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Madugula Papayya and ors. Vs. Province of Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number A.S. Nos. 736 and 809 of 1950
Judge
Reported in[1956]7STC180(AP)
AppellantMadugula Papayya and ors.
RespondentProvince of Madras
Appellant Advocate C.V. Dikshitulu, K.V.R. Sarma and N. Rajeswara Rao, Advs.
Respondent Advocate E. Venkatesam, Adv. for M. Seshachalapathi, Government Pleader
DispositionAppeal dismissed
Excerpt:
- - on 22nd october, 1947, the deputy commercial tax officer, bobbili, issued notices to these assessees calling upon them to produce their accounts, bills, pattis, income-tax orders and trading accounts for 1946-47 and 1947-48 on or before 4th november, 1947, in default of which the turnover would be determined to the best of his judgment without further notice. it was stated inter alia that the account books of the plaintiffs were on scrutiny found to be incorrect and incomplete, that the records from sadhu suryam were genuine and reliable, that every opportunity was afforded to the assessees to prove the correctness and completeness of their returns and that no obligation was cast on him to examine any of the merchants mentioned in suryam's books. (2) (a) if the assessing authority.....chandra reddy, j.1. the interpretation of section 9 of the madras general sales tax act and rules 6, 8, 9 and 11 of the turnover and assessment rules framed thereunder is involved in these two appeals. since the controversy in both the appeals is the same, they can be disposed of together. a.s. no. 809 of 1950 arises out of o.s. no. 58 of 1948 on the file of the sub-court, srikakulam, and a.s. no. 736 of 1950 out of o.s. no. 10 of 1949. these two suits were filed for refund of sales tax illegally and arbitrarily levied by the deputy commercial tax officer and paid by the plaintiffs under protest. the assessment year is 1946-47. to appreciate the conflicting contentions in these appeals, it is necessary to set out the salient facts of the cases.2. the plaintiffs in both the suits are.....
Judgment:

Chandra Reddy, J.

1. The interpretation of Section 9 of the Madras General Sales Tax Act and rules 6, 8, 9 and 11 of the Turnover and Assessment Rules framed thereunder is involved in these two appeals. Since the controversy in both the appeals is the same, they can be disposed of together. A.S. No. 809 of 1950 arises out of O.S. No. 58 of 1948 on the file of the Sub-Court, Srikakulam, and A.S. No. 736 of 1950 out of O.S. No. 10 of 1949. These two suits were filed for refund of sales tax illegally and arbitrarily levied by the Deputy Commercial Tax Officer and paid by the plaintiffs under protest. The assessment year is 1946-47. To appreciate the conflicting contentions in these appeals, it is necessary to set out the salient facts of the cases.

