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TMI Blog1975 (9) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... nts do not contain the details of purchases of jute as the assessee was purchasing jute from local producers. The accounts were not relied upon as correct and complete. The place of business of the assessee was inspected by the inspecting officer on 30th September, 1967, and on physical verification of stocks with the register, some shortages and excess of articles were found. The assessee could not explain the difference of stocks at the time of inspection. The managing partner of the assesseefirm was asked to sign the statement recorded by the inspector. In view of the fact that details of account of purchases were not kept and large amount of shortages and excess were found on verification, the accounts were rejected and a best judgment assessment was made by the assessing officer enhancing the gross turnover resulting in demand of extra tax. 3.. On appeal by the assessee the Assistant Commissioner upheld the decision of the assessing officer but reduced the enhancement by 50 per cent and distributed the enhanced turnover under different tax groups. The Assistant Commissioner held: "Although the assessing officer mentions about this failure to adduce evidence, nothing is sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 3(1)(f) of the Orissa Sales Tax Rules, the Inspector of Sales Tax is one of the authorities appointed for assisting the Commissioner. The dealer is bound to produce accounts or documents or furnish any information relating to stocks of purchases or sales before such inspector and all the registers, accounts and documents should also be kept open for inspection by such officers as provided under section 16 of the Orissa Sales Tax Act. 6.. In the instant case, the assessing officer as well as the Appellate Assistant Commissioner accepted the report of the inspector about shortage and excess of stock and thereby did not accept the accounts maintained by the assessee. The sole question for consideration is whether the assessing authority can rely on the report of the inspector without examining the inspector and without giving any opportunity to the assessee to cross-examine the inspector. 7.. The aforesaid question is no longer res integra. The strict principles of Evidence Act do not apply to an assessment proceeding. The assessing officer is entitled to collect materials behind the back of the assessee and even need not disclose the source to the assessee in all cases. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is entitled to summon the third party for confrontation. 8.. In the instant case, the report of the inspector was disclosed to the assessee. The assessee also tried to explain his accounts and tried to show that there was no shortage or excess as reported by the inspector. On the other hand, certain entries were found to have been made subsequent to the inspection in the books of account of the assessee, which clearly establish that the accounts were manipulated subsequently. It is evident from the orders of the assessing authorities that the assessee gave explanation to the authorities challenging the report of the inspector. He never made any prayer for cross-examining the inspector. His explanation challenging the report of the inspector was not accepted by the assessing authority. Therefore, the reasons given by the Tribunal that as the inspector did not give any remark in the account book, the assessing authority should have examined the inspector, is not correct. The inspector is a public officer under the Act and the report of inspection submitted by him is indisputably the outcome of an official act. The report does not require proof to form part of the record. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e found in the assessee's accounts: Date Amount 1. 1-12-1962 Rs. 1,500 2. 13-1-1963 Rs. 2,000 3. 10-2-1963 Rs. 1,561 4. 13-4-1963 Rs. 300 This fact was put to a partner of the assessee's firm and the assessing officer was not satisfied with the explanation offered by him about the absence of the corresponding entries for these four transactions in the assessee's accounts. The partner of the assessee's firm had stated to the assessing officer that the transactions may have been with the firm of Messrs. Panalal Banwarilal and not with the assessee-firm, which is known as "Banwarilal Sitaram". The Sales Tax Officer stated in his order: "...........This contention of the dealer cannot be accepted in view of the fact that it has been ascertained from official sources that these financial transactions have been made with this firm in the usual course of business. These payments have been received by them towards satisfaction of dues relating to their credit sales. In the face of this authentic evidence as available in the records, I am not prepared to accept the contention of the agent of the dealer, when these transactions have not been noted in their books of account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaiswal on the above dates. But at that stage the assessee-appellant did not ask for confrontation of Sitaram Jaiswal. The only plea taken by him was that these payments might relate to some other Banwarilal Agarwalla of Rourkela. But this plea contains no substance in view of the clear admission of Sitaram Jaiswal that by Banwarilal Harikishan he meant Banwarilal Sitaram, the assessee-appellant of Old Station Road, Rourkela. So, these transactions cannot (sic) relate to the business of the assessee-appellant and the assessee-firm suppressed these transactions from his books of account. Before the Assistant Commissioner of Sales Tax and also before the Tribunal the assessee-appellant had moved for summoning Sitaram Jaiswal for the purpose of confrontation. But no such step having been taken at the stage of assessment, I do not think it is desirable to allow the prayer of the assessee-appellant at this stage." 3.. In the order of assessment the Sales Tax Officer nowhere stated that he had informed the assessee at any stage before completing the assessment that he had collected a statement from Sitaram Jaiswal in relation to the impugned transactions. The assessment order only says ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's request by saying that the claim for confrontation had not been made at the appropriate time. 5.. Law is settled beyond doubt that the strict principles of the Evidence Act do not apply to an assessment proceeding. The assessing officer is entitled to collect materials behind the back of the assessee and even not disclose the source to the assessee in all cases, but he is bound to disclose to the assessee any material adverse to the assessee in his possession, which he is going to utilise against the assessee in the assessment. The assessee is expected to meet such adverse materials and thereby save himself from any adverse assessment (see Muralimohan Prabhudayal v. State of Orissa[1970] 26 S.T.C. 22. This in fact is a well-accepted rule of natural justice. The assessing officer as a quasi-judicial tribunal cannot act beyond such a principle. 6.. Learned standing counsel contended before us that if the principle is that the assessing officer may not disclose the source, by allowing cross-examination the source is disclosed and the interest of revenue is bound to be prejudiced. In every case, the source cannot be withheld. In fact, where the foundation for the assessm ..... 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