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TMI Blog1984 (11) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to each month. Such return has to be filed before the 25th of the succeeding month to which the return relates. The assessee in this case filed such returns for the months of April and May, 1973. In the return for the month of April, 1973, the turnover declared was Rs. 12,794. In the return for the month of May, 1973, the turnover declared was Rs. 10,000. The return for May, 1973, was submitted sometime during the month of June, 1973. There was an inspection of the business premises of the assessee on 15th July, 1983, during the course of which certain account books were found. According to these books of account, the turnover for the month of April, 1973, was Rs. 1,68,595 and the turnover for the month of May, 1973, was Rs. 2,19,835. As soon as the above books were detected and the real turnover for the months of April and May, 1973, were noticed by the authorities during the course of the inspection, the assessee promptly filed revised returns for the two months admitting the turnover according to the books of account noticed during the course of the inspection. The Commercial Tax Officer made a provisional assessment on 1st August, 1973, on the turnovers recorded in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee filed an appeal before the Assistant Commissioner of Commercial Taxes challenging the validity of the order passed by the Commercial Tax Officer levying penalty. The Assistant Commissioner upheld the validity of the order levying penalty but reduced the quantum to Rs. 7,180 thereby giving relief of Rs. 31,870. The Assistant Commissioner reduced the penalty "taking lenient and liberal view in the context of their assessee's financial position". 3.. The assessee carried the matter in second appeal to the Sales Tax Appellate Tribunal. The Tribunal rejected the assessee's contention that, in the facts and circumstances of the case, no penalty can be levied at all. The Tribunal held that penal provisions were clearly attracted. The Tribunal further held that the quantum of penalty sustained by the Assistant Commissioner was reasonable and no further interference was called for in the matter of reducing the penalty. Aggrieved by the order of the Tribunal sustaining the penalty of Rs. 7,180 levied, the assessee filed the present tax revision case. 4.. Sri S. Dasaratharama Reddi, learned counsel for the assessee, raised a twofold plea against the levy of penalty. First conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessing authority in the present case is a best judgment assessment within the terms of section 14(1) of the Act and consequently the assessing authority had power to levy penalty under section 14(2) of the Act. Learned Government Pleader submitted that the revised monthly returns filed by the assessee for the months of April and May, 1973, have no legal sanction whatsoever and the assessing authority in the present case did not act upon the revised returns filed by the assessee. Learned counsel pointed out that the assessee filed revised returns for the months of April and May, 1973, only after detection of the account books in the course of inspection of the assessee's business premises. According to the learned Government Pleader, the assessing authority did not take cognizance of the revised returns and it must, therefore, be said that in the original returns filed, the assessee was admittedly guilty of not disclosing the turnover correctly for the months of April and May, 1973. It was further submitted that filing the revised returns, apart from absence of statutory sanction, cannot have the effect of wiping out the existence of the original returns as contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Velukutty [1966] 17 STC 465 (SC). Dealing with the scope of the expression "to the best of his judgment", the Supreme Court pointed out that the above expression was presumably borrowed from the provisions of the Income-tax Act. Scrutinising certain decisions arising under the Income-tax Act dealing with the issue, the Supreme Court observed as under: "The limits of the power are implicit in the expression 'best of his judgment'. judgment is a faculty to decide matters with wisdom truly and legally. judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess-work in a 'best judgment assessment', it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. Though sub-section (2) of section 12 of the Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard for the available material." We may point out that the Supreme Court was dealing with the provisions contained in section 12(2)(b) of the Travancore-Cochin General Sales Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimate on the basis of the material and merely fixed the turnover as recorded in the books of account of the assessee, he is not indulging in any guess-work and, therefore, the assessment made by the assessing authority in such a case cannot be considered to be a best judgment assessment. We cannot accept the proposition so stated by the learned counsel for the assessee. It is for the assessing authority to determine the turnover to the best of his judgment once he finds that the returns filed by the assessee appear to him to be incorrect or incomplete. In the present case it is admitted that the returns originally filed by the assessee for the months of April and May, 1973, did not disclose the real turnover and in