1973 (6) TMI 60 - HC - VAT and Sales Tax

Issues Involved:
1. Scope for best judgment assessment under section 12(8) of the Orissa Sales Tax Act.
2. Limiting the amount of escapement of the turnover to the actual amount detected.

Issue-wise Detailed Analysis:

1. Scope for Best Judgment Assessment under Section 12(8) of the Orissa Sales Tax Act:

The primary question was whether best judgment assessment is permissible under section 12(8) of the Orissa Sales Tax Act. The court examined the statutory provisions, particularly sections 12(5) and 12(8) of the Act. Section 12(8) allows the Commissioner to reassess the turnover that has escaped assessment within thirty-six months from the expiry of the year to which the period relates. The reassessment must be done in the manner laid down in section 12(5), which includes the provision for best judgment assessment.

The court noted that section 12(5) allows the Commissioner to assess to the best of his judgment if the dealer fails to apply for registration or fails to account for the turnover. The court rejected the argument that section 12(8) does not authorize best judgment assessment, stating that the reference to section 12(5) in section 12(8) implies that the reassessment should follow the same procedure, including best judgment assessment.

The court cited various precedents, including decisions from the Madras, Andhra Pradesh, and Madhya Pradesh High Courts, which supported the view that best judgment assessment is permissible in reassessment proceedings. The court concluded that the reassessment under section 12(8) must be done in the manner prescribed in section 12(5), which includes best judgment assessment.

2. Limiting the Amount of Escapement of the Turnover to the Actual Amount Detected:

The second issue was whether the Tribunal was right in limiting the amount of escapement of the turnover to the actual amount detected. The court reviewed the facts of the case, where the original assessment found a suppression of Rs. 37.05, leading to an enhancement of Rs. 2,000. In the reassessment, another suppression of Rs. 232.05 was found, and the assessing officer enhanced the turnover by Rs. 6,000.

The first appellate authority reduced this enhancement to Rs. 4,000, considering the previous estimate. The Tribunal further reduced the enhancement to the actual suppression amount of Rs. 232.05, arguing that the previous enhancement might have already accounted for the current suppression.

The court emphasized that the exact estimate in such cases is a question of fact. Unless the estimate is arbitrary and without reference to any material on record, it does not raise a question of law. The Tribunal's decision to limit the enhancement to the actual amount detected was based on the reasoning that the previous enhancement could have covered the current suppression. The court found no error in the Tribunal's judgment and declined to answer the second question as it was a matter of fact rather than law.

Conclusion:

The court summarized its conclusions as follows:
(i) The mode of assessment under section 12(8) should follow the manner indicated in section 12(5).
(ii) The assessing officer is entitled to assess according to the best of his judgment under section 12(8).
(iii) A reassessment under section 12(8) can be done according to best of judgment, even if the original assessment was also a best judgment assessment.
(iv) The original estimate should consider the suppression found at the reassessment stage, and the Tribunal's decision to limit the enhancement to the actual amount detected was reasonable.

The first question was answered in favor of the revenue, affirming the scope for best judgment assessment under section 12(8). The second question was deemed a matter of fact, and the court declined to answer it, supporting the Tribunal's decision to limit the enhancement to the actual suppression amount. The department was awarded a hearing fee of rupees one hundred.

← Previous Next →