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TMI Blog1968 (7) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31st March, 1956, and 1st April, 1956, to 31st March, 1957, and the assessment orders were passed in respect of those two separate periods of assessment. Later on, the Sales Tax Officer, Enforcement Branch, Bombay, seized certain account books of M/s. A. Alibhai & Co. of Bombay. Books Nos. 1 and 4 out of the seized books were uplak books containing certain transactions with different persons, the applicant-firm being one of them. These books were sent to the Sales Tax Officer, Surat, who also obtained extracts from the record of one Angadia through whom the applicant-firm is said to have despatched goods to A. Alibhai & Co. We may mention that an Angadia carries goods from one place to another for a consideration and usually carries these goods by railway trains. On scrutiny of the books of account of the assessee-firm in the light of the entries contained in the uplak books of A. Alibhai & Co. and the extracts from the record of the Angadia, the Sales Tax Officer came to the conclusion that the applicant-firm had suppressed sales of certain goods. The turnover of the assessee-firm as assessed previously was Rs. 83,350 in 1955-56. The suppression which was detected was to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere estimated at Rs. 837. The estimates of suppressed purchases were also reduced in accordance with the ratio adopted by the Deputy Commissioner. Thereafter, at the instance of the assessee, the above two questions have been referred to us by the Tribunal. It is common ground before us that at the time when the reassessment proceedings in pursuance of the notice issued in that behalf were going on, the materials were gathered from the uplak books of M/s. A. Alibhai & Co. and the statements were prepared from the materials placed before the Sales Tax Officer by the Angadia. The materials from both these sources were made available to the assessee-firm and thereafter the assessment proceedings were carried on before the Sales Tax Officer and other superior authorities. The Tribunal has observed that the uplak books were found at the time of search of A. Alibhai & Co. and these books contained khata of different persons including the assesseefirm. The khata showed that Jayantilal had effected transactions of sale in favour of A. Alibhai & Co. The extracts from the record of the Angadia showed that the goods were despatched by Jayantilal to A. Alibhai & Co. The Tribunal pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials before it. It was urged before us, as had been urged before the Sales Tax Tribunal and other authorities, that no opportunity of cross-examining any person from the firm of Angadia or from the firm of A. Alibhai & Co. was given to the assessee-firm. It was contended before us that what was made available to the assessee was the extract from the uplak books of A. Alibhai & Co. and extract from the record of the Angadia. The assessee-firm also relied on the fact that a letter from A. Alibhai & Co. was produced by the assessee-firm before the Sales Tax Officer and the letter was to the effect that there were no dealings between A. Alibhai Co. and the assessee-firm other than the transactions stated in the books of account of the assessee-firm. The Tribunal held that this statement of A. Alibhai & Co. did not give any explanation whatsoever regarding the uplak books and the transactions entered therein. According to the Tribunal, it was not possible to construe this statement of A. Alibhai Co. in the form of a letter as meaning either that the uplak books did belong to A. Alibhai & Co. or that the transactions entered therein were not the transactions of the assessee-firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no indication in the reassessment notice as to how the officer proposed to assess the turnover of the petitioner. In para. 5 of the judgment at page 491 of the report, Vaidialingam, J., has observed: "As to how exactly any books of account maintained by somebody else, and much less the secret account books, which according to the department were discovered from a third party, can straightaway and without proof be utilized as against persons like the petitioner, has not been even indicated in the order of assessment. As to whether the petitioner had an opportunity to contest the correctness of the entries in those books, or as to whether the secret account books themselves have been proved by anybody appearing on behalf of Panchukutty, is not certainly clear from the assessment order. Therefore, the attack based on the order under attack, placing considerable reliance on the secret account books of Panchukutty, cannot certainly be said to be without any basis." In para. 11 at page 492 of the report Vaidialingam, J., has observed: "For all these reasons, the order under attack will have to be set aside. The assessing authority is directed to take fresh proceedings for passing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the dealer may produce and such other evidence as the assessing authority may require on specified points. In making an assessment under section 10(2)(b) the Sales Tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law; but he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. When the returns and the books of account are rejected, the assessing officer must make an estimate and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. He must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. Section 10(2)(b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Mandal's case[1957] 8 S.T.C. 770. clearly establishes that once the returns and the books of account are rejected as undependable for the reasons recorded by the