that sense the returns were incorrect or incomplete. The assessing authority is, therefore, driven to the necessity of making an assessment to the best of his judgment. In his endeavour to fix the turnover for the purpose of assessment reasonably and without acting arbitrarily and capriciously, the assessing authority has to take into consideration all available material and circumstances and fix the turnover. In the present case, having found that the returns filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in Sundermul Co. v. Commissioner of Income-tax [1967] 66 ITR 277. In that case, in an appeal against the best judgment assessment made by the Income-tax Officer, the Appellate Assistant Commissioner looked into the account books maintained by the assessee for the purpose of determining the income to be assessed on best judgment. This Court held that it is not improper for the Appellate Assistant Commissioner, even in cases of best judgment assessment under section 23(4) of the Indian Income-tax Act, 1922, to look into the books in order to ensure that the judgment of the assessing officer is not capricious or arbitrary. This decision, therefore, supports the principle that, while making a best judgment assessment, the assessing authority can always look into the account books maintained by an assessee and determine the extent of sales' The same principle is set out by the Bombay High Court in Manek Lal Chuni Lal Sons Ltd. v. Commissioner of Income-tax (1962) 15 Taxation 18 (Ref. No. 25 of 1959 decided on 15/16th September, 1961). 7.. We had already pointed out above that the learned counsel for the assessee relied on the Supreme Court judgment in Jayaraj Nadar's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover is fixed with reference to the account books maintained by the assessee. Assessee's counsel also relied on a decision of this Court in Pusuluri Satyanarayana Murthy v. State of Andhra Pradesh [1978] 42 STC 103. The reliance is misplaced. The assessee in that case did not file the return until an inspection was made and secret account books were found. But, then when a return was filed, he filed a correct return disclosing the turnover recorded in the books of account maintained by him. On those facts, the question arose for consideration is whether the assessment made by the assessing authority accepting the return filed could be considered to be a best judgment assessment. The following observations at page 107 are relevant: ".......Mr. Dasaratharama Reddi contended, and rightly too, that the expression 'best judgment assessment' implies and involves not mere acceptance of the return filed by a dealer but rejecting the turnover as submitted by the dealer and making an assessment to the best of judgment of the assessing authority." In the present case, the assessment is not made by accepting the returns filed. Indeed, the monthly returns for April and May, 1973, were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised return will not condone the offence, It is not necessary to refer to the number of cases under the Income-tax Act as the principle is far too well-settled without any dissent. We may, however, refer to the earliest case on this point in Ganga Sagar v. Emperor 4 ITC 97 (All.) and to the principles flowing from the judgment of this Court in Commissioner of Income-tax, Hyderabad v. Rameswar Co. [1981] 130 ITR 51. Learned counsel for the assessee relied on a decision of the Madras High Court in State of Madras v. Shahul Hameed [1967] 19 STC 288. We are unable to derive any assistance from the above judgment of the Madras High Court, as the relevant facts are not stated and the judgment is too short and we cannot consider that the Madras High Court had occasion to consider the principle in depth. The Madras High Court was referring to the filing of a provisional return which was incorrect, followed by filing a return which was correct. In the present case, the monthly returns filed by the assessee for April and May, 1973, were in no sense provisional. Learned counsel also relied on the judgment of the Calcutta High Court in Mst. Zulekha Begum v. Commissioner of Income-tax [1981] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expectation that his account books would not come to the notice of the tax officials. When the tax officials found the account books showing much larger turnover, the assessee quickly filed revised returns and did not even offer a word of explanation as to why he filed incorrect or incomplete returns initially. On the contrary, he challenges the Revenue that he cannot be punished by levy of penalty claiming that an interpretation of law must leave him free and reward his guilt. We find no remorse or realisation on the part of the assessee that he committed an offence. On the contrary, he claims protection of law for the offence that he had admittedly committed. 10.. We are satisfied that the interpretation of what is a best judgment assessment for purposes of section 14(1) of the Act canvassed by the learned counsel for the assessee is not tenable and is not supported by the decision of the Supreme Court in State of Madras v. Jayaraj Nadar Sons [1971] 28 STC 700 (SC) and the decision of this Court in Pusuluri Satyanarayana Murthy v. State of Andhra Pradesh [1978] 42 STC 103. In our opinion, the provisions of section 14(1) and 14(2) of the Act fully empower the assessing authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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