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TMI Blog2018 (12) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise. If the taxable turnover sought to be evaded cannot be clearly determined and quantified going by the provision, there can be only an imposition of penalty of ₹ 10,000/-. However, that would not preclude the Assessing Officer from proceeding for best judgment assessment based on any of these factors relevant to the activity of the dealer; on there being no production of books of accounts or even when there is production; by rejection of the same. In that event, the Assessing Officer could make an estimation which is the power and authority conferred by the statute for best judgment. On detection of an offence or any other defect on inspection or otherwise where the tax or other amounts sought to be evaded is not practicable of quantification; the Intelligence Officers should immediately transfer the files to the Assessing Officer after imposing a penalty not exceeding ₹ 10,000/-. When that is not done it is a clear reflection of the lack of team work insofar as the functioning of the Department. The questions of law framed is answered in favour of the assessees and against the revenue. - OT. Rev. No. 206 of 2014 - - - Dated:- 6-9-2018 - MR K. VINOD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority set aside the penalty, finding that the Intelligence Officer had not verified whatever books produced by the assessee in a proper manner. An appeal was filed in which the Tribunal agreed with the finding of the First Appellate Authority that there was no proper verification of the books of accounts and also found that there could be no estimation under Section 67 of the Kerala Value Added Tax Act, 2003 ( for brevity the KVAT Act only). 4. The learned Special Government Pleader(Taxes) appearing in O.T.Rev. No.206/2014 and the learned Senior Government Pleader appearing in O.T.Rev. No. 124/2014 essentially submit that the facts herein would not indicate an estimation at all and that the determination of turnover based on Electricity consumption is an accepted mode of finding out actual turnover, especially in cases where no books of accounts are produced. The State hence contended that the decision of a Division Bench of this Court in 2012(3) KHC 111( U.K Monu Timbers v. State of Kerala) (authored by one of us); would not be applicable. On facts, a number of other decisions of this Court were produced before us, which we will deal with immediately; since if there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier or subsequent conduct be reflected in the penalty proceedings by way of estimation of turnover based on such inferences. This, going by the clear words employed in the statute, is within the realm of the assessment proceedings. 11. The principles to be followed in best judgment assessments have been succinctly stated in the oft quoted and followed judgment of the Supreme Court in Commissioner of Sales Tax, M.P. v. H.M. Esufali ((1973) 2 SCC 137). While accepting the position that estimation necessarily involved an amount of guess work the court cautioned the authority from being vindictive and capricious. The availability of material to prove the exact turnover was held to be unnecessary and the only requirement was that the estimate should be on a rational basis having reasonable nexus with the allegations; which necessarily should be something more than a mere suspicion. The Court also distinguished an assessment made on the basis of accounts and on 'best judgment'. While the former is on the basis of the facts and figures disclosed in the books of accounts, the latter rejects the books of accounts and makes a reasonable estimation on the basis of the facts disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Jibin Sha v. State of Kerala (O.TRev.81, 82/10 dated 04.10.2011) was a case in which estimation was made of the turnover in a resturant on the basis of the LPG consumption. The specific questions dealt with by the Court was whether (i) the 11 finding of the appellate tribunal that the assessee was a benami of two others was correct, (ii) estimated turnover on the basis of information gathered from the gas agency was valid and (iii) whether it was proper to estimate the turnover based on the data gathered from the Indian Coffee Workers Co-operative Society. The estimation was upheld. We have to observe that both these dicisions did not consider the aspect of whether there was power conferred on the Intelligence Officer under Section 45A of the KGST Act or Section 67 of the KVAT Act; to make estimation which essentially is an assessment on best judgment. It was later to these decisions that the specific question was considered and answered against the revenue in U.K Monu Timbers. 9. U.K Monu Timbers was referred to specifically in 2013 LAWS(Ker)-2013-12-33 [ Gajanana Agencies v. Intelligence Officer]. Therein penalty was imposed under Section 45A of the Act based on the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elligence Officer could fix the taxable turnover and from that determine the quantum of evasion attempted by the assessee. Again we have to notice that there is no decision on whether estimation could be carried out by the Intelligence Officer in a penalty proceeding. We see that the Division Bench had not noticed the judgment in U.K Monu Timbers and had not spoken on the law against that declared by the earlier Bench of co-ordinate jurisdiction. The learned Government Pleader points out that the decision refers to many decisions having been cited. None however have been specifically referred to and even if we assume that U.K. Monu Timbers was shown to the learned Judges and they harboured a different opinion, we are sure that in judicial propriety they would have referred it to a larger bench. 12. We cannot, but hold ourselves obliged to follow U.K. Monu Timbers and set aside the estimation of turnover made herein. We take note of the submission of the learned Special Government Pleader (Taxes) that in the event of non-production of books of accounts, the Intelligence Officer could only find out the evaded turnover on the basis of other materials available like electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other amounts sought to be evaded is not practicable of quantification; the Intelligence Officers should immediately transfer the files to the Assessing Officer after imposing a penalty not exceeding ₹ 10,000/-. When that is not done it is a clear reflection of the lack of team work insofar as the functioning of the Department. The Intelligence Officer on inspection of the premises, as in one of the above cases, finding no registration having been taken out and proper books of account not maintained; definitely ought to have intimated the Assessing Officer who could have taken up appropriate proceedings and also made best judgment assessment of the taxable turnover sought to be evaded by the assessee. We cannot but also observe that such team work is not facilitated more because of the target imposed on individual officers by the Department, which prompts them to look out for personal aggrandizement. The Intelligence Officer faced with the prospect of achieving his target, sacrifices the interest of the State, to achieve the same; by acting beyond the powers conferred on him and in that process lets limitation set in as far as the assessment proceedings are concerned. If such ..... 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