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Delhi Iron Syndicate Vs. Commissioner of Sales Tax - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberSales Tax Revision No. 4 of 1978
Judge
Reported in[1979]44STC228(All)
AppellantDelhi Iron Syndicate
RespondentCommissioner of Sales Tax
Appellant AdvocateA. Gupta, Adv.
Respondent AdvocateStanding Counsel
DispositionPetition allowed
Excerpt:
- - this clearly indicated that the assessee was not maintaining its accounts properly. but that turnover, however, is a best judgment assessment. the fact that the assessment has to be made to the best of the judgment of the assessing authority imposes a fetter on the estimate to be made by the assessing authority. an arbitrary or capricious assessment based on no relevant material falls short of being a best judgment assessment, which alone can be made in the event of rejection of accounts. in view of the partial success and partial failure of the parties, there shall be no order as to costs......at rs. 29,00,000. the assessee had in this year returned a net turnover of rs. 21,57,717. the appellate authority fixed it at rs. 26,00,000, which was upheld by the revising authority. the appellate authority found that no suppression of turnover was detected in the assessment year 1971-72. basing itself on the past history, viz., the estimated turnovers for the years 1969-70 and 1970-71, as also the conduct of the assessee in suppressing his turnovers in the years 1972-73 and 1973-74, he estimated the turnover for this year at the figure mentioned earlier. it was erroneous on the part of the appellate authority to have considered the conduct of the assessee in the years 1972-73 and 1973-74, for even if the assessee had suppressed his turnovers in the two subsequent years, it did.....
Judgment:

C.S.P. Singh, J.

1. The revision is by the assessee and relates to the assessment year 1971-72. The account books of the assessee have been rejected and estimate made. The assessee has challenged both the rejection of the account books and the estimate of turnover made by the assessing authority.

2. The only reason for rejection of the accounts for the year 1971-72 was that a survey was made on the premises of the firm on 7th August, 1971. At the time of the survey, kachcha rokar contained no entries except the opening balance for 6th August, 1971, and no entries were found in that book for 7th August, 1971. Apart from this, the stock register was not available on the firm's premises. Relying on these two circumstances, the account books of the assessee were rejected, although no specific defect was found in the accounts. The assessee's explanation was that as no sales had been effected on 6th August, 1971, on account of it being Rakshabandhan day, no entries were made on 6th August, 1971.

3. As regards the non-availability of stock register, the explanation was that it had not been asked for by the surveying officer. The explanation given by the assessee has not been accepted. Counsel urged that no reasons have been given by the revising authority for rejecting the explanation of the assessee that the kachcha rokar was not written up on account of the fact that no sales or purchases took place on that date. The assessee also contended that the absence of the stock register on the premises of the assessee was not itself sufficient for rejection of the accounts. It will be noticed that the explanation given by the assessee was only for 6th August, 1971. No explanation was given by it for the absence of entries in the kachcha rokar of 7th August, 1971. Even if the explanation of the assessee was accepted, there was no explanation as to why the kachcha rokar of 7th August, 1971, did not have entries of the opening balance for that date. This clearly indicated that the assessee was not maintaining its accounts properly. In these circumstances, the conclusion was inevitable that the explanation given by the assessee for the account having not been properly maintained could not be accepted. This is what the revising authority says in its order.

4. As regards the non-availability of stock register on the firm's premises, although that circumstance may create a suspicion about the genuineness of stock register produced during the assessment proceedings, the assessing authorities had to scrutinise the stock register produced by the assessee and it was only in case they found it spurious, that a conclusion should be drawn that the assessee had not maintained its accounts properly. However, the fact remains that the accounts of the assessee were not being maintained regularly and, as such, could be rejected on this consideration.

5. Turning now to the assessment of turnover made by the assessing authority, the Sales Tax Officer estimated the net turnover at Rs. 29,00,000. The assessee had in this year returned a net turnover of Rs. 21,57,717. The appellate authority fixed it at Rs. 26,00,000, which was upheld by the revising authority. The appellate authority found that no suppression of turnover was detected in the assessment year 1971-72. Basing itself on the past history, viz., the estimated turnovers for the years 1969-70 and 1970-71, as also the conduct of the assessee in suppressing his turnovers in the years 1972-73 and 1973-74, he estimated the turnover for this year at the figure mentioned earlier. It was erroneous on the part of the appellate authority to have considered the conduct of the assessee in the years 1972-73 and 1973-74, for even if the assessee had suppressed his turnovers in the two subsequent years, it did not follow that he acted likewise in the assessment year in question. In fact, it has been found that no suppressed turnover was detected in this assessment year. It has been noticed in a number of cases that the appellate authority disposes of the appeals of a number of assessment years by a common judgment. While doing so, it looks into the material for the other assessment years for either rejecting the accounts of the assessee or for estimating its turnover. Each assessment year is a unit by itself and, although the assessment record of the assessee may be relevant for some purposes, the appellate authority has to be cautious that its decision is not influenced by factors found in other assessment years, which have no relevance in the assessment appeal. The error indicated above has crept into the appellate order on account of a consolidated appellate order being passed for a number of assessment years. Apart from this error, the assessment records for the earlier years did not provide relevant materials for the enhancement made in the returned turnover. For the year 1969-70, the assessee had returned a net turnover of Rs. 17,14,755. This came to be subsequently estimated at Rs. 19,25,000. In the year 1970-71, the assessee's returned net turnover was accepted, in revision, which was to the extent of Rs. 17,95,490. Thus, the past records disclosed a higher turnover in the year 1969-70 and a reduced turnover in the year 1970-71. It also showed that no enhancement was made in the year 1970-71. In the present year, there is an addition of nearly Rs. 4,20,000 to the net turnover, which does not have a reasonable nexus with the estimated turnover of the year 1969-70 or the accepted turnover for the year 1970-71. Rejection of account books undoubtedly empowers the assessing authority to estimate the turnover; but that turnover, however, is a best judgment assessment. The fact that the assessment has to be made to the best of the judgment of the assessing authority imposes a fetter on the estimate to be made by the assessing authority. Judgment connotes exercise of care and caution, and a decision which would be reasonable in the circumstances of the case. An arbitrary or capricious assessment based on no relevant material falls short of being a best judgment assessment, which alone can be made in the event of rejection of accounts. In the present case, the assessed turnovers for the years 1969-70 and 1970-71 do not provide a reasonable basis for the excessive addition to the returned turnovers as they are disproportionate to the turnovers estimated for the earlier years. The mistake appears to have been induced by the fact that the appellate authority took into account the estimated turnover as fixed either originally by the Sales Tax Officer or on appeal. The estimated turnovers for both the years 1969-70 and 1970-71 as finally fixed by the revising authority was much less than that mentioned in the order. The revising authority also does not appear to have checked the correctness of the estimated turnovers given by the appellate authority for the earlier years while making the assessment for this year. This has led to an erroneous estimate of the turnover both by the appellate authority and the revising authority, and the turnover, as such, has to be estimated afresh.

6. The revision is accordingly allowed. A copy of this order will be sent down to the Additional Revising Authority for redetermination of the tax in accordance with law and in the light of the observations made in the body of the judgment. In view of the partial success and partial failure of the parties, there shall be no order as to costs.


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