1964 (7) TMI 18 - HC - VAT and Sales Tax

Issues:
1. Assessment of escaped turnover under section 16 of the Sales Tax Act.
2. Scope for making an assessment to the best of judgment.
3. Provision for making an assessment of escaped turnover in the Sales Tax Act.
4. Determination of turnover that has escaped assessment.
5. Application of the best of judgment rule in cases of suppressed turnover.
6. Allocation of estimated suppressions to specific commodities.
7. Proper procedure for making assessments of suppressions.

Detailed Analysis:
1. The judgment addresses the issue of assessment of escaped turnover under section 16 of the Sales Tax Act. The case involved an assessment made on the dealer for a specific year, where an anamath account revealed suppressed turnover between certain dates. The Commercial Tax Officer estimated the suppressions, which were subsequently reduced by the Appellate Assistant Commissioner and the lower Appellate Tribunal. The petitioner contended that the assessment was based on an estimate rather than the exact quantum of omitted turnover. The court held that in cases where the conduct of transactions suggests a continuation of suppression for an extended period or the entire assessment year, an estimate of the turnover can be made to the best of judgment.

2. The judgment discusses the scope for making an assessment to the best of judgment in cases of escaped turnover. The petitioner argued that there was no scope for such assessment under the Sales Tax Act post its amendment in 1959. However, the court rejected this contention, emphasizing that when the facts indicate turnover has escaped assessment for an extended period or the entire year, the best of judgment rule is applicable. The court highlighted that the determination of whether the escape was for a specific period or the entire year is a factual inquiry based on the evidence presented.

3. The judgment delves into the provision for making an assessment of escaped turnover in the Sales Tax Act. It notes that while the Act after its amendment in 1959 does not explicitly mention making an assessment to the best of judgment, the rule is implicit in section 16 when turnover is found to have escaped for an extended period. The court emphasized that the best of judgment assessment is warranted when no exact estimate of the suppressed turnover is possible due to the lack of maintained accounts by the assessee.

4. The judgment addresses the determination of turnover that has escaped assessment. It highlights that when the anamath account reveals unexplained transactions for a specific period, but the conduct of transactions suggests a continuous suppression, an estimate for the extended period or the entire year becomes necessary. The court emphasized that this determination is based on both the anamath accounts and the circumstances of the case, with the best of judgment rule being applicable when no exact estimate is feasible.

5. The judgment discusses the application of the best of judgment rule in cases of suppressed turnover. It underscores that when the assessing authority and the lower Appellate Tribunal have provided adequate reasons for concluding that turnover has escaped assessment for the prior year without corresponding entries in the dealer's accounts, the best of judgment rule is invoked. The court accepted the submission that similar provisions in the Indian Income-tax Act allow for making assessments to the best of judgment in such cases.

6. The judgment addresses the allocation of estimated suppressions to specific commodities. It notes that the lower Appellate Tribunal had allocated Rs. 75,000 to rice and Rs. 25,000 to other commodities, with an additional estimate for vanaspati suppression. The court deemed this redundant and emphasized the need to make a single assessment of suppressions. Consequently, the court restricted the addition made for escaped turnover to Rs. 75,000 for rice and Rs. 14,000 for other commodities, totaling Rs. 89,000.

7. Finally, the judgment discusses the proper procedure for making assessments of suppressions. It highlights the necessity of making a reduction corresponding to the addition already made by the assessing officer for vanaspati suppression. The court dismissed the revision in other respects and made a final determination on the allocation of estimated suppressions to specific commodities, emphasizing the need for a coherent assessment process.

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