1987 (9) TMI 409 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 7-B of the Tamil Nadu Entertainments Tax Act, 1939, for reassessment in cases where tax is paid under Section 5-A.
2. Validity of the assessment based on electrical consumption.
3. Legitimacy of best judgment assessment for a period longer than a week based on specific instances of malpractice.

Issue-wise Detailed Analysis:

1. Applicability of Section 7-B of the Tamil Nadu Entertainments Tax Act, 1939, for reassessment in cases where tax is paid under Section 5-A:
The primary issue in the writ appeal was whether the power under Section 7-B of the Tamil Nadu Entertainments Tax Act, 1939, could be exercised to reassess tax in cases where the tax was paid under Section 5-A. The petitioner contended that Section 7-B only permits reassessment for taxes assessed under Sections 4 or 4-A, and since the petitioner paid tax under Section 5-A, the reassessment was without jurisdiction. However, the court noted that Section 5-C(3) explicitly states that the provisions of the Act, except for Sections 4, 4-A, 4-B, 4-C, 6, and 7, apply to taxes payable under Sections 5-A or 5-B. This includes Section 7-B, which allows for reassessment in cases where tax has escaped assessment. Thus, the court held that Section 7-B could be invoked for reassessing tax payable under Section 5-A.

2. Validity of the assessment based on electrical consumption:
The Deputy Commercial Tax Officer assessed the tax liability of the petitioner based on electrical consumption, suspecting suppression of the actual number of shows held. The petitioner argued that electrical consumption alone could not justify the rejection of the returns. The court referred to the Kerala High Court's decision in St. Teresa's Oil Mills v. State of Kerala, which held that accounts maintained in the course of business should be accepted unless proven unreliable. However, the court distinguished this case by noting that the department had conducted a statistical study and determined the average electrical consumption per show. The court found that the petitioner failed to provide a plausible explanation for the high electrical consumption, justifying the assessment based on the total consumption of electricity.

3. Legitimacy of best judgment assessment for a period longer than a week based on specific instances of malpractice:
The petitioner argued that the best judgment assessment for a period longer than a week was invalid, citing the decision in Sellakumar Talkies v. Board of Revenue (C.T.), Madras. The court in that case held that a single instance of malpractice (e.g., issuing duplicate tickets) could not justify reassessment for an extended period without additional incriminating material. However, the court in the present case noted that Section 7-B(3-A) allows for a single order of reassessment for a financial year or any part thereof, provided there is material evidence of tax evasion. Given the unexplained high electrical consumption, the court found sufficient grounds for the best judgment assessment for the entire period in question.

Conclusion:
The court dismissed the writ petition and the appeal, holding that the reassessment under Section 7-B was valid even for taxes paid under Section 5-A, that the assessment based on electrical consumption was justified, and that the best judgment assessment for the entire financial year was permissible given the evidence of tax evasion. There was no order as to costs.