2. The plaintiffs in both the suits are dealers in groundnut, groundnut products and other commodities. In addition, the plaintiff in O.S. No. 58 of 1948 is the proprietor of Sri Krishna Vizaya Groundnut Oil Mills, Pondur. The plaintiff in O.S. No. 58 of 1948 submitted a return showing a turnover of Rs. 11,36,317-6-9 while the plaintiffs in the other suit made a return for Rs. 20,79,821-2-8 on 29th April, 1947. A few days later, a provisional assessment was made on the basis of these returns. On 22nd October, 1947, the Deputy Commercial Tax Officer, Bobbili, issued notices to these assessees calling upon them to produce their accounts, bills, pattis, income-tax orders and trading accounts for 1946-47 and 1947-48 on or before 4th November, 1947, in default of which the turnover would be determined to the best of his judgment without further notice. The assessees produced some account books with a list thereof but not the pattis, bill-books or the income-tax orders etc. A request was made on their behalf for extension of time for the production of the other records required by the Department, and they were permitted to do it in the first case before the 21st and in the second before the 20th of December, 1947. But, nothing was done by either of them within the time allowed. On behalf of the plaintiff in 0. S. No. 58 of 1948, a letter was written to the Deputy Commercial Tax Officer containing a representation that the vouchers for purchases and report books for the years 1946-47 and 1947-48 were not available and that the contracts and the railway receipts relating to 1945-46 and 1947-48 would be filed in four or five days. The same day another letter was written on his behalf to the effect that he did not have the contracts with him, that he would submit a list of waggons and other relevant records for the year 1946-47 such as copies of loan and stock statements from the Imperial Bank. Time was extended up to 10th March, 1948, finally for the production of the other records. As the assessee in the other case remained silent a demand was made again upon him to produce the statements furnished by the Imperial Bank-all the accounts, stock-books, pattis and bills and the contracts. But, neither of them did anything further in the matter. Thereupon, notices were issued to them separately on the 15th and 16th of March, 1948, intimating that on verification of transactions reported in the note-books of one Sadhu Suryam a broker employed by them with their accounts it was seen that they omitted to account for several purchases and sales of commodities and that the rates of the several commodities recorded in their accounts were less than those noted in the note-books of the said Suryam. It was added : 'In view of the wilful omission, I am convinced that the accounts maintained by you are incorrect and I therefore reject the reported turnover as incorrect.' In ,one case i.e., 0. S. No. 58 of 1948, the omitted turnover was estimated at Rs. 5,10,000 and in the other at Rs. 8,00,000. The assessees were told that if they had any objection to be assessed on this basis, they could produce the relevant accounts, contracts, bills and pattis within a week for comparison with Suryam's books. A list of the alleged omissions was annexed to each of the notices. In reply, both the assessees stated that their accounts were correct and that no weight could be attached to the entries found in the diaries or other records recovered from Suryam as they did not represent the real state of affairs. The assessing authority was also requested to furnish certain particulars and to call upon the said Suryam to prove the correctness of the entries in his books by documentary evidence. Immediately, the officer concerned gave the particulars asked for and gave them once again an opportunity to prove the correctness of their returns and the allegations that they had no transactions with the individuals shown in the list of omissions. Beyond reiterating their earlier statements, nothing further was done.

3. Thereupon, the Deputy Commercial Tax Officer made the orders of assessment in question estimating the turnover at Rs. 11,89,000 in O. S. No. 58 of 1948 and Rs. 22,01,960 in 0. S. No. 10 of 1949. The sales tax levied on this basis was paid by both the plaintiffs under protest. This was carried in appeal to the District Commercial Tax Officer who confirmed the assessment order after hearing the parties. The plaintiffs in O. S. No. 10 of 1949 filed a revision petition in the Board of Revenue but that was dismissed with the result that the turnover estimated by the Deputy Commercial Tax Officer became final.

4. The present suits are brought to declare the assessments to be illegal and to recover the amounts paid in excess of the admitted tax. The basis of the claim in both the suits is that the account books of the plaintiffs should have been accepted as correct and complete and that the records obtained from Sadhu Suryam could not form the basis of an estimate either under Rule 8 or 11 of the Turnover and Assessment Rules as the entries therein were fictitious, that no opportunity was given to them to prove the correctness and completeness of the return and that the assessing authority had not examined the merchants noted in the list of omissions attached to the communication dated 15th March, 1948, and verified their accounts with those of the plaintiffs.

5. The suits were resisted by delivering an answer which is mutatis mutandis common to both. It was stated inter alia that the account books of the plaintiffs were on scrutiny found to be incorrect and incomplete, that the records from Sadhu Suryam were genuine and reliable, that every opportunity was afforded to the assessees to prove the correctness and completeness of their returns and that no obligation was cast on him to examine any of the merchants mentioned in Suryam's books. The estimate was arrived at only after following the procedure prescribed in the relevant rules.

6. On these pleadings, several issues were raised, but the one material for the present enquiry is this ;-

Whether the assessment in question made by the Deputy Commercial Tax Officer, Bobbili, is erroneous, illegal, ultra vires of his powers and this Court can reopen the assessment.

7. The Subordinate Judge found this issue against the plaintiffs. We are not concerned now with the decision on other issues, and so it is unnecessary to set them out. He reached the conclusion that the Assessing Officer estimated the turnover on the material before him and there was no violation of any of the provisions of law bearing on the subject. In the result, the assessments were upheld and the suits were dismissed with costs. It is these judgments that are now under appeal.

