1970 (9) TMI 99 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the assessment made by the Sales Tax Officer for the year 1961-62.
2. Rejection of the assessee's books of account.
3. Interpretation of Section 12(2)(b) of the General Sales Tax Act, 1125 M.E. and Section 17(3) of the Kerala General Sales Tax Act, 1963.
4. Principles governing "best judgment assessment."
5. Validity of inferences drawn by the assessing authorities based on available materials.

Detailed Analysis:

1. Validity of the Assessment Made by the Sales Tax Officer for the Year 1961-62:
The primary issue was whether the assessment made on the petitioner by the Sales Tax Officer for the year 1961-62 was according to the best of his judgment. The court examined the facts and found that the turnover furnished in the return and the accounts produced were defective and unacceptable. The Sales Tax Officer, the Appellate Assistant Commissioner, and the Tribunal all rejected the books of account of the assessee, which the court deemed appropriate.

2. Rejection of the Assessee's Books of Account:
The rejection of the assessee's books of account was based on several reasons:
- The turnover furnished in respect of hill produce was the sales turnover instead of the purchase turnover.
- Sales effected through commission agents were accounted for only after deducting commission, instead of the gross amount.
- Business place inspections revealed unaccounted transactions in note-books and slips, indicating suppressions.

The court upheld the rejection, noting the irregularities and malpractices reflected in the slips, which suggested a pattern of suppression.

3. Interpretation of Section 12(2)(b) of the General Sales Tax Act, 1125 M.E. and Section 17(3) of the Kerala General Sales Tax Act, 1963:
The court analyzed the relevant sections of the General Sales Tax Act, 1125 M.E., and the Kerala General Sales Tax Act, 1963. Section 12(2)(b) of the 1125 Act and Section 17(3) of the 1963 Act both empower the assessing authority to assess the dealer to the best of its judgment if the return is incorrect or incomplete. The court noted that the difference in wording between the two sections did not substantially alter the jurisdiction of the authority to make a "best judgment assessment."

4. Principles Governing "Best Judgment Assessment":
The court referred to several precedents to outline the principles governing "best judgment assessment":
- The assessment must be based on a fair estimate, considering all relevant materials, local knowledge, and previous returns.
- The assessment should not be arbitrary or capricious.
- There must be evidence or material to support the assessment, beyond mere suspicion.
- The assessing officer is not bound by technical rules of evidence and can act on material that may not be accepted in a court of law.
- The principles laid down by the Supreme Court in cases like Raghubar Mandal Harihar Mandal v. The State of Bihar and State of Kerala v. Velukutty were emphasized.

5. Validity of Inferences Drawn by the Assessing Authorities Based on Available Materials:
The court examined whether the inference of continuous suppression for the entire season, based on detected suppressions for a short period, was justified. It was noted that the assessment should have a reasonable nexus to the available material and circumstances. The court found that there was sufficient material to indicate a pattern of suppression:
- Continuous suppression for five days involving considerable amounts.
- Suppressions at both business places.
- Unexplained slips indicating large-scale suppressions.

The court concluded that the inference drawn by the assessing authorities was based on an honest and reasonable assessment of the available materials.

Conclusion:
The court dismissed the tax revision case, affirming that the assessment made by the Sales Tax Officer was according to the best of his judgment and supported by sufficient material evidence. The principles governing "best judgment assessment" were correctly applied, and the rejection of the assessee's books of account was justified based on the irregularities and malpractices detected.

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