Best judgment assessment may rely on prior year records when estimating gross profits on relevant material.

In a best judgment assessment under the proviso to section 13 of the Indian Income-tax Act, 1922, the Tribunal may rely on relevant material and is not confined to technical rules of evidence, but the estimate cannot rest on pure conjecture. Here, the Tribunal used the immediately preceding year's 17% profit rate, higher overhead costs, and the trading results on record to compute gross profits at 17% for the assessment year 1957-58. The High Court held that these materials were sufficient to support the estimate and that previous assessment records can furnish proper basis where better evidence is unavailable.

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Issues: Whether there was material before the Tribunal to compute the gross profits of the assessee at 17% for the assessment year 1957-58.

Analysis: The assessee maintained a method of accounting which justified invocation of the proviso to section 13 of the Indian Income-tax Act, 1922, and the Tribunal was entitled to make a best judgment assessment. In such a case the authority is not confined to technical rules of evidence, but it cannot proceed on pure conjecture or without some material. The Tribunal relied on the immediately preceding assessment year, where the profit rate had been taken at 17%, and also took account of the higher overhead costs and the trading results disclosed in the record. Previous assessments, even if themselves based on best judgment, may furnish proper material where better evidence is unavailable.

Conclusion: There was good evidence before the Tribunal for adopting 17% as the basis for computing gross profits, and the reference was answered against the assessee.

Ratio Decidendi: In a best judgment assessment, previous assessment records may constitute sufficient material to support the estimate, provided the conclusion is not a pure guess and is based on some relevant evidence.

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