1968 (1) TMI 48 - HC - VAT and Sales Tax

Summary

Issues:
1. Competence of the Commercial Tax Officer to commence a proceeding under section 12-A of the Mysore Sales Tax Act.
2. Validity of the reassessment made by the Commercial Tax Officer based on the total power consumed by the petitioner in various business activities.

Detailed Analysis:

1. Competence of the Commercial Tax Officer:
The petitioner challenged the competence of the Commercial Tax Officer to initiate a proceeding under section 12-A of the Mysore Sales Tax Act, arguing that only assessing, appellate, or revising authorities could do so. The petitioner contended that the Commercial Tax Officer did not fall under any of these categories. However, the court did not delve into the sustainability of this argument, as it found other grounds to set aside the orders made by the Commercial Tax Officer.

2. Validity of Reassessment Based on Power Consumption:
The Commercial Tax Officer proposed a reassessment based on the total power consumed by the petitioner in his oil-mill, hulling paddy, and flour manufacturing businesses. The officer suggested that 50% of the electrical energy was used for the oil-mill, leading to a reassessment of the turnover. The petitioner disputed this, claiming that a higher percentage of energy was used for hulling operations and flour manufacturing. The court noted that while best judgment assessments involve some guesswork, they must be rational and supported by material. The Commercial Tax Officer's reassessment lacked disclosure of the basis for the estimate and failed to provide supporting material for the allocation of power consumption among the different business activities. The court emphasized that the burden of proof to establish escaped turnover lies with the tax authority, and it cannot shift entirely to the taxpayer based solely on the officer's proposal. Consequently, the court found the reassessment unsustainable due to lack of rational basis and material support.

In conclusion, the court allowed the petition, setting aside the orders made by the Commercial Tax Officer, Deputy Commissioner, and Sales Tax Appellate Tribunal in all three cases, without issuing any direction regarding costs.