Best judgment assessment requires prior rejection of books with recorded dissatisfaction; unsupported suppression estimates cannot stand.

Best judgment assessment under section 144 cannot be sustained unless the Assessing Officer first records a reasoned dissatisfaction, based on relevant material, that the books of account are incorrect or incomplete under section 145(3). Where the books are duly audited, no specific defect or inaccuracy is identified, and the alleged suppression rests only on general assertions or unsubstantiated departmental allegations, rejection of the books is not justified. In the absence of express or implied rejection of the accounts and corroborative evidence of suppression, estimation of income is invalid and unsustainable, resulting in a finding in favour of the assessee.

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Issues: Whether the Assessing Officer could make an estimation of suppressed receipts and resort to best judgment assessment without first rejecting the books of account by recording dissatisfaction about their correctness or completeness under section 145(3).

Analysis: The books were duly audited and no specific defect, discrepancy, incompleteness, or inaccuracy was pointed out in the accounts. The alleged basis for suppression rested on a general statement regarding planning for possible connectivity and on unsubstantiated departmental allegations, neither of which established that the recorded accounts were unreliable. The statutory scheme requires the Assessing Officer to form satisfaction, on relevant material, that the accounts are incorrect or incomplete before invoking section 145(3) and proceeding under section 144. In the absence of express or implied rejection of the books and in the absence of corroborative evidence of suppression, estimation of income could not be sustained.

Conclusion: The invocation of section 145(3) and the consequential estimation of income were invalid and unsustainable; the issue is decided in favour of the assessee.

Ratio Decidendi: Best judgment assessment under section 144 cannot be made unless the Assessing Officer first records a reasoned dissatisfaction, based on material, that the assessee's books of account are incorrect or incomplete under section 145(3).

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