Best judgment reassessment for suppressed sales upheld, while penalty required redetermination after return disclosure.

Where inspection discloses unaccounted sales supported by estimate bills and credit note books, together with stock shortage indicating defective records, the reassessing authority may invoke best judgment under Section 39(1) to add escaped turnover; the additions for suppressed sales and stock discrepancy were sustained. On penalty, however, where the return for the relevant tax period had already disclosed the turnover detected during inspection, the penalty under Section 72(2) required reconsideration and fresh determination by the assessing authority; it was therefore set aside only for redetermination.

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Issues: (i) Whether the addition of suppressed sales turnover and stock discrepancy in best judgment assessment was justified. (ii) Whether the penalty levied under Section 72(2) required redetermination in light of the return filed for the relevant tax period.

Issue (i): Whether the addition of suppressed sales turnover and stock discrepancy in best judgment assessment was justified.

Analysis: The inspection revealed unaccounted sales supported by estimate bills and credit note books, and the stock shortage corroborated non-maintenance of proper books of account. In such circumstances, the prescribed authority was empowered under Section 39(1) to reassess the escaped turnover on best judgment basis and make the related additions. The factual matrix showed sufficient material for the enhancement, and the mere absence of a further separate basis did not invalidate the additions.

Conclusion: The additions towards suppressed sales turnover and stock discrepancy were upheld against the Assessee.

Issue (ii): Whether the penalty levied under Section 72(2) required redetermination in light of the return filed for the relevant tax period.

Analysis: The return for the relevant month had disclosed the turnover detected during inspection, and that circumstance required reconsideration of the penalty component. The existing penalty was therefore not sustained as finally determined and had to be reworked by the assessing authority in accordance with Section 72(2).

Conclusion: The penalty was set aside for the limited purpose of redetermination by the assessing authority.

Final Conclusion: The revision succeeded only on the penalty aspect, while the reassessment and turnover additions were sustained.

Ratio Decidendi: Where inspection discloses unaccounted sales and stock discrepancy supported by contemporaneous material, the reassessing authority may make best judgment additions to escaped turnover; however, a penalty based on the same detection may require fresh determination where the relevant return had already disclosed the detected turnover.

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