1974 (4) TMI 86 - HC - VAT and Sales Tax

Summary

Issues:
1. Jurisdiction of Sales Tax Officer to reopen assessment under section 21 of the Sales Tax Act for the years 1969-70 and 1970-71.
2. Validity of best judgment assessment made by the Sales Tax Officer after rejecting the account books of the petitioner.
3. Arbitrary determination of the petitioner's turnovers at Rs. 35,00,000 and Rs. 41,00,000 without basis.

Detailed Analysis:
1. The petitioner challenged the jurisdiction of the Sales Tax Officer to reopen the assessment for the years 1969-70 and 1970-71 under section 21 of the Sales Tax Act. The Sales Tax Officer reopened the assessment based on information gathered during a search conducted at the petitioner's premises, revealing discrepancies in the accounts. The court held that the material obtained from the search provided sufficient reason for the Sales Tax Officer to believe that a part of the turnover had escaped assessment, justifying the reopening of the assessment proceedings. The court rejected the petitioner's argument that there was no valid reason for the reassessment.

2. The petitioner contended that the Sales Tax Officer erred in making a best judgment assessment for both years after rejecting the account books. The court noted that the survey conducted by the Sales Tax Officer revealed that the petitioner had maintained double sets of accounts and had not recorded certain transactions in the official account books. This justified the Sales Tax Officer's decision to make a best judgment assessment based on the available information, and the court held that there was no violation of natural justice in this regard.

3. The petitioner further argued that the determination of turnovers at Rs. 35,00,000 and Rs. 41,00,000 for the respective years was arbitrary and lacked a basis. The court disagreed, stating that the Sales Tax Officer had based the turnover estimates on concrete evidence obtained during the search, which revealed concealed purchases and sales. The court cited a relevant case law to support the principle that estimating escaped turnover involves some guesswork but must have a rational basis. The court found that the Sales Tax Officer's estimates were reasonable and had a rational nexus with the information available, dismissing the petitioner's claim of arbitrariness in the turnover determination.

In conclusion, the court dismissed the petition, upholding the validity of the assessment orders and rejecting the petitioner's arguments regarding jurisdiction, best judgment assessment, and turnover determination.