1975 (2) TMI 92 - HC - VAT and Sales Tax

Summary

Issues:
Assessment based on suppressed purchases, justification of best judgment assessment, presumption of purchases from registered dealers, penalty under section 36(2)(c) of the Bombay Sales Tax Act, 1959.

Analysis:
The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, where the respondents were assessed for the period of 9th November, 1961, to 18th October, 1962. The Sales Tax Officer found discrepancies in the account books of the respondents regarding purchases from Messrs. Badrinarayan Jamnadas Oil Mills. Subsequently, the Sales Tax Officer enhanced the turnover of sales and purchases based on his estimation. The respondents appealed to the Assistant Commissioner of Sales Tax, arguing lack of opportunity to defend, questioning the justification of the best judgment assessment, and highlighting that purchases from registered dealers were treated as suppressed. The Assistant Commissioner dismissed the appeal, emphasizing that the respondents should have provided evidence to refute the alleged purchases.

The respondents then appealed to the Sales Tax Tribunal, which criticized the assessment process and concluded that the presumption that suppressed purchases were from unregistered dealers was unfounded. The Tribunal reasoned that all purchases were likely from registered dealers based on the nature of the business and absence of transactions with unregistered dealers. The Tribunal also noted that the only suppressed purchase was from a registered dealer, supporting the presumption of purchases from registered dealers. The Tribunal overturned the penalty imposed on the respondents.

The High Court examined the basis for the presumption drawn by the Sales Tax Officer and affirmed by the Assistant Commissioner. The Court emphasized the need for a rational and factual basis for best judgment assessments. It found the Sales Tax Officer's inference illogical, as it assumed suppressed purchases were from unregistered dealers without considering the business context. In contrast, the Tribunal's inference was deemed rational and logical, drawn from known or proved facts. The Court rejected the comparison to a previous case where the circumstances were different, emphasizing the presence of account books and the nature of transactions in the current case.

Ultimately, the High Court answered the reference question in the negative, agreeing with the Tribunal's conclusion that all enhanced purchases should be presumed as made from registered dealers. The Court directed the applicant to pay the respondents' costs for the reference.

In summary, the judgment addressed issues related to assessment based on suppressed purchases, the justification of best judgment assessments, the presumption of purchases from registered dealers, and the imposition of penalties under the Bombay Sales Tax Act, 1959. The High Court upheld the Tribunal's decision, emphasizing the need for rational and factual bases for assessments and rejecting unfounded presumptions.