Best judgment assessment estimate upheld where withheld accounts and rational gross profit estimation showed no arbitrariness.

In a best judgment assessment, the assessing authority may make a fair estimate on a rational basis where the assessee withholds books of account despite notice and fails to object to the pre-assessment notice. Here, gross profit was first fixed at 80% and later reduced by the first appellate authority to 70% having regard to the business location. The High Court declined interference in revision because the estimate was supported by relevant material, was not arbitrary or vindictive, and the assessee had been given sufficient opportunity to produce records.

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Issues: Whether the estimation of gross profit at 70% of the cost of goods sold in the best judgment assessment for the assessment years 2017-18 and 2018-19 was liable to be interfered with in revision.

Analysis: The assessee did not produce the books of account despite notice and did not place any objection to the pre-assessment notice. The assessing authority, therefore, completed the assessments on best judgment basis by fixing gross profit at 80%, which was modified by the first appellate authority to 70% considering the location of the business. The principles governing best judgment assessment require the authority to make a fair estimate on a rational basis, with some element of guesswork, and the High Court does not ordinarily substitute its own estimate when the assessment is founded on relevant material and is neither arbitrary nor vindictive. The Tribunal also found that the assessee had been given sufficient opportunity to produce the records and had failed to do so.

Conclusion: The estimation of gross profit at 70% was held to be bona fide and supported by a rational basis, and no interference was warranted in revision.

Ratio Decidendi: In a best judgment assessment, where the assessee withholds proper accounts despite opportunity, an estimate based on relevant material and rational assessment will not be interfered with in revision unless it is shown to be arbitrary, capricious, or lacking bona fides.

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