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Commissioner of Sales Tax Vs. Gangaram Mohanlal Mittal - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 284 of 1976
Judge
Reported in[1980]45STC381(MP)
AppellantCommissioner of Sales Tax
RespondentGangaram Mohanlal Mittal
Appellant AdvocateK.L. Goyal, Government Adv.
Respondent AdvocateR.G. Waghmare
Cases ReferredM.P. v. H.M. Esufali A.I.R.
Excerpt:
.....that assuming that the books of account could be rejected, in making best judgment assessment, the assessing authority will have to establish on ascertained facts that either the purchase of raw material or the sale of manufactured produce has been suppressed. 3. the learned counsel for the department contended that, in the instant case, the sales tax officer was justified in assessing the dealer to the best of his judgment, as provided by section 18(4) of the act, because the method of accounting employed by the assessee was such that assessment could not properly be made on that basis. ..(4) if a registered dealer -(a) has not furnished returns in respect of any period by the prescribed date, or (b) has knowingly furnished incomplete or incorrect returns for any period, or (c) having..........that assuming that the books of account could be rejected, in making best judgment assessment, the assessing authority will have to establish on ascertained facts that either the purchase of raw material or the sale of manufactured produce has been suppressed. in this view of the matter, the board allowed the appeal and set aside the enhancement. aggrieved by the order of the board, the commissioner preferred an application before the board for making a reference and it is at the instance of the commissioner that the aforesaid question of law has been referred to this court for its opinion.3. the learned counsel for the department contended that, in the instant case, the sales tax officer was justified in assessing the dealer to the best of his judgment, as provided by section 18(4) of.....
Judgment:

1. By this reference under Section 44 of the M.P. General Sales Tax Act, 1958, hereinafter referred to as the Act, the following question of law has been referred to this Court for its opinion:

Whether, under the facts and circumstances of the case, the non-maintenance of stock register, non-submission of stock list and non-maintenance of manufacturing account will not justify best judgment assessment under Section 18(4)(d) of the M.P. General Sales Tax Act, 1958?

2. The material facts giving rise to this reference briefly are as follows: The assessee is a dealer carrying on business of manufacturing and selling utensils. For the assessment of tax payable under the Act for the period between 25th October, 1965, and 12th November, 1966, the assessee submitted the return. According to the assessee, his gross turnover was Rs. 9,10,384. The Sales Tax Officer, however, enhanced it to Rs. 9,22,000. He held that as the assessee had failed to maintain stock register and manufacturing account from day-to-day, it was not possible to rely upon the accounts submitted by the assessee. The Sales Tax Officer, therefore, made assessment under the provisions of Section 18(4) of the Act. On appeal, the Assistant Commissioner of Sales Tax, Indore, held that in the absence of stock register and manufacturing account, the correctness of the accounts submitted by the dealer could not be verified and, hence, the Sales Tax Officer was justified in proceeding to assess the dealer under the provisions of Section 18(4) of the Act. On second appeal, the Board of Revenue held that while it was true that the accounts could be verified properly if there was a stock register and manufacturing account, as the maintenance of these books of account was not obligatory under the Act, their non-maintenance could not by itself justify best judgment assessment. The Board further held that assuming that the books of account could be rejected, in making best judgment assessment, the assessing authority will have to establish on ascertained facts that either the purchase of raw material or the sale of manufactured produce has been suppressed. In this view of the matter, the Board allowed the appeal and set aside the enhancement. Aggrieved by the order of the Board, the Commissioner preferred an application before the Board for making a reference and it is at the instance of the Commissioner that the aforesaid question of law has been referred to this Court for its opinion.

3. The learned counsel for the department contended that, in the instant case, the Sales Tax Officer was justified in assessing the dealer to the best of his judgment, as provided by Section 18(4) of the Act, because the method of accounting employed by the assessee was such that assessment could not properly be made on that basis. Now, Section 18(4) of the Act reads as under:

18. Assessment of tax...

(4) If a registered dealer --

(a) has not furnished returns in respect of any period by the prescribed date, or

(b) has knowingly furnished incomplete or incorrect returns for any period, or

(c) having furnished such returns fails to comply with any of the terms of a notice issued under Sub-section (2), or

(d) has not maintained any accounts or the accounts maintained by him are not in accordance with the provisions of Sub-section (1) of Section 26 or has not regularly employed any method of accounting or if the method employed is such that in the opinion of the Commissioner assessment cannot properly be made on the basis thereof,

the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment.

4. No statutory rule or regulation in force at the material time was brought to our notice which made it obligatory for the assessee to maintain accounts in a particular form. Therefore, the non-maintenance of stock register, non-submission of stock list and non-maintenance of manufacturing account could not, by themselves, justify best judgment assessment under Section 18(4) of the Act. The assessing authority must find that as a result of non-maintenance of stock register, non-submission of stock list and non-maintenance of manufacturing account, the method of accounting employed by the assessee is such that, in his opinion, the assessment cannot properly be made on that basis. The following observations of the Supreme Court in Commissioner of Sales Tax v. H.M. Esufali A.I.R. 1973 S.C. 2266 are pertinent:

The assessing authority while making the 'best judgment' assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his 'best judgment' and not anyone else's. The High Court could not substitute its 'best judgment' for that of the assessing authority. In the case of 'best judgment' assessments, the courts will have to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed.

5. The observation of the Board that after rejection of accounts of the assessee, the burden was on the assessing authority to prove what turnover had been suppressed by the assessee runs counter to the decision of the Supreme Court in Commissioner of Sales Tax, M.P. v. H.M. Esufali A.I.R. 1973 S.C. 2266. The first question the Board should have decided was whether the accounts maintained by the assessee were rightly rejected by the assessing authorities. The Board had next to consider whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. On these aspects, the learned counsel for the department and the assessee agreed that the Board has not given any finding. In these circumstances, the learned counsel for the parties agreed that the Board be directed to send a supplementary statement of case, after hearing the parties, giving its findings on the questions as to whether, in the circumstances of the case, the assessing authority was justified in holding that the method of accounting employed by the assessee was such that assessment could not be properly made on that basis and whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made.

6. Accordingly, the Board is directed to send a supplementary statement of case, after hearing the parties in that behalf, giving its findings on the questions as to whether, in the circumstances of the case, the assessing authority was justified in holding that the method of accounting employed by the assessee was such that assessment could not be properly made on that basis and whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. After the supplementary statement of case is received, the matter shall be fixed for further hearing.


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