only as a corroborative factor for estimating turnover after the accounts had been rejected on material evidence. The finding of enhancement therefore did not rest on any irrelevant material.

Conclusion: The issue was decided against the assessee and in favour of the revenue.

Issue (ii): Whether, in a best judgment assessment, figures for a three-month period could be extrapolated to the whole financial year on the basis of detected suppression.

Analysis: Once the books were rejected on the basis of material showing outside-book dealings, the authority was entitled to make a bona fide estimate. In a best judgment assessment some guesswork is inevitable, and an estimate is sustainable if it has a rational basis and a reasonable nexus with the facts discovered. Detection of suppression over three months, covering two quarters of the financial year, provided a permissible basis for extrapolation to the full year.

Conclusion: The issue was decided against the assessee and in favour of the revenue.

Issue (iii): Whether the Tribunal erred in omitting to decide the assessee's claim for deduction on sales made to a registered dealer.

Analysis: The Tribunal had noticed the contention regarding sales to the registered dealer but recorded no finding on the claim. A material plea requiring adjudication could not be left undecided, and the omission amounted to an error in law.

Conclusion: The issue was decided in favour of the assessee and against the revenue.

Final Conclusion: The reference was answered partly against the assessee and partly in its favour, with the turnover enhancement upheld but the deduction claim requiring consideration by the Tribunal.

Ratio Decidendi: In a best judgment assessment, once accounts are rejected on cogent material, turnover may be estimated on a rational basis using corroborative indicators and reasonable guesswork, but material contentions affecting deductions must be expressly adjudicated.

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