8. Before us, the assessments are impeached on various grounds :-

(1) The Commercial Tax Department is not entitled to call upon the assessee to produce any records other than the account books.

(2) The material on which the Department acted was not of an acceptable character nor was it shown to the assessees.

(3) The estimate of turnover made by the officer without examining Sadhu Suryam and the merchants who were shown to have had dealings with the plaintiffs in the books of Suryam is arbitrary and therefore unsustainable. The refusal to supply the assessees with a copy of the statement recorded from Suryam was illegal.

(4) No reasonable opportunity was given to the appellants to show that their returns were correct and complete.

(5) Lastly, the procedure enacted in Rule 9 was not followed by the Taxing Officer in estimating the turnover under Rule 8.

9. In order to appreciate these contentions, it is necessary to extract the relevant provisions of law. Section 9 of the Madras General Sales Tax Act enacts :-

9. (1) Every dealer whose turnover is ten thousand rupees or more in a year shall submit such return or returns relating to his turnover in such manner, and within such periods as may be prescribed.

(2) (a) If the assessing authority is satisfied that any return submitted under Sub-section (1) is correct and complete he shall assess the dealer on the basis thereof.

(b) If no return is submitted by the dealer under Sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall assess the dealer to the best of his judgment:Provided that before taking action under this clause, the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him.

10. In exercise of the powers conferred by Sub-sections (4) and (5) of Section 3 of the Act and all other powers thereunto enabling, the Madras General Sales Tax (Turnover and Assessment) Rules have been framed. The rules relevant for our present purpose are rules 6, 8, 9 and 11.

11. Rule 6 provides:-

6. (1) Every dealer commencing business after the first day of October 1939 whose estimated net turnover for the first twelve months of his business is not less than Rs. 10,000 shall within thirty days of commencing his business, submit to the assessing authority of the area in which his principal place of business is situated a return in Form A-l showing his estimated gross and net turnover for the first twelve months of his business.

(2) Every dealer commencing business who has not submitted a return under Sub-rule (1), but whose net turnover reaches Rs. 10,000 in any year for the first time shall, within thirty days of the day on which his net turnover reaches Rs. 10,000, submit to the assessing authority of the area in which his principal place of business is situated a return in Form A-1.

Rule 8. 'If no return is submitted by the dealer as required by Rule 6 or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as he considers necessary, determine the turnover of the dealer to the best of his judgment, and fix provisionally the annual tax or taxes payable at the rate or rates specified in Section 3 or 5 or notified under Section 6(1).

(The proviso need not be set out here as the assessments do not relate to the year 1947-48.)

Rule 9. 'Where any return submitted by a dealer appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, before taking action under Rule 8, issue a notice to the dealer calling upon him to produce his accounts and prove the correctness and completeness of his return at a time and place to be specified in the notice.

Rule 11. '(1) Every dealer liable to submit a return under Rule 6, except those 'who have elected to be assessed by the method described in Rule 13, shall, on or before the first day of May in every year submit to the assessing authority of the area in which his principal place of business is situated a return in Form A showing the actual gross and net turnover for the preceding year and the amounts by way of tax or taxes actually collected during that year.

(2) On the receipt of a return in Form A the assessing authority shall, if he is satisfied after such scrutiny of the accounts and such enquiry as he considers necessary that the return is correct and complete, finally assess on the basis of the return the tax or taxes payable under Sections 3, 5 or 8-B(2) or under the notification or notifications issued under Section 6(1) for the preceding year.

(3) If no return is submitted or if the return submitted appears to the assessing authority to be incorrect or incomplete, the assessing authority may, after following the procedure prescribed in rules 8 and 9, finally assess the tax according to the best of his judgment. * * *

12. It is thus seen that these rules are framed for giving effect to the intent and purpose of Section 9. While rules 6 to 9 relate to the submission of returns by the assessee at the commencement of his business, Rule 11 concerns returns for subsequent periods. But the procedure indicated in rules 8 and 9 has to be adopted under Sub-rule (3) of Rule 11 in either of the two eventualities contemplated therein. With these preliminaries, we will proceed to examine the contentions put forward by the appellants seriatim.

