Regular books and bona fide pricing cannot be rejected on suspicion without cogent evidence of suppression or undervaluation.

Transit loss in edible oil could not be treated as suppressed turnover where the first-year business records showed regular register entries, the loss was minor, and no independent material proved unaccounted sales. The court held that rejection of the disclosed loss on conjecture was unjustified. Account books also could not be discarded, nor turnover enhanced, merely because the goods were allegedly sold below market rate, absent reliable evidence of a higher market price or falsity in the sale price. In the absence of cogent adverse material, best judgment assessment based on suspicion was impermissible.

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Issues: (i) Whether the disclosed transit loss in edible oil could be rejected and the related turnover treated as suppressed; (ii) Whether the account books could be rejected and the turnover enhanced on the ground that the goods were sold below market rate.

Issue (i): Whether the disclosed transit loss in edible oil could be rejected and the related turnover treated as suppressed.

Analysis: The assessment year was the first year of business and the goods were transferred from outside the State. The account records showed systematic entries in the relevant registers, and the alleged loss was about one per cent of the total quantity handled. No independent material showed that the dealer had effected sales outside the books. The finding of suppression was based only on conjecture, while similar loss had been accepted in subsequent years on comparable facts.

Conclusion: The rejection of the disclosed transit loss was unjustified and is set aside in favour of the assessee.

Issue (ii): Whether the account books could be rejected and the turnover enhanced on the ground that the goods were sold below market rate.

Analysis: The dealer was entitled to fix its selling price according to business exigency, particularly in the first year of operations. No reliable exemplars or other material were brought on record to establish a higher market rate or to show that the disclosed sale price was false. In the absence of adverse material, the books of account could not be discarded and best judgment assessment could not rest on mere suspicion.

Conclusion: The rejection of account books and enhancement of turnover on the ground of under valuation was illegal and is set aside in favour of the assessee.

Final Conclusion: The revision succeeds, the impugned orders are quashed, and the matter is remitted for a consequential order under the relevant statutory provision.

Ratio Decidendi: Account books maintained in the regular course of business cannot be rejected, and turnover cannot be enhanced, merely on suspicion or conjecture in the absence of cogent adverse material; a dealer's bona fide pricing decision cannot be substituted by the revenue without reliable evidence of suppression or artificial undervaluation.

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