1961 (3) TMI 83 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the assessment is arbitrary and illegal when based on no evidence except the observation that the amount returned by the assessee is very big.
2. Whether best judgment assessment can be made under section 12(2)(b) of the Orissa Sales Tax Act.
3. Whether a defect found in accounting on a particular day in a quarter can justify rejecting the accounts of other quarters for which no defect is found.

Detailed Analysis:

Issue 1: Arbitrary and Illegal Assessment
The first issue concerns whether the assessment is arbitrary and illegal when the assessing officer rejects the return and accounts based on no evidence except the observation that the amount returned by the assessee is very big. The court examined the materials before the assessing authority, which included the suppression of several items, the habit of the assessee, and the volume of business. The court referenced previous judgments, including the Supreme Court's decision in Raghubar Mandal Harihar Mandal v. State of Bihar, which held that an estimate must be related to some evidence or material and must be more than mere suspicion. The court concluded that the circumstances, suppression of transactions, and the habit of the assessee are all materials for proceeding to make the best judgment assessment. Hence, the first question was answered in the negative, indicating that the assessment was not arbitrary or illegal.

Issue 2: Best Judgment Assessment under Section 12(2)(b)
The second issue addressed whether a best judgment assessment can be made under section 12(2)(b) of the Act. The court discussed this matter at length in a related case, Silla Krishna Murty, and concluded that if the assessee does not comply with all the terms of a notice issued under sub-section (2) of section 12, the assessing authorities are competent to proceed under section 12(2)(b). Therefore, the court answered the second question in the affirmative, confirming that a best judgment assessment can indeed be made under section 12(2)(b) of the Act.

Issue 3: Rejection of Accounts for Other Quarters
The third issue involved whether a defect found in accounting on a particular day in a quarter can justify rejecting the accounts of other quarters for which no defect is found. The court noted that while quarterly returns are required under the law, the assessee maintained accounts for the financial year. The court referenced section 15 of the Act, which directs a dealer to maintain correct and complete accounts, and rule 26-A of the Orissa Sales Tax Rules, which prescribes the procedure for maintaining accounts on an annual basis. The court concluded that the books of accounts are to be maintained on an annual basis, and therefore, the argument that only the defective quarter's accounts should be rejected was not accepted. Thus, the third question was answered in the affirmative, allowing the rejection of accounts for other quarters even if no defect is found in them.

Conclusion:
In summary, the court answered the first question in the negative, indicating that the assessment was not arbitrary or illegal. The second and third questions were answered in the affirmative, confirming that a best judgment assessment can be made under section 12(2)(b) of the Act and that a defect in one quarter can justify rejecting the accounts of other quarters. The assessee was ordered to pay the cost of the Commissioner, assessed at Rs. 100.