13. Point No. 1 : Rule 9 enables the assessing authority to call upon the assessee to produce his accounts. Does this mean that the notice to be issued under that rule should be confined only to the account books in the ordinary and popular sense In this context, Rule 11 of the Madras General Sales Tax Rules may be noticed. Accounts maintained by dealers and licensees relating to stocks, deliveries, purchases, output and sales shall be preserved for a period of two years after the close of the year to which they relate. The vouchers of each kind shall be serially numbered separately. No purpose is served by directing the assessee to preserve the things mentioned in that rule for a period of two years if the idea is not to enable the assessing authority to call for them. In our opinion, the department is empowered to call upon the assessee to produce the records referred to in the aforesaid rule. Be that as it may, in this case, relevant contracts, vouchers relating to stocks, pattis etc., could be produced by the appellants at their option in support of their returns. When the Taxing Officer had reason to doubt the genuineness of the accounts and the correctness of the returns be could cast the burden on the assessees to satisfy him in the matter. For this purpose, the assessees could call in aid the aforementioned records. If they do not choose to rely on them they do so at their peril. They could be made available to the officer to induce him to accept as correct the returns. The department has nothing to lose by the non-production. Further, this was not the attitude adopted by them either before the department or in the trial court. At one stage, it was pleaded that the contracts for the assessment year were non-existent. The action of the officer in this respect has not occasioned any prejudice to the appellants. This contention cannot therefore find acceptance with us.

14. The next contention relates to the nature of the material on which action was taken by the assessing authority under rules 8 and 9. A court cannot sit in judgment over the decision of the assessing officer in this regard. When the assessees do not place material on which the officer could make a proper assessment he could take steps to procure material and proceed in the manner specified in the relevant rules. No standard is laid down in these rules as to the quantity or quality of this material. Of course, this does not enable him to act capriciously or freakishly. A mere suspicion that the return is incorrect is not sufficient to enable the assessing authority to proceed under Rule 9. He must have reason to believe that the return is incorrect or incomplete which in its turn should be based upon some material or information and the estimate of the turnover should be based upon the material gathered by him. The phrase 'to the best of his judgment' implies a consideration of something that is before him. In other words, he should exercise his judgment. It should not be the result of pure guess-work. To some extent, no doubt, it is guess-work but it should be honest guess-work.

15. In this context, the observations of the Judicial Committee of the Privy Council in Commissioner of Income-tax, United and Central Provinces v. Badridas [1937] 5 I.T.R. 170 are pertinent :-

The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into 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.

16. Although these remarks are made with reference to Section 23 of the Indian Income-tax Act they apply with equal force to the language of rules 8 and 9 of the Turnover and Assessment Rules as the language of these rules is analogous to the relevant provision of the Indian Income-tax Act. There must be some, material on which he could act though that might not be accepted as evidence by a court of law. The sufficiency or otherwise of it does not fall to be decided by a court of law.