assessing authority, then it is open to the authority to estimate the gross turnover but the authority has to base its conclusion on some material before it; and if there is no material before it, it is not open to the authority to resort to pure guess work. We may also point out that at page 779 of the report, the Supreme Court has pointed out that the decision of the Lahore High Court in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab[1944] 12 I.T.R. 393., was specifically approved by the Supreme Court in Dhakeswari Cotton Mills' case[1954] 26 I.T.R. 775. The rules laid down in that decision were: "(1) While proceeding under sub-section (3) of section 23 of the Income-tax Act, the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee the material on which he is going to found that estimate; (3) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any period by the prescribed date, the Collector shall, after giving the dealer a reasonable opportunity of being heard, assess to the best of his judgment, the amount of the tax, if any, due from the dealer. (6) If upon information which has come into his possession, the Collector is satisfied that any dealer has been liable to pay the tax in respect of any period but has failed to apply for registration, the Collector shall, after giving the dealer a reasonable opportunity of being heard, assess to the best of his judgment, the amount of the tax, if any, due from the dealer in respect of such period and all subsequent periods." Section 15 of the Act provided as follows: "15. (1) If in consequence of any information which has come into his possession the Collector is satisfied that any turnover in respect of sales or purchases of any goods chargeable to tax has escaped assessment in any year or has been under-assessed or assessed at a lower rate or any deductions have been wrongly made therefrom, the Collector may, in any case where such turnover has escaped assessment or has been underassessed or assessed at a lower rate for the reason that the provision of sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct amount of tax payable by you for the said period.--Thus it is clear that so far as the sections and the Procedure Rules were concerned, ample opportunity was given to the assessee concerned, the applicant before us in the instant case, to show cause why the sales which had been suppressed should not be included in his turnover for the relevant periods in reassessment proceedings under section 15 of the Act. There is nothing in the procedure laid down by section 14 so far as the assessment proceeding is concerned and section 15 so far as reassessment proceeding is concerned, which violated any of the principles of natural justice. After issuing the notice contemplated by the respective sections, the assessing authority was entitled to proceed to assess or reassess the amount of tax due from a particular dealer. It was open to the assessing authorities to treat the returns and the books of account of the assessee-firm as undependable and on the materials before them to come to their own conclusions regarding the sales which had been suppressed. In the instant case, on the materials which were forthcoming from the uplak books of A. Alibhai & Co. and the records of the Anga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment and has not extended it to estimates depending upon inferences to be drawn by the department from certain circumstances; and that it does not clothe the department with power to make a best judgment assessment. Section 14(4) of the statute before the Andhra Pradesh High Court was in the following terms: "Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax, or has been underassessed or assessed at too low a rate, or where the licence fee or registration fee has escaped levy or has been levied at too low a rate, the assessing authority may, at any time within a period of four years from the expiry of the year to which the tax or the licence fee or registration fee relates, assess the tax payable on the turnover which has escaped assessment or levy the correct amount of licence fee or registration fee, after issuing a notice to the dealer and after making such inquiry as he considers necessary. Such authority may also direct the dealer to pay in addition to the tax so assessed, a penalty not exceeding one and half times the amount of that tax, if the turnover had escaped assessment or had been underassessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "16. (1) Where, for any reason, the whole or any part of the turnover of business of a dealer has escaped assessment to tax or has been assessed at a rate lower than the rate at which it is assessable, the assessing authority may, subject to the provisions of sub-section (2), at any time within a period of five years from the expiry of the year to which the tax relates, assess the tax payable on such turnover after service of notice on the dealer and after making such enquiry as it may consider necessary.- Sub-section (2) of section 16 of the Madras Act provides for the levy of penalty under certain circumstances and that sub-section is not material for the purpose of this judgment. We need only point out at this stage section 16(1) of the Madras General Sales Tax Act inasmuch as there is no equalising of reassessment proceedings with the original assessment proceedings as is to be found in the Bombay legislation. On this ground, we distinguish this Full Bench decision of the Madras High Court. It is also possible to take the view that the assessing authorities have come to the conclusion that the books of account of the assessee and the returns are not dependable as was found ..... X X X X Extracts X X X X X X X X Extracts X X X X
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