Purchase tax assessment by guesswork rejected where records could have been called for; fresh lawful re-assessment ordered.

Purchase tax assessment under the Tamil Nadu VAT Act could not rest on a proportionate formula and guesswork where the assessing authority could have required transaction-wise records to segregate taxable local purchases. Best judgment assessment is justified only when relevant records are unavailable and estimation is unavoidable; on these facts, the authority's approach was arbitrary rather than a lawful assessment exercise. The Madras HC therefore held the assessments unsustainable, quashed the impugned orders, and remitted the matter for fresh assessment on the basis of proper records and lawful determination.

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Issues: Whether the purchase tax assessment could be sustained when the assessing authority adopted a formula and guesswork instead of requiring the assessee to produce and segregate transaction-wise records under Section 12 of the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The assessee dealt in multiple categories of transactions, including imports, consignment sales, local purchases and inter-state purchases. The assessment was made by applying a proportionate formula on the entire turnover on the premise that separate accounts were not available. The Court held that there was no need to resort to guesswork when the authority could have required the assessee to furnish the relevant records and details for segregating the taxable local purchases. Best judgment assessment is justified only where records are unavailable and an estimate is unavoidable. On the facts, the impugned order rested on an arbitrary estimation rather than a proper exercise of assessment.

Conclusion: The assessment orders were unsustainable and were quashed, with the matter remitted for fresh assessment in accordance with law, in favour of the assessee.

Final Conclusion: The decision sets aside the impugned purchase tax assessments and restores the matter to the assessing authority for a lawful re-determination on the basis of proper records rather than estimation by guesswork.

Ratio Decidendi: A purchase tax assessment cannot be sustained on arbitrary guesswork where the authority ought to have called for the relevant records and made a lawful determination on their basis; estimation is permissible only as a last resort in a true best judgment assessment.

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