Turnover enhancement on best judgment requires cogent material; rejection of books alone is not enough.

Rejection of books of account based on survey material did not, by itself, justify enhancement of turnover on best judgment assessment. The HC held that estimated undisclosed purchases and sales must rest on cogent material and a rational basis, not on surmises or conjecture. Because the loose papers were explained, no substantial reason supported the turnover increase, and the record did not show business activity beyond disclosed trading, the proposed enhancement for the full year was rejected and the taxable turnover was accepted in favour of the assessee.

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Issues: Whether, after rejecting the books of account on the basis of survey material, the turnover could be enhanced by a best judgment assessment in the absence of sufficient material supporting the estimated undisclosed purchases and sales.

Analysis: The assessment year was the first year of business and the survey yielded only loose papers, which were explained by the assessee. The finding recorded by the Tribunal itself showed that no substantial reason had been furnished for the enhancement of turnover. Rejection of books of account may be justified where the material is unreliable, but enhancement of turnover requires some cogent basis and cannot rest on surmises and conjectures. The Court also noted that estimation for the entire year was not justified merely because some alleged suppression was found for a limited period, and that the record did not support an inference that the assessee had engaged in stitching or manufacturing activity beyond its disclosed trading business.

Conclusion: The enhancement of turnover was not justified and the taxable turnover was accepted in favour of the assessee.

Ratio Decidendi: Rejection of books of account does not, by itself, authorize enhancement of turnover unless the estimation is supported by cogent material and a rational basis.

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