Best judgment turnover assessment upheld where rejected accounts and commodity consumption supported a rational estimation method.

Best judgment assessment of turnover was upheld where the assessing authority rejected the assessee's accounts for defects and irregularities in restaurant operations and estimated turnover from consumption of foodgrains and other commodities used in the business. The proposition notice disclosed the proposed method of estimation, satisfying notice requirements as to the basis of determination. The court treated that method as rational on the facts and rejected the argument that a single fixed formula must govern every case of rejected accounts. Additions made in the estimation were also sustained because the precedents relied on by the assessee were found inapplicable on the facts.

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Issues: Whether the best judgment assessment of turnover based on inspection of accounts, stock verification and consumption of raw materials was valid, and whether the additions made while estimating turnover were justified.

Analysis: The assessee's return was rejected after the assessing authority found defects in the accounts and irregularities in the running of the restaurant business. The proposed method of estimation was disclosed in the proposition notice, satisfying the requirement that the assessee be informed of the basis on which turnover was to be determined. The method adopted was held to be a rational one in the facts of the case, namely, estimation from the consumption of foodgrains and other commodities used in the business. The earlier decision relied on by the assessee was distinguished because it did not lay down that any one fixed formula alone could be used in all cases of rejected accounts, and the precedent on additions was also found inapplicable on the facts.

Conclusion: The challenge to the best judgment assessment failed, and the turnover estimation and related additions were upheld against the assessee.

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