Best judgment assessment must rest on rational evidence; a single fake invoice could not justify taxing the entire disclosed turnover.

In a best judgment assessment under the U.P. Value Added Tax Act, 2008, an estimate of escaped turnover must be based on an honest, intelligent and rational appraisal of the material on record, not on conjecture or a mechanical extension from one non-genuine invoice. The Court held that a single fake invoice of small value did not justify enhancing evaded sales to the entire disclosed turnover because the estimate lacked a reasonable nexus to the discovered material. The enhancement was therefore not justified, and the evaded sales were restricted to 10% of the disclosed sales, with the revision partly allowed in favour of the assessee.

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Issues: Whether the enhancement of evaded sales to the level of the entire disclosed turnover, on the basis of a single fake invoice, was justified in a best judgment assessment under the U.P. Value Added Tax Act, 2008.

Analysis: The assessment was founded on one invoice of small value found to be non-genuine. In a best judgment assessment, the taxing authority must act honestly and make an intelligent, well-grounded estimate based on the material on record. The assessment cannot rest on pure surmises, conjectures, or a whimsical extension of a single escaped transaction to the full disclosed turnover without rational basis or supporting evidence. The estimated turnover must bear a reasonable nexus to the material discovered.

Conclusion: The enhancement to the entire disclosed sales turnover was not justified. The evaded sales were directed to be quantified at 10% of the disclosed sales, and the revision was answered partly in favour of the assessee.

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