1968 (12) TMI 82 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and justification of the revised assessment enhancing the taxable turnover.
2. Possibility of a best judgment assessment under section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958.
3. Legality and justification of the penalty imposed based on the revised assessment.
4. Legality of the penalty imposed under section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958, read with section 9(3) of the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Legality and Justification of the Revised Assessment:
The court examined whether the revised assessment, which enhanced the taxable turnover under the State law by Rs. 2,50,000 and under the Central law by Rs. 1,00,000, was illegal, unjustified, or excessive. The Sales Tax Officer had based this enhancement on an undisputed escape amount of Rs. 31,171.28, using it as a measure for determining the quantum of enhancement for the entire year. The court found this method to be arbitrary and unsupported by any material evidence or surrounding circumstances. The estimate was deemed a "pure guess" and thus illegal and unjustified. The court concluded that the escaped turnover proved was only Rs. 31,171.28, and the assessee should be assessed only on this amount under both Acts.

2. Best Judgment Assessment under Section 19(1):
The court considered whether a best judgment assessment could be made under section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958. It was held that there could indeed be a best judgment assessment under this section. The court stated that in a best judgment assessment, the quantum of escaped turnover would be that which the assessing authority thinks is proved or established. The court referenced the case of Commissioner of Sales Tax v. Kunte Brothers, which supported the notion that the assessing authority is entitled to form its own opinion about the escaped turnover if the assessee fails to appear or produce evidence. The court rejected the view of the Andhra Pradesh High Court in State of Andhra Pradesh v. Ravuri Narasimloo, which dissented from this principle.

3. Legality and Justification of the Penalty Imposed:
The court addressed whether the penalty of Rs. 2,000 imposed on the assessee was legal and justified. Under section 19(1) of the local Act, the penalty for escaped assessment cannot exceed the amount of tax determined payable on reassessment. Since the taxable turnover for the period was only that comprised in the escaped turnover of Rs. 31,171.28, the amount of tax payable on reassessment would be proportionately reduced, and consequently, the penalty would also be reduced. Therefore, the imposed penalty of Rs. 2,000 was deemed not legal.

4. Legality of the Penalty under Section 19(1) Read with Section 9(3):
The court examined whether the imposition of a penalty under section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958, read with section 9(3) of the Central Sales Tax Act, was legal. Section 9(3) states that the procedure for assessment, collection of tax, and enforcement of payment, including penalties under the Central Act, is the same as under the local Sales Tax Act. Therefore, the provisions for the imposition of penalties for escaped assessment under the local Act would apply to the Central Act as well. The court referenced Commissioner of Sales Tax v. Kantilal Mohanlal and Brothers, which supported this view. The Board of Revenue was found to be in error for thinking that penalty could only be imposed under rule 12 of the Madhya Pradesh Sales Tax (Central) Rules, 1957.

Conclusion:
The court concluded that the estimate of taxable turnovers under the local Act and the Central Act made by the assessing authority was illegal and unjustified. The escaped turnover proved was only Rs. 31,171.28, and the assessee is liable to be assessed only on this amount. There can be a best judgment assessment under section 19(1) of the local Act. The imposed penalty of Rs. 2,000 was not legal, and a penalty for escaped assessment under the Central Act can be imposed under section 19(1) of the local Act. The Commissioner of Sales Tax was directed to pay the costs of the reference to the assessee, with counsel's fee fixed at Rs. 200.