1968 (7) TMI 73 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the principles of natural justice were violated by not recording statements and not allowing cross-examination.
2. Whether the Tribunal was justified in estimating the turnover of sales higher than the detected suppression of sales.

Issue-Wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The Tribunal had to determine if the principles of natural justice were violated by the Sales Tax Officer by not recording statements of A. Alibhai & Co. and the Angadia, and not giving the applicant-firm an opportunity to cross-examine them. The materials from the uplak books of A. Alibhai & Co. and the records of the Angadia were made available to the assessee-firm. The Tribunal observed that the uplak books contained khata of different persons, including the assessee-firm, and showed transactions of sales to A. Alibhai & Co. The Tribunal concluded that the goods shown in the extract of the Angadia account were despatched by the assessee-firm to A. Alibhai & Co. and payments were made accordingly. The Tribunal found that the sales not entered in the assessee-firm's account books were entered in the uplak books of A. Alibhai & Co. The Tribunal did not place reliance on a letter from A. Alibhai & Co. produced by the assessee-firm, as it did not explain the transactions in the uplak books.

The Tribunal held that the principles of natural justice were not violated as the materials were made available to the assessee-firm and the reassessment proceedings were conducted accordingly. The Tribunal relied on the Supreme Court's observation in Raghubar Mandal Harihar Mandal v. State of Bihar, which stated that evidence for departmental Tribunals means any material with probative value, not necessarily legal evidence. The Tribunal concluded that the Sales Tax Officer was justified in his actions based on the materials available.

2. Justification of Estimating Turnover Higher than Detected Suppression:
The Tribunal had to decide if it was justified in estimating the turnover of sales higher than the detected suppression of sales. The Sales Tax Officer had initially assessed the turnover and detected suppression of sales for two periods, 1955-56 and 1956-57. The Tribunal observed that the ratio of enhancement to the estimated suppressed sales was proper for 1955-56 and applied the same ratio for 1956-57. The Tribunal confirmed the suppression of sales for 1955-56 and partially allowed the revision application for 1956-57, estimating the suppressed sales at Rs. 837.

The Tribunal's decision was supported by the Supreme Court's ruling in Raghubar Mandal's case, which stated that once the returns and books of account are rejected, the assessing authority must make an estimate based on some material. The Tribunal found that there were materials before the assessing authorities to estimate the suppressed sales. The Tribunal also referred to the Bombay Sales Tax Act, 1953, which allowed reassessment proceedings to follow the same procedure as original assessment proceedings, including the power of best judgment.

The Tribunal rejected the assessee's contention that reassessment proceedings should not involve best judgment assessment, distinguishing the case from the Andhra Pradesh and Madras High Court decisions, which were based on different legislative provisions.

Conclusion:
The Tribunal answered both questions in the affirmative, holding that the principles of natural justice were not violated and that the estimation of turnover higher than the detected suppression was justified. The assessee was ordered to pay the costs of the reference to the State of Gujarat.