17. But, that question seems to be of academic interest in this case for the reason that the material which formed the basis of the estimate was of a kind which could be safely accepted. It consisted of Exhibits B-22 to 27, pocket note-books, and Exhibits B-61, B-62 and B-63 contract-books in addition to some brokerage slips. Exhibit B-42 series. The plaintiffs sought to get over the effect of these documents by trying to show that Sadhu Suryam was a half-witted man, that he made various entries in his diaries with a view to bring them into trouble, that the contract forms and brokerage slips had no relation to the dealings which the plaintiffs had with other merchants and that no contracts were entered into by them through Sadhu Suryam. It was a vain attempt made by the appellants to depict Sadhu Suryam as either a crazy or cantankerous man and that he had no concern with their trade. The books of the appellants reveal that brokerage was paid in regard to several transactions of theirs though the name of the broker was not mentioned. But they do not show that they had any other broker. That apart, it is admitted by P. W. 17 the clerk of the appellant in A. S. No. 736 of 1950 that there was a katha of Suryam in Exhibit A-3, and cheques for large sums of money were cashed by him on their behalf. It was also elicited from P. W. 17 that Suryam was the broker for several firms and so also was he for their firm. P. W. 1 had stated that Suryam was a member of the North Vizag Millers' Association. It has also been established that Suryam was a recognised broker being a member of the Vizagapatnam Millers' Association and that several other merchants had transactions through him like D. W. 2. D. W. 7 who was a clerk of the Hindustan General Produce Company, Vizianagaram, testified to Suryam being the broker of both the plaintiffs and nothing has been elicited from him to show that he was an interested witness. Incidentally, it may be stated that he proved the writing of Suryam in Exhibits B-22 to B-27 and Exhibits B-61, B-62 and B-63. This was necessitated, according to the respondents, by Suryam having been gained over by the time the matter had reached a final stage before the department. On this evidence, there can be little difficulty in holding that Suryam was the broker for the appellants in both the cases and the entries in the documents referred to above represented real transactions. It appears from the evidence of D.W. 6 that the entries in Exhibits B-22 to B-27 were compared with those in Exhibit B-42 and Exhibits B-61, B-62 and B-63 and they mostly tallied and that he checked the accounts of the merchants with reference to the entries in Exhibits B-22 to B-27. He also compared the accounts of the plaintiffs with Exhibits B-22 to B-27 and found that most of them tallied with reference to the contracting parties, quantity contracted for and rate etc. According to his evidence, out of 400 transactions mentioned in Exhibits B-22 to B-27, 250 tallied with the entries in the plaintiffs' accounts. Moreover, the genuineness and correctness of these books have been proved beyond doubt by the following circumstances :-

The signature of P.W. 1 was admitted by him in some of the contract forms recovered from Suryam, Exhibits B-6 to B-10 being some of them. He had also admitted that 'no contract can be said to have been concluded unless it is signed by the broker, buyer and seller'. It was admitted that, whenever contracts were effected through a broker, forms had to be made in three sets and on each of them the signature of the parties would be affixed. The contracting party and the broker would each have one set. That is how the signature of the appellants in A. S. No. 736 of 1950 happened to be there. There can therefore be nothing suspicious about the contract forms with Suryam. So far as the appellant in A.S. No. 809 of 1950 is concerned the contract forms containing their signatures seems to have been in existence at earlier stages of the trial, but destroyed subsequently, as appears from paragraph 18 of the judgment under appeal. The relevant passage may be extracted :-

The counsel appearing for the defendant noted certain forms in the contract as having been-signed by the plaintiffs.

He was also representing to the court that there were some contracts actually signed by the plaintiffs. On some other date when he had to cross-examine the plaintiffs' clerks, he opened the contract-books but found these forms on which the plaintiffs signed, missing. He at once brought to my notice about this aspect and I asked him to produce the notice prepared by him. He immediately placed it before me and I put my initials against the numbers of those contracts which are alleged to have been signed by the plaintiffs and which have been noted by him as having contained the signatures of the plaintiffs. They are six in number and the notes prepared by the counsel for the defendants is marked as Exhibit B-52. I have also carefully examined the contract books and have found that some of the papeis in them were removed recently.

18. This statement of facts makes it abundantly clear that the pages which contained the writing of the appellants were removed subsequent to the preparation of Exhibit B-52. We have no hesitation in concluding that Exhibit B-52 embodies -details relating to the contracts with the signatures of the concerned parties including the appellants. Though there is no evidence sufficient to fix responsibility on any one for this removal, we may not be wrong in assuming that it must have been done at the instance of the appellants. It is to their interest to cause disappearance of these forms since the authenticity of the entries in Suryam's books would be vouchsafed by those contracts. The defendants would not be interested in having this done as it would be to their disadvantage. It is most regrettable that this should have happened while the records were in the custody of the court. It is difficult to believe that it would have been done without the active co-operation or connivance or at least knowledge of the person in charge of the records. We wish to impress upon the courts below that they should see that person in charge of the records would not have any opportunities to help the unscrupulous parties to do away with records in this fashion, by devising some means such as keeping them under lock and key.

