1976 (3) TMI 205 - HC - VAT and Sales Tax

Issues Involved:
1. Competence of the Assistant Commissioner to make a best judgment assessment of the escaped turnover under section 15 of the Bombay Sales Tax Act, 1953.
2. Whether the purchases estimated in a best judgment assessment could be treated as purchases from registered dealers.

Detailed Analysis:

Competence of the Assistant Commissioner to Make a Best Judgment Assessment of the Escaped Turnover:
The core issue was whether the Assistant Commissioner of Sales Tax or the authority making assessment or reassessment had the power of best judgment assessment while assessing the escaped turnover of the respondents under section 15 of the Bombay Sales Tax Act, 1953. The respondents were reassessed for the period 19th September 1956 to 31st March 1957. The reassessment was initiated after the Enforcement Branch seized certain books of account which were not produced during the original assessment. The figures in these books did not tally with the figures previously submitted.

The Special Bench of the Tribunal had answered this question in the negative, holding that the reassessing authority could only consider turnover established on fresh material and was not competent to make a best judgment assessment. This decision was based on a comparison of sections 14 and 15 of the Act and judgments from the Andhra Pradesh and Madras High Courts.

However, the High Court of Bombay disagreed with the Tribunal's view. The Court noted that section 15(1) of the Act allows the reassessing authority to issue a notice containing the requirements of section 14(3) and proceed to assess or reassess the escaped turnover. The Court emphasized that once a notice under section 15 is issued, the reassessing authority acquires jurisdiction to proceed as if it were an original assessment under section 14. This includes the power to make a best judgment assessment if the dealer fails to comply with the notice or produces false evidence.

The Court referenced the Supreme Court's ruling in Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali H.M. Abdulali, which held that reassessment is a fresh assessment and the authority has the power to make a best judgment assessment. The Court also cited the Gujarat High Court's decision in Jayantilal Thakordas v. State of Gujarat, which supported the view that reassessment proceedings and original assessment proceedings stand on the same footing regarding the power to make a best judgment assessment.

Treatment of Purchases Estimated in a Best Judgment Assessment:
The second issue was whether the purchases estimated in a best judgment assessment could be treated as purchases from registered dealers. The Special Bench of the Tribunal had held that it could not be presumed that the purchases were made from registered dealers and that the dealer being reassessed had to prove such claims like any other fact.

The High Court did not provide a detailed analysis on this issue within the judgment text provided. However, it implied that the reassessing authority has the discretion to determine the nature of the purchases based on the evidence presented.

Conclusion:
The High Court of Bombay concluded that the reassessing authority under section 15 of the Bombay Sales Tax Act, 1953, does have the power to make a best judgment assessment. The Tribunal's decision to the contrary was incorrect. The Court emphasized that the reassessing authority must follow the same procedure as in an original assessment under section 14, including the power to make a best judgment assessment if the dealer fails to comply with the notice or produces false evidence.

The respondents were ordered to pay the costs of both references, quantified at Rs. 250. The Tribunal was directed to consider other points raised by the respondents on the merits, including whether the conditions for a best judgment assessment existed in their case. The references were answered in the affirmative.

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