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The State of Andhra Pradesh Vs. Ruldu Ram and Sons - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberTax Revision Case No. 41 of 1981
Judge
Reported in[1987]64STC465(AP)
ActsAndhra Pradesh General Sales Tax Act - Sections 14(3) and 14(8)
AppellantThe State of Andhra Pradesh
RespondentRuldu Ram and Sons
Advocates:A. Venkata Ramana, Government Pleader for ;Commercial Taxes
Excerpt:
.....of tax - subsequently return was filed by assessee which was accepted in toto - acceptance of return filed by assessee cannot be considered as best judgment assessment under section 14 (3) - when return furnished by assessee was accepted there is no ground for levying penalty - held, penalty imposed was illegal. - - 2. for the assessee's failure to file the return voluntarily and before detection by the authorities, the commercial tax officer took proceedings under section 14(3) read with section 14(8) of the act for the levy of penalty and eventually levied penalty of rs. before the assistant commissioner of commercial taxes, the assessee contended that the assessment made by the commercial tax officer was not a best judgment assessment, inasmuch as the a-1 return filed by the..........turnover of rs. 3,57,290 on which he was liable to pay sales tax. it is not in dispute that the return filed by the assessee was accepted without any variation and the assessee had also paid the corresponding tax. 2. for the assessee's failure to file the return voluntarily and before detection by the authorities, the commercial tax officer took proceedings under section 14(3) read with section 14(8) of the act for the levy of penalty and eventually levied penalty of rs. 75,925 which was five times the amount of tax levied. the assessee filed an appeal against the levy of the abovementioned penalty. before the assistant commissioner of commercial taxes, the assessee contended that the assessment made by the commercial tax officer was not a best judgment assessment, inasmuch as the a-1.....
Judgment:

Y.V. Anjaneyulu, J.

1. This revision relates to the assessment year 1974-75. The Commercial Tax Officer levied penalty of Rs. 75,925 under section 14(8) of the A.P. General Sales Tax Act (for short 'the Act'). The assessee purchased Gopika Ghee from Hindustan Milk Food ., Rajahmundry. During the year 1974-75, the purchases amounted to Rs. 3,57,290. It appears the assessee did not file a return voluntarily. When the ghee was being transported, the check post authorities detected the purchases made by the assessee. Subsequently, thereafter, the assessee filed A-1 return and disclosed the turnover of Rs. 3,57,290 on which he was liable to pay sales tax. It is not in dispute that the return filed by the assessee was accepted without any variation and the assessee had also paid the corresponding tax.

2. For the assessee's failure to file the return voluntarily and before detection by the authorities, the Commercial Tax Officer took proceedings under section 14(3) read with section 14(8) of the Act for the levy of penalty and eventually levied penalty of Rs. 75,925 which was five times the amount of tax levied. The assessee filed an appeal against the levy of the abovementioned penalty. Before the Assistant Commissioner of Commercial Taxes, the assessee contended that the assessment made by the Commercial Tax Officer was not a best judgment assessment, inasmuch as the A-1 return filed by the assessee was accepted without any variation and assessment completed on the turn over declared by the assessee. Since the assessment made by the Commercial Tax Officer was not a best judgment assessment, the assessee contended, there is no power conferred on the Commercial Tax Officer to levy penalty under section 14(3) of the Act. The Assistant Commissioner rejected the assessee's contention and upheld the validity of the penalty levied. At the same time, he reduced the quantum of penalty from five times to twice amount of tax on the turnover.

3. The assessee carried the matter in further appeal to the Sales Tax Appellate Tribunal and reiterated the same contentions. The Tribunal accepted the assessee's contention and held that the assessment made in the present case could not be considered to be a best judgment assessment within the meaning of section 14(3) of the Act. Consequently, the Tribunal held that the Commercial Tax Officer was in error in levying the penalty. The penalty levied was accordingly cancelled. Against this order of the Tribunal, the State came in revision to this Court.

4. The learned Government Pleader contends that this is a case where the assessee failed to submit return before the date prescribed and also submitted the returns subsequent to the date of inspection. According to the learned counsel the assessment in this case is governed by the provisions of section 14(3) of the Act. It is contended that any assessment made under section 14(3) should be considered to be a best judgment assessment and consequently the power to levy penalty can be exercised under sub-section (8) of section 14 of the Act. The expression 'best judgment assessment' is not defined under the Act. There is however sufficient guidance in judicial pronouncements as to what constitutes a best judgment assessment. Where an assessee filed a return which is either incomplete or false, involving the assessing authority estimating the turnover to the best of his judgment having regard to the incompleteness of the return filed, the assessment would straightaway be a best judgment assessment. The estimate made in such a case by the assessing authority would necessarily involve some amount of guess-work and consequently the determination of turnover for purpose of assessment would be to the best of his judgment based on necessary materials ands evidence.

5. In a case where the return filed by the assessee is accepted in toto without any allegation of incompleteness or falsity in the return it is difficult to accept the contention that such an assessment would still be a best judgment assessment for purposes of section 14(3) of the Act. There is no guess-work involved; there is no power exercised by the assessing authority to make any estimate of turnover. All that is done by the assessing authority is to accept the return filed by the assessee in all respects. Such an assessment cannot be considered to be a best judgment assessment within the terms of section 14(3) of the Act. Reference may be made to the decision of the Supreme Court in State of Madras v. Jayaraj Nadar & Sons : [1972]1SCR751 . The Supreme Court held in the above case that where account books are accepted along with the other records there can be no ground for making a best judgment assessment. The Supreme Court further observed that where certain items which are not included in the turnover are discovered from the dealer's own account books and the assessing authority includes these items in the dealer's turnover, the assessment cannot be regarded as based on best judgment. The Supreme Court held that penalty cannot be levied in respect of such items. There is also authority for the view that where a return is accepted, the assessment made cannot be considered to be a best judgment assessment in a decision of this Court in T.R.C. Nos. 24 to 29 of 1977 dated 31st January, 1978 (Pusuluri Satyanarayana Murthy v. State of A.P. [1978] 42 STC 103). In the above case the assessing authority accepted the returns and finalised the assessments and at the same time initiated proceedings for the levy of penalty. Dealing with the question regarding levy of penalty this Court observed that where a return is filed subsequent to the date of inspection and discovery of secret accounts and such a return is accepted by the assessing authority as complete and correct and assessment made on the basis of the turnover furnished therein, it would be a misnomer to term such an assessment as 'best judgment assessment'. The above decision of this Court provides a complete answer to the question involved in the present case. We are satisfied that the assessment made by the Commercial Tax Officer accepting the turnover declared in the return cannot be regarded as a best judgment assessment and consequently it is not open to the Commercial Tax Officer to levy any penalty under section 14(3) read with section 14(8) of the Act. The Tribunal was justified in coming to the conclusion that the penalty was illegal. The revision case is accordingly dismissed. No costs. Advocate's fee Rs. 250.

6. Petition dismissed.


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