Best judgment assessment needs rational basis; unsupported profit estimate could not be sustained, and appellate view stood.

A best judgment assessment cannot rest on an arbitrary gross-profit estimate; it must be supported by inquiry, comparable material, data, or other rational basis. On the facts described, the Assessing Officer's 25% gross-profit rate was unsupported, while the appellate authorities treated the 8% benchmark in section 44AD as a practical reference despite that provision being inapplicable because turnover exceeded the statutory limit. The Court found no substantial question of law and left the appellate view in favour of the assessee undisturbed.

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Issues: Whether the estimation of income in a best judgment assessment could be sustained without any basis, and whether the statutory gross-profit thumb rule under section 44AD could be applied in the circumstances.

Analysis: The assessment order adopted a 25% gross-profit rate and allowed 75% of the gross receipts as expenses, but no inquiry, data, comparable case material, or other objective basis was shown for that estimate. In a best judgment assessment, the estimate must still rest on some rational foundation and cannot be a mere ipse dixit. Section 44AD was inapplicable on the facts because the turnover exceeded the prescribed limit, yet the appellate authorities treated the 8% benchmark in that provision as a practical standard in the absence of any material supporting the higher estimate made by the Assessing Officer.

Conclusion: The challenge failed. The Court held that no substantial question of law arose and sustained the appellate view in favour of the assessee.

Final Conclusion: The revenue appeal was rejected, and the income estimation adopted below was left undisturbed.

Ratio Decidendi: A best judgment assessment must be supported by some rational basis or material, and an arbitrary profit estimate without inquiry or comparative data cannot be sustained.

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