Audited accounts bar annual turnover estimation from a short sales period without defects in the books.

In the absence of any defect in duly maintained and audited computerised accounts, annual sales turnover cannot be estimated merely by extrapolating figures from a brief period of higher sales. The assessee's books and computerised bills were found regular, and no irregularity was detected by the departmental officers. Estimating the whole year's sales on that basis was held unsound because sales in a hotel business may fluctuate for several reasons, and the addition rested on conjectures and surmises rather than proven defects. The Tribunal was therefore not justified in sustaining the estimated turnover and consequent demand.

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Issues: Whether the sales figures for the entire year could be estimated on the basis of sales recorded for a short period without pointing out defects in the assessee's accounts.

Analysis: The assessee maintained fully audited computerised accounts and issued computerised bills. The departmental officers did not notice any irregularity in the accounts. The additional demand was nevertheless raised by extrapolating sales of a short period to the whole year. Such an approach was held to be unsound because sales in a hotel business may fluctuate for several reasons, and a short period of higher sales could not safely form the basis for determining annual turnover absent any defect in the books. The estimation was based on conjectures, surmises, and a presumptive approach rather than any proven irregularity in the accounts.

Conclusion: The issue was decided in favour of the assessee. The Tribunal was not justified in sustaining the annual sales estimate and the consequent demand.

Ratio Decidendi: In the absence of defects in duly maintained and audited accounts, sales turnover cannot be estimated for an entire year merely by extrapolating figures from a brief period of higher sales.

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