Best judgment assessment requires evidentiary basis and natural justice; mechanical formula-based turnover estimation cannot stand.

Best judgment assessment may be made where proper accounts are not maintained, but the estimate must still rest on some evidence and a reasonable nexus with the material on record. A mechanical formula, such as applying five times establishment expenses without examining its suitability, is impermissible. Relevant factors including actual establishment expenses, sales mix, input and output prices, and comparable business data must be considered, and the assessee must be given notice and an effective opportunity before turnover is freshly determined. The existing assessment based on an untested formula could not be sustained and the matter required fresh enquiry and reassessment in observance of natural justice.

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Issues: Whether the revisional authority could sustain a best judgment assessment by mechanically applying a formula of five times the establishment expenses without adequate material, and whether the assessment required to be set aside for fresh enquiry in observance of natural justice.

Analysis: Proper accounts having not been maintained, resort to best judgment assessment was permissible, but such estimate had to rest on some evidence and a reasonable nexus with the available material. A best judgment assessment could not be made on arbitrary caprice or by mechanically applying a general formula without examining its suitability to the case. The record showed that relevant factors such as actual establishment expenses, sales of soft drinks, purchase price of materials, sale price of finished goods, and comparable restaurant data had not been properly examined. The assessee was also entitled to an opportunity before the turnover was freshly determined.

Conclusion: The existing assessment could not be sustained insofar as it was based on the untested formula, and the matter was required to be re-examined afresh after enquiry and notice to the assessee.

Final Conclusion: The turnover determination was sent back for fresh best judgment assessment on the basis of relevant material and after giving the assessee an effective opportunity of hearing.

Ratio Decidendi: A best judgment assessment must be founded on some material and a reasonable nexus to the facts of the case, and cannot rest on a mechanical or arbitrary formula without enquiry and observance of natural justice.

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