Best judgment stock estimation must rest on facts, not mechanical comparison; excessive turnover addition was modified.

Books of account may be rejected where inspection reveals stock discrepancies, seized slips show unaccounted transactions, and the accounts are not up to date. In a best judgment assessment, the turnover estimate must have a reasonable nexus to the facts proved and cannot be fixed mechanically by reference to other cases. The tribunal was required to consider the nature of the business, location, period involved, and extent of suppression before fixing the addition. Rejection of the accounts was justified, but the estimate at three times the average running stock was held excessive and was modified to two times the average running stock.

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Issues: Whether, after rejection of the books of account for stock discrepancies and unaccounted transactions, the turnover could validly be estimated by the running stock method at three times the average running stock, or whether that addition was excessive and required modification.

Analysis: The books were rightly rejected because inspection revealed stock differences, seized slips showed unaccounted transactions, and the accounts were not written up to date. In a best judgment assessment, the estimate must rest on material and must bear a reasonable nexus to the facts found. The choice of method depends on the facts of each case, and the number of times the average running stock cannot be fixed mechanically by reference only to other decisions. The Tribunal failed to examine the relevant circumstances bearing on the quantum of addition, including the nature of the business, its location, the period involved, and the extent of the disclosed suppression.

Conclusion: The rejection of accounts was justified, but the estimate at three times the average running stock was excessive. The assessment was required to be modified by adopting two times the average running stock.

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