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TMI Blog1973 (4) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... EGDE J. -These appeals by special leave arise from the decision of the High Court of Madhya Pradesh in a consolidated reference under section 44 of the Madhya Pradesh General Sales Tax Act, 1958 (to be hereinafter referred to as the "State Act"). That reference was made by the Board of Revenue, Gwalior, partly at the instance of the assessee and partly at the instance of the Commissioner of Sales Tax, Madhya Pradesh. Four questions of law were referred to the High Court for its decision. They are: " (1) Whether, on the facts and circumstances of the case, the revised assessment enhancing the taxable turnover under the State law by Rs. 2,50,000 and the taxable turnover under the Central law by Rs. 1,00,000 on the basis of the undisputed escape in the amount of Rs. 31,171.28 by adopting the said amount of escaped turnover as the measure for determining the quantum of enhancement for the whole year was illegal, unjustified or excessive? (2) Whether a best judgment assessment could at all be made under section 19(1) of the Act or whether revision of the assessment should be confined to the quantum of proved or admitted escaped turnover? (3) If the answer to the previous question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these appeals, as could be gathered from the statement of the case may now be set out. The assessee was a registered dealer under the "State Act" as well as the Central Sales Tax Act (which will hereinafter be referred to as the "Central Act"). He was a dealer in iron and steel. In these appeals, we are concerned with his turnover for the period November 1, 1959, to October 20, 1960. In that year he declared a gross turnover of Rs. 3,97,356.18 and taxable turnover of Rs. 1,10,246.63. The Sales Tax Officer determined his gross turnover at Rs. 3,97,357 and taxable turnover at Rs. 1,21,567. Under the "State Act" he assessed him in the sum of Rs. 3,743.34 on November 20, 1961. The assessee had not declared his gross or taxable turnover in respect of the year in question under the "Central Act". But the Sales Tax Officer determined his turnover under the "Central Act" by his order dated December 8, 1962, at Rs. 22,916 and levied on him a tax of Rs. 252.04. The assessee did not appeal against these orders. It appears that on September 19, 1963, the flying squad inspected the business premises of the assessee and found a bill book for the period Septemher 1, 1960, to September 19, 1960 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court. Before proceeding to examine the contentions advanced on behalf of the parties, it is necessary to clarify certain aspects. It may be noted that the first assessments were made by the Sales Tax Officer primarily on the basis of the returns submitted by the assessee. In the proceedings relating to those assessments the Sales Tax Officer relied on the books of account of the assessee. While making reassessments on the basis of the information gathered from the bill book seized, the Sales Tax Officer rejected the accounts maintained by the assessee as unreliable and assessed the assessee on the basis of his "best judgment". The distinction between a "best judgment" assessment and assessment based on the accounts submitted by an assessee must be borne in mind. Sometimes there may be innocent or trivial mistakes in the accounts maintained by the assessee. There may be even certain unintended or unimportant omissions in those accounts; but yet the accounts may be accepted as genuine and substantially correct. In such cases, the assessments are made on the basis of the accounts maintained even though the assessing officer may add back to the accounts price of items that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppressed. If that is true, there is no question of "best judgment" assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence, the burden of proving that fact is on him. No circumstance has been placed before the assessing authority to show that the assessee's dealings during September 1, 1960, to September 19, 1960, outside his accounts were due to some exceptional circumstance or that they were proportionately more than his dealings outside his accounts during the remaining periods. The assessing authority could not have been in possession of any correct measure to find out the escaped turnover during the periods November 1, 1959, to August 31, 1960, and September 20, 1960, to October 20, 1960. The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary." In Raghubar Mandal Harihar Mandal v. State of Bihar, a case arising under the Bihar Sales Tax Act, 1944, the law relating to "best judgment" assessment was examined at length by this court. Therein, S. K. Das J., speaking for the court, observed: " No doubt it is true that 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. To use the words of Lord Russell of Killowen again, '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 office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessing authority and the estimate of escaped turnover made. We have no doubt that there is such a nexus. On behalf of the assessee, reliance was placed on the decision of this court in Commissioner of Income-tax v. Padamchand Ramgopal B. Therein, while investigating into the case of the assessee, the Income-tax Officer found two insignificant mistakes in the assessee's accounts relating to the assessment year 1953-54. No mistakes were found in the accounts relating to the assessment years 1954-55 to 1957-58. Merely because there were some insignificant mistakes in the accounts maintained by the assessee for the assessment year 1953-54, the Income-tax Officer rejected the accounts of the assessee for all the concerned assessment years and added to the income returned half the amount of gross receipts shown by the assessee under the head "interest" for each of the years as escaped income. The Tribunal upheld the addition but the High Court to the conclusion that the additions made by the Income-tax Officer were quite arbitrary. This court agreed with that view. We do not think that the said decision lends any support to the assessee's contention. For the reasons ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice and prefer his objections and produce such evidence as he may think necessary. Sub-rule (2) of rule 33 provides that if the assessee appears in response to the notice under rule 33(1), the assessing authority may make reassessment, if necessary, only after considering the objections raised by the dealer and after examining such evidence as may be produced by him. It is important to note that in the notice which the assessing authority is required to issue to the dealer in Form XVI, the extent of the escaped turnover as estimated by the assessing authority has to be specified. The procedure laid down in rule 33 could not have been a mere empty formality. If the assessee's contention is right, in order to escape reassessment all that the assessee need do is to ignore the notice issued under rule 33(1) and refuse to co-operate with the assessing authority in the reassessment proceedings. We are unable to accept that that is the true position in law. In our opinion, the decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Ravuri Narasimloo, relied on by the assessee, was not correctly decided. For the reasons mentioned above, we allow these appeals, vacat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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