19. To come back to the narrative, it was open to the assessees to prove the correctness of their accounts or returns by producing written contracts they had entered into, orders of assessment made by the Income-tax Officers, stock-books, stock-statements received from the bank, pattis and other records that are usually maintained by traders. It may be mentioned here that the assertion in the correspondence between the department and the assessees that the latter's account books were found to be examined by the Income-tax authorities etc., was falsified by the admission in the witness-box to the contrary. Despite several demands, no attempt was made to place before the authorities concerned any of these books. In one of the replies to these notices it was merely stated that the contracts relating to the year 1946-47 were not with the assessees. No explanation was given for the non-existence of the contracts. This was obviously an untrue statement. Apart from the oral evidence, the recitals in Exhibit B-17 would belie that statement :-

No transactions of either sale or purchase through the medium of a broker can ever take place in the world of business without there being a contract in writing entered into by the concerned parties and the broker to the transaction and all such transactions of mine, whoever might be the broker, have similarly been based on contracts duly entered into by both the parties. A mere verification of the records and contracts in writing that would be available with me and the other party would clearly prove beyond reasonable doubt that the alleged omissions of transactions and differences in prices are only fictitious and do not deserve any credit. Even the very copies of contracts that would be available with the said Sadhu Suryam as the concerned broker and duly verified by the Commercial Association, Vizianagaram, from time to time would bear testimony to the fact mentioned above.

20. These allegations prove two things : the existence of written contracts with them and copies of such contracts with Sadhu Suryam which, it may incidentally be mentioned, confirms the correctness of Exhibits B-61 to B-63. Surprising it is, that even after making the statements, the written contracts were not produced before the assessing authority. The inference is inevitable that the assessees omitted to do it, because they would be adverse to their case. It is thus established by overwhelming evidence that the material on which the Commercial Tax Authorities acted was of an unexceptionable kind and could safely be taken into account.

21. There remains the contention on this topic that these books were not shown to the appellants. We do not agree that there was any obligation on the part of the assessing authority to place before the defaulting person the records they had obtained from third parties. The dictum of Chief Justice Leach in Subbayya v. Commissioner of Income-tax, Madras [1939] 7 I.T.R. 21, is relevant in this context :-

There is nothing in the Act itself which requires the Income-tax Officer to disclose to the assessee the material on which he proposes to act or to refer to it in his order but natural justice demands that he should draw the assessee's attention to it before making the order. Information which the Income-tax Officer has received may not always be accurate and it is only fair when he proposes to act on material which he has obtained from an outside source that he should give the assessee an opportunity of showing, if he can, that the Income-tax Officer has been mis-informed, but the Income-tax Officer is obviously not bound to disclose the source of his information.

22. Similar is the rule stated in Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj of Darbhanga [1933] 1 I.T.R. 94 on appeal from the judgment of the High Court of Patna. Their Lordships agreed with the remarks of Chief Justice Terrel who said :-

Learned counsel for the assessee has argued that the officer is not entitled to make a guess without evidence and I agree with that contention, but in this case the state of affairs in the previous years, coupled with the fact that the assessee had a large mortgage loan business and must have enforced mortgages by sale on many occasions, afford ample material for the assessment made.

23. It was added :-

If the assessee wished to displace the Taxing Officer's estimate, it was open to him to adduce evidence of all his purchase transactions during the year and of the financial results thereof, which he apparently made no attempt to do.

24. The principle contained in these passages govern, in our opinion, the procedure to be followed by the Sales Tax Authorities. All that is demanded by natural justice is that the attention of the assessee should be drawn to the material which shows that the return submitted by the assessee is incorrect or incomplete. In this case, admittedly, this was done by furnishing the necessary particulars.

25. That apart, we have unimpeachable evidence that the assessees had access to these account books. In addition to the testimony of D.W. 6, that the assessees or their representatives had looked into these records, there is the admission of both P. Ws. 1 and 17 that not only were they allowed to look into these papers but even to compare them with their account books. It also appears from the evidence that the scrutiny of the accounts of the appellants took nearly two months and this was done in the presence of the assessees or their representatives. In these circumstances, it is futile for them to pretend ignorance of the account books recovered from Suryam. The complaint in this behalf must be dismissed as being devoid of any merits.

