1952 (2) TMI 18 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the Commissioner's order under Section 20(2) of the Bihar Sales Tax Act.
2. Validity of the assessment made under Section 10(3) of the Act.
3. Justification for refusing deductions claimed under Section 5(2)(a)(i) of the Act.
4. Inclusion of sales tax realized by the dealer in the gross turnover for computing taxable turnover.

Detailed Analysis:

1. Legality of the Commissioner's Order Under Section 20(2):
The court did not address this issue as the assessee did not press it. The Board of Revenue had previously stated that there was no illegality in the orders passed by the Board or the Commissioner, and this view was accepted by the court.

2. Validity of the Assessment Made Under Section 10(3) of the Act:
The court examined whether the assessment made under Section 10(3) was legal and valid. The Sales Tax Officer had rejected the accounts of the assessee as unreliable and estimated the turnover at a round figure of Rs. 5 lakhs. The Commissioner and the Board of Revenue upheld this assessment. The court noted that under Section 10(3), an assessment to the best of judgment is permissible if the documents produced are unreliable. The court distinguished this case from the Raghunath Mahadeo v. Commissioner of Income-tax case, noting that the Sales Tax Officer found the documents utterly unreliable, justifying the best judgment assessment. The court held that the officer must make an honest estimate and can use local knowledge and other relevant information. Therefore, the court answered this question in the affirmative, validating the assessment under Section 10(3).

3. Justification for Refusing Deductions Claimed Under Section 5(2)(a)(i) of the Act:
The assessee claimed deductions for tax-free goods, which the Sales Tax Officer disallowed due to irregularities in the receipts and counterfoils. The Commissioner allowed one-fourth of the claimed deductions, and the Board of Revenue affirmed this decision. The court found that while the officer noted irregularities, he did not disbelieve the documents as fabricated. The court held that irregularities alone do not justify discarding the accounts if their genuineness is not questioned. Therefore, the court ruled that the Sales Tax Officer was not justified in refusing the deductions and ordered a re-examination of the accounts to determine the admissible deductions.

4. Inclusion of Sales Tax Realized by the Dealer in the Gross Turnover:
The court referred to the definition of "sale price" in Section 2(h) of the Act and a precedent from the Calcutta High Court. It held that any amount charged by the dealer as consideration for goods, including sales tax, forms part of the "sale price." The court reasoned that since the law does not authorize the dealer to collect sales tax from the purchaser separately, the entire amount paid by the purchaser is considered the sale price. Thus, the court answered this question affirmatively, stating that the sales tax realized by the dealer should be included in the gross turnover for computing taxable turnover.

Conclusion:
The court validated the assessment under Section 10(3), ruled in favor of the assessee regarding deductions under Section 5(2)(a)(i), and confirmed the inclusion of sales tax in the gross turnover. The references were disposed of without an order for costs, and the assessee was not entitled to a refund of the deposited amount.