1972 (3) TMI 71 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality and validity of the addition of Rs. 5,76,887.41 to the gross turnover for the period 1961-62 on account of possible omission.
2. Legality and validity of the addition of Rs. 2,85,471.37 to the gross turnover for the period 1st April, 1963, to 30th September, 1963, on account of possible omission.

Detailed Analysis:

Issue 1: Legality and Validity of the Addition of Rs. 5,76,887.41 for the Period 1961-62
The petitioner, a registered dealer, was subjected to a surprise inspection by the Superintendent of Commercial Taxes, resulting in the seizure of twelve books of account, including six items relevant to clandestine business transactions. The sales tax authorities made three additions to the petitioner's gross turnover for the period 1961-62: actual suppressed sales of Rs. 4,63,210.82, estimated suppressed sales of Rs. 6,90,564.00 for the period not covered by the seized books, and Rs. 5,76,887.41 for possible omissions.

The petitioner challenged the addition of Rs. 5,76,887.41, arguing it was based on no material and thus unsustainable. The court agreed, referencing case laws that emphasize the necessity of basing best judgment assessments on some material rather than mere guesswork. The court concluded that the sales tax authorities had already exhausted all available material in making the first two additions and that the further addition for possible omissions lacked any supporting evidence. Thus, the addition of Rs. 5,76,887.41 was not legal and valid.

Issue 2: Legality and Validity of the Addition of Rs. 2,85,471.37 for the Period 1st April, 1963, to 30th September, 1963
For the period 1st April, 1963, to 30th September, 1963, the sales tax authorities made two additions: actual suppressed sales of Rs. 5,70,942.00 and Rs. 2,85,471.37 for possible omissions. Similar to the previous period, the petitioner contended that the addition for possible omissions was unsupported by any material.

The court reiterated the principle that even for best judgment assessments, the determination must be based on some material. The court found that the sales tax authorities had already made full use of the seized accounts to calculate the suppressed sales. There was no further material left to justify the additional amount for possible omissions. The court concluded that the addition of Rs. 2,85,471.37 for the period 1st April, 1963, to 30th September, 1963, was not legal and valid.

Conclusion
The court answered both references in the negative, declaring that the additions of Rs. 5,76,887.41 for the period 1961-62 and Rs. 2,85,471.37 for the period 1st April, 1963, to 30th September, 1963, on account of possible omissions were not legal and valid. The department was ordered to pay costs, with a hearing fee of Rs. 150.

Separate Judgments:
Both judges, S.P. Sinha, J., and Shambhu Prasad Singh, J., delivered a consolidated judgment, agreeing on the conclusions reached.