26. We now come to the third point. The power to make private enquiries is implicit in Rule 8 and the Taxing Officer is under no obligation to supply the assessee with copies of confidential statements. Nor could the assessees demand that the informant should be examined in their presence and opportunity given to them to cross-examine him. There is also no force in the grievance that the officer failed to examine the merchants whose names were mentioned to him in the course of his enquiry, for, neither the language of the relevant rules nor the principles of natural justice enjoin on him to do this. When holding an enquiry he is not a court within the meaning of the word.

27. It was next pressed on us that the Deputy Commercial Tax Officer turned down the request of the appellants to summon Suryam and other merchants as their witnesses and thus violated the principles of natural justice. To say the least, there is absolutely no foundation for this complaint. There is not a trace of this request in the various letters written by the appellants to the Department. All that the officer was asked to do by the assessees was to satisfy himself about the nature of Suryam's books by conducting enquires in that regard. The relevant contents of Exhibit B-17 are significant in this context :-

4. * * * * *And as such information of the alleged transaction in the so-called books of Sadhu Suryam cannot but be only presumptive and unreliable. A verification of the very books of the said Suryam would, I am sure, disclose that information regarding transactions, fictitious or otherwise, with which he had actually no concern either as a broker or otherwise also finds a place.

5. I beg to submit that it is contrary to all canons of justice and equity that any sort of reliance should be attempted at being placed on such unreliable books of the said Sadhu Suryam and it will surely work a hardship to me if any turnover on the alleged false omissions and difference in prices is unnecessarily estimated as stated by you in your notice. It is already for several adjournments in this matter before you that I attended your office at Bobbili at an abnormal cost. Under the circumstances, I pray that you may be pleased to be appraised of the actual truth underlying by examining the parties to the alleged transactions together with their records, reject the so-called books of Sadhu Suryam as unreliable and refrain yourself from levying any tax of the kind contemplated by you in your notice referred to above, as there be no legal justification binding me for such an assessment, if any.

28. Thus, it is clear that the Taxing Officer was not asked to summon any witness in this behalf. There is no mention of any such request having been rejected even in the grounds of appeal filed before the Commercial Tax Officer. Nor does it find any support from the plaints in either suit. That this is a frivolous complaint is also seen from the admissions of P. Ws. 1 and 17. In the course of the cross-examination, P. W. 1 deposed :-

I asked the Deputy Commercial Tax Officer for examining Sadhu Suryam in our presence. I did it after the final assessment was made.

29. The admission of P. W. 17 is more interesting:-

We stated orally to the Deputy Commercial Tax Officer that we could produce Suryam before him. But we did not take him there.

30. For these reasons, we overrule this contention also.

31. This leads us to the question whether the assessees were denied an opportunity to prove the correctness and completeness of their returns. The argument is that the assessees were given only a week's time to prove the correctness and completness of their return and this was hardly sufficient for that purpose. We are not impressed with this argument. For one thing, we regard that period as sufficient to comply with the notice. Even otherwise, there is no justification for this grievance. If the parties felt that more time was required, they could have certainly applied for it. This was not done. Even at the stage of appeal, they did not ask for further time, nor complained of denial of opportunity in this respect in the memorandum of grounds of appeal. No attempt was ever made by them to establish the genuineness of the entries in their accounts or the correctness of their returns. That was obviously for the reason that that would be undertaking a task which was bound to fail. The appellants have not fared better on this point also.

