1980 (8) TMI 167 - SC - VAT and Sales Tax

Whether there is no material in support of best judgment assessment? Whether, on the facts and in the circumstances of this case, the assessee acted in respect of the estimated purchase turnover of Rs. 3,80,000 as a dealer so as to be liable to purchase tax? Held that - Appeal allowed. Whether the Sales Tax Officer was justified in making a best judgment assessment under section 7(3) of the Act was not referred to the High Court, therefore, not open to the High Court to go into the question. It could not allow the new point to be raised for the first time in reference. Nor was the High Court entitled on a reference under section 11(4) of the Act to set aside the finding of the Additional Judge (Revisions) merely because on a reappraisal of the evidence it would have come to a contrary conclusion. It was also not entitled to examine whether the explanation of the assessee in regard to the deficiencies found in the account books should or should not be accepted. It may be that the sales tax authorities should have accepted the explanation of the assessee with regard to the aforesaid deficiencies, but it may as well be that there are various other deficiencies which the assessee will have still to explain.

Issues Involved:

1. Whether there is no material in support of best judgment assessment.
2. Whether the assessee acted in respect of the estimated purchase turnover of Rs. 3,80,000 as a dealer so as to be liable to purchase tax.

Issue-wise Detailed Analysis:

1. Whether there is no material in support of best judgment assessment:

The High Court decided that there was no basis for making a best judgment assessment, leading to a remand for reassessment. The Additional Judge (Revisions) had found no material on record to conclusively determine whether the best judgment assessment of the taxable turnover at Rs. 3,80,000 could be sustained. The High Court examined the details of the various surveys and the nature of the deficiencies found in the account books of the assessee.

During the first survey on August 11, 1967, the naqal bahi had not been written for eleven days, which the High Court found justifiable due to the absence of cash transactions. In the second survey on December 13, 1967, a loose Parcha was found, but only one entry was not contemporaneously recorded. The High Court noted that no other discrepancies were found in the loose Parcha. The third survey on January 7, 1968, revealed twelve bags of wheat in stock, but the stock register was not shown to the officer. The High Court accepted the explanation that there was no duty to produce the stock register without a demand. In the fourth survey on March 8, 1968, the mondhi bahi was not updated for eight days, which the High Court accepted as there were no contracts during that period.

The Supreme Court disagreed with the High Court's reasoning, stating that the High Court should not have examined the applicability of section 7(3) of the Act, as it was not referred to the High Court. The High Court was not entitled to reappraise the evidence or accept new points not raised before the Additional Judge (Revisions). The Supreme Court concluded that the High Court's finding regarding the method of accounting could not be upheld and restored the order of the Additional Judge (Revisions) for a fresh best judgment assessment.

2. Whether the assessee acted in respect of the estimated purchase turnover of Rs. 3,80,000 as a dealer so as to be liable to purchase tax:

The High Court held that the assessee was not a dealer, stating that a kutcha arhatiya merely brings together the seller and the purchaser without passing the title in the goods sold. The High Court relied on the definition of "dealer" and the explanation to section 2(c) of the U.P. Sales Tax Act, 1948, which includes a factor, broker, commission agent, or arhatiya who carries on the business of buying or selling goods on behalf of his principals or through whom the goods are sold or purchased.

The Supreme Court found that the High Court overlooked the explanation to section 2(c), which includes a kutcha arhatiya within the definition of "dealer." The Supreme Court emphasized that the nature of the assessee's business indicated that it acted more like a pucca arhatiya, purchasing goods from cultivators and selling them in the market as its own. The assessee paid the price to the cultivators and received the price from buyers, indicating that it bought and sold goods rather than merely facilitating transactions.

The Supreme Court concluded that the High Court should have held the assessee to be a dealer under section 2(c) of the Act, read with the explanation. The judgment of the High Court was set aside, and the order of the Additional Judge (Revisions), Sales Tax, Meerut, remanding the case for a fresh best judgment assessment under section 7(3) of the Act was restored.

Final Judgment:

The Supreme Court allowed the appeal, set aside the judgment of the High Court, and restored the order of the Additional Judge (Revisions), Sales Tax, Meerut, for a fresh best judgment assessment under section 7(3) of the Act. There was no order as to costs.

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