1955 (10) TMI 22 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement of the Commercial Tax Department to call for records other than account books.
2. Acceptability and disclosure of the material on which the Department acted.
3. Arbitrary estimation of turnover without examining relevant parties.
4. Provision of reasonable opportunity to the appellants to prove their returns.
5. Compliance with procedural rules in estimating turnover.

Detailed Analysis:

1. Entitlement of the Commercial Tax Department to Call for Records Other Than Account Books:
The court examined whether the Commercial Tax Department was entitled to call upon the assessee to produce records other than account books. Rule 9 of the Madras General Sales Tax Act allows the assessing authority to call for the production of accounts. The court interpreted this to include not just account books but also other relevant records such as contracts, vouchers, and pattis. The court observed that the department is empowered to call for these records to verify the correctness of the returns. The court concluded that the department's action in this respect did not prejudice the appellants and thus, this contention was not accepted.

2. Acceptability and Disclosure of the Material on Which the Department Acted:
The appellants contended that the material on which the Department acted was not of an acceptable character and was not shown to them. The court held that the assessing authority is not required to disclose the source of the information but must draw the assessee's attention to the material indicating the return is incorrect. The court found that the material, including pocket note-books and contract-books recovered from Sadhu Suryam, was credible and could be safely relied upon. The court also noted that the appellants had access to these documents and had an opportunity to compare them with their account books. Thus, this contention was dismissed.

3. Arbitrary Estimation of Turnover Without Examining Relevant Parties:
The appellants argued that the estimation of turnover without examining Sadhu Suryam and the merchants was arbitrary. The court held that the power to make private inquiries is implicit in rule 8, and the Taxing Officer is not obligated to supply the assessee with copies of confidential statements or to examine the informant in the presence of the assessee. The court found no evidence that the appellants requested the Taxing Officer to summon Suryam or other merchants. The court concluded that there was no violation of natural justice principles and overruled this contention.

4. Provision of Reasonable Opportunity to the Appellants to Prove Their Returns:
The appellants claimed they were not given a reasonable opportunity to prove their returns. The court found that the appellants were given sufficient time and opportunities to produce relevant records and prove the correctness of their returns. The court noted that the appellants did not request additional time or make any effort to establish the genuineness of their accounts. Therefore, the court dismissed this argument.

5. Compliance with Procedural Rules in Estimating Turnover:
The appellants contended that the assessment was invalid due to non-compliance with procedural rules under rules 8 and 9. The court interpreted rule 9 to mean that the assessing authority could issue separate notices for the production of accounts and for proving the correctness of the returns. The court found that the notices issued in March 1948 satisfied the requirements of rule 9, even though they did not use the exact language of the rule. The court emphasized that the spirit of the rule was followed, and there was no contravention of rules 8 or 9. The court also noted that the appellants did not raise this objection before the assessing authority or in their plaints. Thus, this contention was rejected.

Conclusion:
The court upheld the validity of the assessments, finding no merit in the appellants' contentions. The judgments under appeal were affirmed, and the appeals were dismissed with costs.