32. There remains the contention that the assessment is invalid by reason of the non-observance of the procedure indicated in rules 8 and 9. According to the appellants, the notice served on them in October, 1947, was not one asxrequired by the provisions of Rule 9, since this notice called upon them only to produce the accounts. They were not asked to prove the correctness and completeness of the returns. It being mandatory on the taxing authority to demand both the things in the first notice before any further action could be taken and this not having been done he had no jurisdiction to proceed further in the matter or to determine the turnover to the best of his judgment,-so continued the counsel. We find ourselves in disagreement with this contention. There does not seem to be any justification for the view that in one and the same notice the dealer should be called upon to produce his accounts and prove the correctness and completeness of his return. We do not think that the assessing authority is precluded from requiring the assessee to produce his accounts by one notice and calling upon him to prove the correctness and completeness of his return after scrutinising the accounts by another notice. In our judgment, the requirements suggested by the counsel for the appellants cannot be extracted from the language of Rule 9. This rule embodies only the principle of natural justice that before the accounts and the return are rejected as not furnishing a basis or data for raising an estimate of the turnover the assessee should be afforded an opportunity to prove their acceptability. It may be that the Taxing Officer on scrutiny of the accounts might be satisfied with the correctness thereof and may not feel the necessity to call upon the assessee to prove the correctness and completeness thereof. It is only when the accounts do not satisfy him that he might require the assessee to do the other thing. The issue of two notices, one for the production of accounts and another to establish the correctness and completeness of his return is not forbidden by Rule 9 and there is sufficient compliance with that rule, when two notices are served for the purposes mentioned above. We cannot, therefore, endorse the view that is pressed upon us by the counsel for the appellants.

33. Even assuming there is some substance in this contention the notices issued in Exhibits B-14 and B-3 on 15th March, 1948, and 16th March, 1948, respectively, satisfied that condition. In these notices, the assessee is called upon to prove the correctness of the returns by producing the relevant accounts, contracts, bills and pattis before a particular date. It is true that these two documents do not conform to the language of Rule 9 in that they do not say: 'Produce the accounts and prove the completeness and correctness of the return', but they recite : 'If you have any objection to be assessed on the said turnover please produce relevant accounts, contracts, bills and pattis, etc., before me on 22nd March, 1948, at 11 a.m. at Bobbili failing which you will be assessed finally for 1946-47 on the said turnover without further notice'. There can be little doubt that the purport of it is the same and it is not essential that the words of the rule should be copied in the notice. We have to pay attention more to the spirit of the rule rather than to the letter thereof. In the circumstances, we hold there has been no contravention of either Rule 8 or 9. The procedure prescribed by those rules has been followed by the assessing authority. Further no such objection was taken before the assessing authority. The assessment was not attacked even in the plaints on this ground. There was also no issue raised about it nor an adjudication invited.

34. It was next urged that Exhibits B-3 and B-14 show that the Deputy Commercial Tax Officer had already made up his mind as regards the estimate of the turnover and so his calling for the relevant records, and requiring them to prove the correctness and completeness of the returns had no meaning. We are unable to appreciate this contention. The figure mentioned by the assessing authority in both the notices represented the total amount of the omitted transactions, a list of which was annxed to each of the notices. They only showed that the transactions roughly amounting to Rs. 5,10,000 in one case and Rs. 8,00,000 in the other were omitted in the return. The appellants have not shown how this has occasioned any prejudice to them. There would have been some force if in spite of their establishing that several of the alleged omissions did not represent the real dealings with third parties the Taxing Officer stuck to that figure. As already remarked, no attempt was ever made by the appellants in that direction. It is also not out of place in this context to say that at no time before was any exception taken to the mention of this estimate. This did not form a ground of attack against the order of assessment even in the plaints.

35. Another branch of the same contention is that the assessment is vitiated by the omission of the Commercial Tax Authorities to hold an enquiry once again after the issue of notices, Exhibits B-14 and B-3, and before the estimate of the turnover was finally determined. This contention also is unsubstantial. We need not launch upon a discussion whether the rules contemplate two enquiries normally one before the issue of a notice under Rule 9 and another thereafter, i.e., before the turnover is estimated finally. In the circumstances of the case, no useful purpose would have been served by starting another enquiry. The appellants did not offer any satisfactory explanation with regard to the omissions pointed out in the list sent with the notices. They did not make any endeavour to convince the Taxing Officer that the information in his possession was unreliable, the final estimate should not rest thereon and that consequently their returns could be regarded as correct and complete. We have shown that the assessing authorities conducted elaborate enquiries and did not do things in a haphazard manner. There was therefore no necessity for another enquiry. For these reasons this submission also has to be rejected.

36. It follows the assessments were validly made and could not be impugned on any ground whatesoever and the judgments under appeal are unassailable. In the circumstances, the appeals are dismissed with costs.


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