Best judgment estimation after rejection of accounts must rest on relevant evidence, not suspicion; estimated profit addition disallowed.

After rejection of accounts, an estimated addition for suppressed transactions must rest on relevant material evidence and not on mere suspicion or pure guess. Here, the assessment relied on material indicating an earlier commencement of business than shown in the books, omitted transactions, and an unexplained cash credit, but a substantial part of the basis for the estimate was later held irrelevant. As the figure could not be shown to rest independently on the remaining relevant material, the estimated profit addition was not justified in law and the assessee succeeded.

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Issues: Whether the addition of Rs. 51,000 as estimated profits from suppressed transactions was justifiable in law.

Analysis: The assessment was made after rejection of the assessee's accounts, and the rejection itself rested on material showing that the business had commenced earlier than the date reflected in the books, that several transactions were omitted, and that another cash credit was not satisfactorily explained. However, the legal principle governing such an estimate is that once accounts are rejected, the assessing authority must base the addition on some material or evidence and not on mere suspicion or pure guess. Where a substantial part of the material originally relied upon for the estimate is later held to be irrelevant, the original figure cannot be sustained unless the estimate is shown to rest independently on the remaining relevant material.

Conclusion: The addition of Rs. 51,000 as estimated profits from suppressed transactions was not justifiable in law and the issue is answered in favour of the assessee.

Final Conclusion: The reference was answered against the revenue and the impugned estimate was disallowed.

Ratio Decidendi: A best judgment estimate after rejection of accounts must rest on relevant material evidence and cannot be sustained if it is founded partly on irrelevant material without showing the basis of the figure independently.

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