1969 (8) TMI 74 - HC - VAT and Sales Tax

Issues Involved:
1. Justification of the determination of the gross turnover (G.T.O.) at Rs. 10,13,284 by making an ad hoc increase of thirty percent.
2. Legality and justification of the ad hoc increase of thirty percent to the gross turnover returned by the petitioner.

Issue-wise Detailed Analysis:

1. Justification of the determination of the gross turnover (G.T.O.) at Rs. 10,13,284 by making an ad hoc increase of thirty percent:

The petitioner, a firm dealing in kirana and edible oil, showed a G.T.O. of Rs. 7,79,284 for the year 1960-61. However, the assessing officer disbelieved the books of account and made an assessment to the best of his judgment under section 16(3) of the Bihar Sales Tax Act, 1959, determining the G.T.O. at Rs. 10,13,284. The assessment was based on findings that the dealer maintained duplicate sets of accounts, refused inspection of stock, and did not account for certain consignments received by rail and road.

The dealer's appeal was dismissed by the Deputy Commissioner, Commercial Taxes, and the revision application was rejected by the Commercial Tax Tribunal. The Tribunal upheld the findings that the dealer maintained duplicate accounts, prevented stock inspection, and did not account for certain goods received.

The High Court directed the Tribunal to refer two questions regarding the justification and legality of the ad hoc increase of thirty percent in G.T.O. The learned counsel for the petitioner argued that the assessment was not justified as it was not based on any evidence, particularly regarding the receipt of consignments by rail.

The court examined the evidence, including the Assistant Superintendent of Sales Tax's order detailing five unaccounted consignments. The Deputy Commissioner accepted the dealer's contention for two consignments based on a letter from the Station Master and an affidavit but upheld the findings for the remaining three consignments.

The Tribunal also agreed with the Deputy Commissioner's view that the dealer failed to account for certain consignments, despite an affidavit from the dealer's employee. The Tribunal concluded that the dealer had suppressed certain transactions from his accounts.

The court noted that in best judgment assessments, the estimate must be related to some evidence or material and not based on mere suspicion. The materials available justified the rejection of the books of account and raising the G.T.O. by thirty percent. However, the authorities did not consider the non-receipt of two consignments in the ad hoc increase.

2. Legality and justification of the ad hoc increase of thirty percent to the gross turnover returned by the petitioner:

The court emphasized that the assessment should not be arbitrary or based on mere suspicion. The Supreme Court in Raghubar Mandal Harihar Mandal v. The State of Bihar held that the assessing officer must make a fair estimate based on available materials, including the assessee's circumstances and previous returns.

The court found that the authorities had good grounds for rejecting the books of account and raising the G.T.O. by thirty percent. However, the authorities failed to consider the non-receipt of two consignments, which should have been factored into the ad hoc increase.

The court concluded that the increase in G.T.O. was justified, but the authorities did not consider whether there should be a proportionate scaling down due to the non-receipt of two consignments. The percentage of scaling down and the quantum should be decided by the authorities concerned.

Conclusion:

The court answered the reference by stating that the increase in G.T.O. was justified, but the authorities failed to consider the non-receipt of two consignments for proportionate scaling down. The reference was disposed of without any order for costs, and the dealer was entitled to a refund of the deposit.

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