1967 (2) TMI 81 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment of turnover on best judgment basis
- Appeal to Deputy Commissioner of Commercial Taxes
- Exercise of suo motu powers of revision by Commissioner of Commercial Taxes
- Justification for interference with Deputy Commissioner's order
- Prejudice to revenue
- Impropriety in decision-making process
- Restoration of Deputy Commissioner's order by High Court

Analysis:
The judgment pertains to two appeals by the same assessee concerning the assessment of turnover for the years 1960-61 and 1961-62 by the Commercial Tax Officer on a best judgment basis. The officer estimated the turnover based on establishment charges, leading to a higher turnover figure. The assessee appealed to the Deputy Commissioner of Commercial Taxes, presenting evidence of heavy losses due to litigation and a lower turnover assessed by Income-tax Authorities. The Deputy Commissioner, after verifying the genuineness of the difficulties faced by the assessee, reduced the turnover to Rs. 25,000 for each year.

The Commissioner of Commercial Taxes, utilizing his suo motu powers of revision, set aside the Deputy Commissioner's order and reinstated the original authority's decision with slight modifications. The assessee challenged this decision in the High Court, arguing that there was no valid basis for the Commissioner's interference. The Court noted that the Commissioner can only interfere if the order to be revised is illegal or improper. However, the Commissioner failed to demonstrate any illegality in the Deputy Commissioner's order and merely stated that it was prejudicial to revenue without substantiating this claim adequately.

The Court emphasized that prejudice to revenue must be based on concrete evidence of under-assessment or incorrect application of the law, not merely a reduction in tax liability upon appeal. It further highlighted that impropriety in decision-making arises when there is a lack of correlation between the evidence and the decision. In this case, the Deputy Commissioner had considered relevant circumstances and genuine difficulties faced by the assessee before reducing the turnover, indicating a proper decision-making process.

Ultimately, the High Court allowed the appeals, setting aside the Commissioner's orders and restoring those of the Deputy Commissioner. The assessee was awarded costs for the appeals. The judgment underscores the importance of evidence-based decision-making and the limited scope for interference by higher authorities in the absence of legal grounds.