1997 (11) TMI 508 - AT - VAT and Sales Tax

Summary

Issues:
Challenge to assessment order for four quarters ending on December 31, 1987; Allegation of arbitrary best judgment assessment; Discrepancies in gross turnover assessment; Validity of penalty and disallowance of labour charges; Request for declaration of illegal and improper assessment; Quashing of assessment order; Relief sought to restrain further proceedings.

Analysis:

The applicant challenged an assessment order for the four quarters ending on December 31, 1987, under the West Bengal Taxation Tribunal Act, 1987. The applicant, a proprietor of a business concern engaged in manufacturing machine parts and machining jobs, contested the assessment due to discrepancies between the returns and figures from the books of accounts. The assessment was made ex parte by the Commercial Tax Officer due to the applicant's non-appearance, leading to an estimation of gross turnover at Rs. 3,50,000. The applicant appealed, but the appellate and revisional authorities upheld the assessment, resulting in the applicant moving the current application before the Tribunal, alleging arbitrariness in the assessment and incorrect treatment of labour charges for jobs done outside West Bengal.

The main issue revolved around whether the assessment was a valid best judgment assessment with due application of mind. The assessing authority is empowered to assess the tax due when returns are not furnished or deemed incorrect, under section 11(1) of the Bengal Finance (Sales Tax) Act, 1941. The Tribunal emphasized that the assessment must be based on a fair estimate related to evidence or material, not mere suspicion. The Supreme Court's guidance in making a fair estimate was cited, emphasizing the need for logical reasoning and consideration of previous returns. The Tribunal found the assessment for the disputed year, 1987, to be arbitrary and divorced from logic, especially given the significant discrepancy between the assessed gross turnover and figures from the books of accounts.

The Tribunal noted that while there were marginal enhancements in previous years' assessments, the leap in the assessed gross turnover for 1987 was unjustified and arbitrary. The assessing officer failed to provide reasoning for the substantial increase in the turnover figure. The Tribunal held that the assessment was arbitrary and directed a remand for a fresh assessment based on available materials, in line with the Supreme Court's guidance. The applicant was instructed to provide all books of accounts for reassessment, to be completed within three months.

In conclusion, the Tribunal allowed the application, setting aside the assessment and subsequent orders, and remanded the matter for a fair reassessment based on the available evidence and logical reasoning.