1972 (6) TMI 58 - HC - VAT and Sales Tax

Summary

Issues:
Assessment based on best judgment | Suppression of turnover | Additions to total and taxable turnover | Lack of disclosure of basis for additions | Legality of estimating turnover on best judgment basis

Analysis:
The case involves a revision petition under the Mysore Sales Tax Act, 1957, concerning an assessment for the period between November 19, 1963, and November 4, 1964. The assessee, a bamboo merchant, initially disclosed a total turnover of Rs. 78,479.25 and a taxable turnover of Rs. 4,655. However, upon discovery of suppressed turnover, the assessee filed a revised return showing a total turnover of Rs. 1,32,425.92 and a taxable turnover of Rs. 50,627.90. The Commercial Tax Officer made additions of Rs. 45,000 to the total turnover and Rs. 40,000 to the taxable turnover without providing reasons for these additions. The Tribunal upheld the assessment, justifying the additions based on the percentage of suppressed turnover compared to the declared turnover.

The Tribunal's rationale for upholding the assessment was based on the perceived magnitude of suppression in turnover, indicating potential undisclosed transactions. However, the Tribunal failed to provide a legal basis for estimating turnover on the best judgment basis. The court emphasized that such assessments should not be arbitrary and must have a rational basis, considering factors like previous years' turnover and that of similar dealers. Additionally, the assessing authority must disclose the material and reasons for any additions made to allow the assessee a fair opportunity to challenge them.

In its judgment, the High Court found the additions to the gross and taxable turnovers to be highly arbitrary and unsupported. Consequently, the court allowed the petition, modifying the orders by removing the additions of Rs. 45,000 and Rs. 40,000 to the gross and taxable turnovers, respectively. The taxable turnover was determined at Rs. 50,627.90, and the assessing authority was directed to issue a fresh demand notice based on this judgment. The petitioner was also awarded costs, including advocate's fee.