1. This is a reference under S. 61(2) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act') made at the instance of the assessees.
2. The question referred to us for our determination is as follows :
'Whether there was any material on record to support the finding that the applicants had suppressed sales to the Bombay dealer ?'.
The assessees conducted an oil mill and manufactured edible oil for sale. They also purchased oil for resale. They maintained regular books of account in respect of their business. Information was furnished by the Sales Tax Officer (I) Enforcement Branch, Bombay, to the Sales Tax Officer assessing the assessee at the relevant time (hereinafter referred to as 'the said Sales Tax Officer') that on 7th June 1960 the said Sales Tax Officer had raided the place of business of M/s. Shaichand Hemchand & Co. in Bombay and had seized certain books of account in which there were entries showing that the Bombay dealer viz. M/s. Bhaichand Hemchand & Co., had received nine trucks of edible oil from the assessees. The said Sales Tax Officer found that the assessees had accounted for only one truck whereas the Bombay dealer's books of account showed that nine trucks of edible oil had been despatched by the assessee to the Bombay dealer. The said Sales Tax Officer issued a notice under S. 33 of the said Act for the purpose of assessment of the assessees for the period from 1-1-1960 to 31-3-1960. Thereafter, the said Sales Tax Officer passed an assessment order holding that the assessees had failed to account for eight trucks of oil and assessing the assessees on estimated sales of oil on the footing that the assessees had suppressed sales of the said eight trucks of oil and that there must be such similar suppression even in respect of some other transactions. The assessees appealed to the Assistant Commissioner of Sales Tax contending that they had correctly recorded in the excise register and in the books of account maintained by them the quantities of oil manufactured and sold by them. The assessees also contended that they should not be held responsible for the entries found in the books of account of a third party namely, the Bombay dealer. These contentions were rejected by the Assistant Commissioner of Sales Tax. The assessees then filed a second appeal before the Sales Tax Tribunal repeating their contentions. This appeal was heard along with Appeals Nos. 229 and 230 of 1963 filed by M/s. Venkatesh Oil Mills, where some of the facts were similar. The second appeal of the assessees was dismissed by the Tribunal. The assessees applied to the Tribunal for referring certain question to this Court. This application of the assessees was rejected by the Tribunal and it is on the application made by the assessees to this Court that the present question has been directed to be referred to us.
3. The question which we are called upon to consider in this case is whether there was any material on record on which it could be held that the assessees had suppressed any sales to the Bombay dealer. It is common ground that the only material before the said Sales Tax Officer as well as the Tribunal, on which reliance has been sought to be placed for coming to the conclusion that the assessees had suppressed sales, was the information furnished by the Sales Tax Officer, Enforcement Branch, Bombay that from the books of account of the aforesaid Bombay dealer it was shown that nine trucks of oil had been despatched by the assessees to the Bombay dealer, whereas only one truck was accounted for by the assessees. It is significant that neither the books of account of the said Bombay dealer nor any entries therein have been brought on record or shown to the assessees. It is contended by Mr. Andhyarujina, the learned counsel for the respondent, that the information furnished by the Sales Tax Officer, Enforcement Branch, Bombay, itself constituted material in law on which the aforesaid conclusion could be based, because it created a suspicion that the books of account of the assessees were not correct and that they might have suppressed certain sales. Mr. Andhyarujina may be right when he says that the information conveyed might create suspicion as claimed by him. There is, however, a significant difference between material which can create suspicion and material which can be said to be of any probative value. The information furnished in this case might have properly caused the said Sales Tax Officer to examine closely the books of account of the assessees but that information by itself, without bringing on record the entries in the books of account of the Bombay dealer and without even bringing on record any statement of the Sales Tax Officer, Enforcement Branch, Bombay, could not constitute, in our view, any material at all on which such a conclusion as aforesaid could be founded. Mr. Andhyarujina has pointed out that in this case the assessees could have demanded an opportunity to cross-examine the Bombay dealer which they failed to do and hence it must be taken that the assessees accepted the correctness of the information given by the Sales Tax Officer, Enforcement Branch, Bombay. We are unable to accept this argument. In view of the fact that the entries in the books of account of the Bombay dealer were not brought on record at all, we see no reason why the assessees should have called upon the Department to give them an opportunity to cross-examine the Bombay dealer. We are totally unable to agree with the view of the Tribunal that, in view of the information furnished by the Sales Tax Officer, Enforcement Branch, Bombay, it was for the assessees to have examined the Bombay dealer to show how the entries in question came to be made in the books of account of the Bombay dealer. It is common ground that one truck of edible oil was despatched by the assessees to the Bombay dealer. But, that by itself is no material to hold that there were other such despatches which were suppressed. We may also point out that although the Tribunal has observed that the Bombay dealer was the commission agent of the assessees, there is no such finding at all in the case of the assessees, nor is there any evidence to support such a finding, but the observation seems to have been made merely because of a finding to that effect given in the case of Venkatesh Oil Mill's case referred to earlier. Moreover, even if the statement is correct, it can make no difference regarding the determination of the question referred to us.
4. We are supported in the view which we take by the decision of a Division Bench of this Court in Additional Commissioner of Income-tax vs. Miss Lata Mangeshkar. In that case, the Income-tax authorities sought to assess certain income as income from undisclosed sources received by the assessee. The evidence on which the income-tax authorities relied were statements by two persons that they had paid money in 'black' to the assessee and entries in books belonging to them regarding alleged payments to the assessee. The Tribunal examined the statements made by the two persons and found that the evidence tendered by them suffered from serious infirmities. The Tribunal held that the evidence of mere entries in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal held that there was no proof that the amounts in question represented income from undisclosed sources belonging to the assessee. This view of the Tribunal was upheld by this Court.
Mr. Andhyarujina relied on the decision of the Madras High Court in Devasaheva Nadar vs. Commissioner of Income-tax Where it has been held that it cannot be laid down as a general proposition of law that the Income-tax Department cannot rely upon any evidence which has not been subjected to cross examination. In our view, this decision has no application to the facts of the case before us. The question before us is not whether the entries in the books of account of the Bombay dealer could not be relied upon without an opportunity being given to the assessees to cross-examine the Bombay dealer. But the question really is whether without these entries being brought on record, mere information by the Sales Tax Officer, Enforcement Branch, Bombay, about such entries could constitute any material at all.
5. Mr. Andhyarujina next placed reliance on the decision of a Division Bench of the Gujarat High Court in Jayantilal Thakordas vs. State of Gujarat. On the other hand, Mr. Surte, the learned counsel for the assessees drew our attention to the fact that this decision of the Gujarat High Court has been dissented from by a Single Judge of the Kerala High Court in V. S. Narayanam Nair vs. Sales Tax Officer and by a Division Bench of the Orissa High Court in Muralimohan Prabhudayal vs. State of Orissa. In our view, it is not necessary for us to consider the decision of the Gujarat High Court at all, because it turns on its own facts which are altogether different from the facts of the case before us.
6. In the result, we answer the question referred to us in the negative. The respondent to pay to the applicants the costs of this reference fixed at Rs. 300/-.