J.S. Verma, J.
1. This order shall also dispose of M.C.C. No. 352 of 1981, 353 of 1981 and 354 of 1981 all of which involve the same question of law in respect of the same assessee for different periods of assessments. These four references relate to the periods 1962-63, 1963-64, 1964-65 and 1965-66.
2. The common question of law referred to this Court for its decision under Section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, is as under:
Whether, under the facts and circumstances of the case, the Tribunal was justified in holding in making the assessment under Section 19(1) of the Act the turnover will be confined to the established escaped turnover and resort to best judgment cannot be made ?
The question has been reproduced exactly as framed by the Tribunal. In short, the question is: whether the Tribunal was justified in holding while making the reassessments under Section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958, that the turnover has to be confined only to the escaped turnover which had been definitely established and resort could not be made to best judgment assessment ?
3. The material facts giving rise to the above question of law are these. The assessee carries on business of gold and silver and also manufactures and sells ornaments. The premises of the assessee was inspected by the Flying Squad of the Sales Tax Department on 13th July, 1968, when it was found that some transactions relating to gold, silver and ornaments had not been shown by the assessee in his regular books of accounts. The Flying Squad found that there was concealment of these transactions in the accounts and on the basis of such concealment during the particular period, concealment for the entire year was worked out by application of the appropriate multiple. This was done for all the four years of assessment. The estimated sales which had been concealed were worked out accordingly.
4. The assessment for the aforesaid four years, that is, 1962-63 to 1965-66, which had been finalised was reopened and reassessment was made under Section 19(1) of the Act on the basis of the escaped turnover. Penalties under Section 19(1) of the Act were also imposed for these years.
5. The assessee's contention throughout was that only the exact amount of these transactions which were found concealed during a particular period could be treated as escaped turnover for the entire year and that the same could not be the basis for computing escaped turnover for the entire year by applying to it the appropriate multiple based on the proportion of the period to the whole year. The power to make best judgment assessment in this manner as was done during reassessment under Section 19(1) of the Act was challenged by placing reliance on a decision of this Court in H. M. Esufali v. Commissioner of Sales Tax 1969 MPLJ 228. The Board of Revenue (Tribunal) accepted the assessee's contention to this extent following the decision of this Court in H. M. Esufali's case 1969 MPLJ 228 and it held that the escaped turnover can be held to be established only to the extent definite transactions were found concealed and not in excess thereof.
6. Subsequent to the order of the Tribunal, the Supreme Court reversed the above decision of this Court. The decision of the Supreme Court is Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali AIR 1973 SC 2266. The department applied to the Tribunal for making a reference to this Court under Section 44(1) of the Act, for decision of the above question placing reliance on the Supreme Court decision and this is how the above question has been referred to this Court.
7. There is no dispute that the question to be answered by us is now fully covered by the Supreme Court decision in Commissioner of Sales Tax v. H. M. Esuf-ali AIR 1973 SC 2266. In a similar situation the Supreme Court has held, that the reassessment can be based on best judgment made taking into account the concealed dealings within a particular period. Calculation of escaped turnover for the entire year, at a figure arrived at with the aid of the appropriate multiple, cannot be said to be arbitrary. The Supreme Court also pointed out with reference to earlier authorities on the point that in such a situation, for which the assessee himself is to blame, the best judgment must be honest guess-work and to some extent arbitrary. Unless the assessee, in such a situation, shows that there were exceptional circumstances during the particular period no further question arises for being taken into account while making the calculation on this basis. In the case before the Supreme Court, dealings outside the assessee's accounts during a period of 19 days were found proved and it was on that basis that calculation of the escaped turnover for the entire period was made by application of the appropriate multiple based on the proportion of 19 days to the total period of assessment.
8. In upholding this view, their Lordships of the Supreme Court observed as under:.From this circumstance, it was open to the Sales Tax Officer to infer that the assessee had large scale dealings outside his accounts. The assessee has neither pleaded nor established any justifiable reason for not entering in his accounts the dealings noted in the bill book seized. It is obvious that he was maintaining false accounts to evade payment of sales tax. In such a situation, it was not possible for the Sales Tax Officer to find out precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an underestimate. But that is no ground for interfering with his 'best judgment'. It is true that the basis adopted by the officer should be relevant to the estimate made. The High Court was wrong in assuming that the assessing authority must have material before it to prove the exact turnover suppressed. If that is true, there is no question of 'best judgment' assessment. The assessee cannot be permitted to take advantage of his own illegal acts. It was his duty to place all facts truthfully before the assessing authority. If he fails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. That fact must be within his personal knowledge. Hence the burden of proving that fact is on him....The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. 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 of anyone else. 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. In the present case there is no dispute that the assessee's accounts were rightly discarded. We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tax Officer was a relevant one whether it was the most appropriate or not. Hence the High Court was not justified in interfering with the same.
* * * 11. Applying the rule laid down in Raghubar Mandal Harihar Mandril's case AIR 1957 SC 810 to the facts of the present case, it is seen that the Sales Tax Officer had material before him to find out, how much turnover had escaped assessment during a period of 19 days. On the basis of that material he estimated the escaped turnover for the entire year. Hence it cannot be said that there was no basis for the estimate made by the Sales Tax Officer. It may be that his estimate was an over-estimate or an under-estimate, but it cannot be said that the estimate was without any basis. In making that estimate, there was an element of guess-work which was inevitable in the circumstances of the case. If the Sales Tax Officer was compelled to adopt a rule of thumb which in a sense is an arbitrary rule, the assessee was entirely responsible for that situation.
* * *13. The question before us is whether there is a reasonable nexus between the basis adopted by the assessing authority and the estimate of escaped turnover made. We have no doubt that there is such a nexus.
* * *15. For the reasons mentioned above, we are unable to agree with the High Court that the Sales Tax Officer had arbitrarily assessed the assessee.
* * *17. What is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under Section 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making reassessment under Section 19, if the assessing authority has no power to make best judgment assessment, all that the assessee need do to escape reassessment is to refuse to file a return or refuse to produce his account books. If the contention taken on behalf of the assessee is correct, the assessee can escape his liability to be reassessed by adopting an obstructive attitude. It is difficult to conceive that such could be the position in law.
9. As a result of the above discussion the aforesaid common question of law has to be answered in favour of the department and against the assessee in all these four references. Our answer to the question is, therefore, as under;
The Tribunal was not justified in holding while making the reassessment under Section 19(1) of the Act; that the turnover must be confined only to the established escaped turnover and that resort to best judgment assessment could not be made.
The parties shall bear their own costs.