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TMI Blog1992 (9) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... ealt Assessment Penalty Appeal No. name with year disputed --------------------------------------------------------------------------- 34 of 1985 Poonam Traders, Turmeric and 1974-75 Rs. 31,182 Cuddapah gunnies 39 of 1985 Jain Industries, Tins 1975-76 Rs. 2,235 Cuddapah 40 of 1985 do. do. 1976-77 Rs. 20,510 41 of 1985 King Light Factory, Furniture 1975-76 Rs. 15,687 Cuddapah 42 of 1985 do. do. 1976-77 Rs. 15,510 --------------------------------------------------------------------------- One Sri Hastimal Chaudary was one of the partners of these three firms. His residential house was searched on December 13, 1976 and certain books of account and records kept outside the regular course of business were recovered or "got filed" during the search. The appellants were filing monthly returns. On a scrutiny of the returns, the regular books of account and the material recovered during the search and inspection, it was revealed that there was understatement of the turnovers in the returns. After issuing a show cause notice to the appellant-assessee proposing to reject the return, the Commercial Tax Officer added the turnover as disclosed from the books of account and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.V.S. Ramakrishnaiah. The first contention raised by the learned counsel is that the monthly returns filed by the assessee under rule 12 of the Andhra Pradesh General Sales Tax Rules, 1957, are only provisional in nature. Filing of monthly returns is only meant for the benefit of the assessee so that he could pay the taxes periodically. According to the learned counsel, the figures given in the monthly returns cannot be considered to be final and if the books of account-whether detected or otherwise are filed before the concerned authority at the time of or before the final assessment and the turnovers therein are taken into account for the purpose of making assessment, there is no suppression, much less a best judgment assessment. The argument advanced by the learned counsel for the petitioner which sounds to be rather an extreme contention can get no support from the scheme and provisions of the APGST Act and the Rules. We would now briefly refer to the relevant provisions which were in force during the assessment years in question. Sections 5 and 6 are the charging sections. We are concerned here with sub-section (2) of section 5. Sub-section (2) enjoins that the tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the APGST Act provides for assessment of tax. Though the word "final" is not found in this section, what is contemplated by section 14 is in fact final assessment after the end of the year. The corresponding rules are sub-rules (5) and (6) of rule 17. Section 14 read with sub-rules (5) and (6) of rule 17 deal with different facets of quantification of the tax due on the turnover of the dealer. The assessing authority may either accept the return as correct and complete and determine the tax on the basis of the return or if the return appears to be incorrect or incomplete he shall after making such enquiry as he deems necessary assess to the best of his judgment the amount of tax due from the dealer. In case of failure to submit a return before the prescribed date or submission of return after the date of inspection or production of accounts after inspection, the assessing authority can resort to best judgment assessment and determine the tax due on the turnover for the year and demand the balance if any payable. A reading of these provisions make it clear that the dealer is under an obligation to file a correct return in respect of his turnover for the previous month and pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate the charge to tax and to minimise the scope for evasion of tax. Having regard to all these factors and circumstances, we have no hesitation in rejecting the argument of the learned counsel. Another contention closely allied to the above contention raised by the learned counsel is that as there is no estimate or addition apart from the turnover noted in the books and other material recovered, there is no best judgment assessment. As the best judgment assessment is a pre-condition for levy of penalty, the penalty orders cannot be sustained. The learned counsel has relied upon State of Madras v. S.G. Jayaraj Nadar Sons [1971] 28 STC 700 which was relied on by the appellate authority as well. Before referring to that decision, it is necessary to advert to the relevant penalty provisions under the Act. Subsection (2) of section 14 reads: "When making an assessment to the best of judgment under sub-section (1), the assessing authority may also direct the dealer to pay in addition to the tax assessed a penalty as specified in sub-section (8) on the turnover that was not disclosed by the dealer in his return." Sub-section (1) of section 14 reads: "If the assessing authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. " While there is no taboo against going beyond the entries in the incriminating books and material and arriving at a figure by means of an estimate over and above the figure culled out from the incriminating records, it is not always necessary that such estimate should be resorted to. When the assessing authority is not satisfied that the return represents the true state of affairs by verification of the regular books of account and the incriminating material recovered and he considers it reasonable and proper to adopt the turnover figure as culled out from the incriminating records and nothing more, it can still be regarded as best of judgment assessment. The Supreme Court stressed in a catena of decisions that wherever there is estimate, it should not be arbitrary or capricious, but it does not mean that un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a best judgment assessment as explained by the Supreme Court in Velukutty's case [1966] 17 STC 465 (SC) as well as Jayaraj Nadar's case [1971] 28 STC 700 (SC)." The reliance placed by the learned counsel for the petitioner on the judgment of the Supreme Court [1971] 28 STC 700 (State of Madras v. S.G. Jayaraj Nadar Sons) is rather misconceived. The Supreme Court was concerned with a case where the assessee did not furnish certain turnovers in the return although recorded in the regular books of account on the ground that they were exempt from tax. In that context, the Supreme Court observed: "In other words, when the assessing authority has made the assessment to the best of its judgment, it can levy a penalty. It is well-known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognised principles of justice. An element of guess-work is bound to be present in best judgment assessment but it must have a reasonable nexus to the available material and the circumstances of each case: [see State o Kerala v. C. Velukutty [1966] 17 STC 465 (SC)]. Where account books are accepted along with oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with the cotton dealers in and around Tiruppur, that the fact that the assessee had purchased cotton and taken delivery of the same at Tiruppur came to light............" The learned counsel for the petitioner relied upon the judgment of a Division Bench of this Court in Pusuluri Satyanarayana Murthy v. State of A.P. [1978] 42 STC 103. In fact, that case was referred to in Konatham Bhaskar Rao v. State of Andhra Pradesh [1986] 63 STC 297 (AP) and distinguished in the following terms: "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." Even if there is a conflict between the earlier judgment in [1978] 42 STC 103 (Pusuluri Satyanarayana Murthy v. State of A.P.) and the later judgment in [1986] 63 STC 297 (AP) (Konatham Bhaskar Rao v. State of Andhra Pradesh) we prefer to follow the later judgment of the Division Bench. The reasoning in the later case appeals to us better. We, therefore, reject the contention of the learned counsel on this aspect. The next contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, we feel that setting aside the order of the Commissioner on the ground that he had no jurisdiction at the relevant point of time and then directing a fresh order to be passed by a competent authority, is nothing but an empty formality and a futile exercise. We are, therefore, not inclined to uphold the contention of the learned counsel for the petitioner on this count. The learned counsel for the petitioner then attacked the validity of the impugned orders of the Commissioner from another standpoint as far as Special Appeal Nos. 34, 39 and 41 of 1985 are concerned. The learned counsel argued that the effect of the orders of the Commissioner setting aside the appellate order and sustaining the penalty imposed by the assessing officer, is to restore an order passed without jurisdiction and hence, it cannot be upheld. According to the learned counsel, the orders levying penalty were passed by the Commercial Tax Officer (Intelligence) in these three cases. G.O. Ms. No. 434, Revenue (S) dated March 30, 1982, constituting the Commercial Tax Officer (Intelligence) as an assessing authority and conferring on him State-wide jurisdiction having been struck down by this Court in Sri B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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