1972 (9) TMI 123 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of best judgment assessment by the administrator.
2. Adherence to principles of natural justice.
3. Requirement of reasonable basis for assessment.
4. Quasi-judicial function of the assessing authority.
5. Arbitrary and capricious nature of the assessment.

Issue-wise Detailed Analysis:

1. Validity of Best Judgment Assessment by the Administrator:
The appellant, a licensed dealer in agricultural produce, was subjected to a best judgment assessment by the administrator of the Market Committee, Ambala Cantt. The administrator assessed the appellant at Rs. 22.04 per working day from 1st April 1969 to 9th December 1969, based on the discovery of unrecorded transactions on a single day. The court found this basis arbitrary and not reasonable. The assessment must be grounded on some reasonable data and not on an arbitrary basis adopted by the assessing authority.

2. Adherence to Principles of Natural Justice:
The court emphasized that the best judgment assessment must be made honestly by exercising judicial mind as the proceedings are quasi-judicial in nature. The administrator or secretary should have conducted honest inquiries from other sources after disbelieving the appellant's account books. The collected information should then have been communicated to the appellant-firm, providing an opportunity to contest the material. The failure to do so violated the principles of natural justice.

3. Requirement of Reasonable Basis for Assessment:
The court cited several precedents to highlight that the best judgment assessment should not be capricious, arbitrary, or punitive. It must disclose the basis for the assessment so that higher authorities can understand the grounds. The assessment should have a reasonable nexus to the available material and circumstances of each case. In this instance, the assessment was based on mere guess-work without proper basis, rendering it arbitrary and vindictive.

4. Quasi-judicial Function of the Assessing Authority:
The court reiterated that the assessing authority, while making a best judgment assessment, discharges quasi-judicial functions. The order must be fair and not capricious. The authority must make available to the assessee all aspects considered in the assessment and provide a fair opportunity to contest. The assessment in this case did not meet these criteria, as it was based on an arbitrary assumption that unrecorded transactions on one day implied similar omissions on all working days over several months.

5. Arbitrary and Capricious Nature of the Assessment:
The court found the assessment arbitrary and capricious, emphasizing that it should be an honest estimate. The administrator failed to make honest inquiries or provide the appellant an opportunity to contest the material used for the assessment. The assessment was thus not in accordance with the rules and principles of natural justice, leading to its quashing.

Conclusion:
The court set aside the order of assessment dated 19th January 1970 and the notice of demand issued in pursuance thereof. The market committee was permitted to make a fresh assessment in accordance with the law and the observations made. The appeal was allowed with costs, and counsel's fee was set at Rs. 100.