P.V. Dixit, C.J.
1. This is a reference by the Sales Tax Commissioner, M.P., under Section 13(1) of the M.B. Sales Tax Act, 1950 (hereinafter called the Act). The questions referred to for decision are :
(1) Whether on finding that the accounts produced at the time of first assessment were incorrect and did not include all transactions the assessing authority is (under Section 10 of the Madhya Bharat Sales Tax Act) empowered to make best judgment assessment for the whole turnover estimated for the period of previous assessment or he can only make additional assessment of items proved to have escaped assessment previously.
(2) Whether assessment of the assessing authority under Section 8(4) (a) is according to law in the circumstances of the case.
(3) Whether it was incumbent on the assessing authority to have brought to the notice of the opposite party specific items which had escaped assessment and to have offered him an opportunity to rebut the evidence in regard to such specified items.
2. The material facts are that the assessee-firm, Messrs Kunte Brothers of Gwalior, is a dealer in scientific instruments, chemicals, etc. During the assessment year 1951-52 its taxable turnover was determined at Rs. 4,071-4-0, and sales tax was levied accordingly. Subsequently, the assessing authority discovered that there was an under-assessment for the year in question. A notice under Section 10 of the Act was therefore issued to the non-applicant and it was asked to produce its account books and other relevant records for further scrutiny. The assessee failed to appear or to produce its account books in response to this notice. Thereupon the Sales Tax Officer made an estimate of the escaped turnover and made an assessment to the best of his judgment. The total taxable turnover of the dealer was found to be Rs. 28,000, inclusive of the taxable turnover of Rs. 4,071-4-0 determined earlier. After giving credit for Rs. 208-14-9 deposited under the first assessment, an additional demand for payment of Rs. 1,541-1-3 was made on the assessee. The assessee unsuccessfully preferred a revision petition before the Commissioner of Sales Tax. The present reference has been made at his instance.
3. The answer to the first question depends on Section 10 of the Act, which runs as follows :
If for any reason the whole or any part of the turnover of business of a dealer has escaped assessment to the tax, or if the licence fee, registration fee or exemption fee has escaped levy or has been assessed at too low a rate in any year, the assessing authority at any time within a period of three years next succeeding that to which the tax or the licence fee, registration fee or the exemption fee relates, assess the tax payable on the turnover which has escaped assessment or levy the correct amount of licence fee, registration fee or exemption fee, after issuing a notice to the dealer and after making such inquiry as he considers necessary.
It will be seen that under this provision if the assessing authority finds that any part of the turnover of the dealer has escaped assessment then the authority after issuing a notice to the dealer and making such inquiry as may be found necessary can 'assess the tax payable on the turnover which has escaped assessment'. The words 'turnover which has escaped assessment' clearly show that when an additional assessment is made under Section 10 in respect of any turnover which has escaped tax, the assessing authority's jurisdiction under this section is confined to such turnover which has escaped tax and does not extend to revising, reopening, or reconsidering the whole assessment. In proceedings under Section 10, the assessee cannot reopen questions already decided in the original assessment, and likewise the assessing authority cannot make a re-assessment inconsistent with the original assessment in respect of the turnover which is not the subject-matter of proceedings under Section 10. The matter is plain enough on the wording of Section 10 itself. Here, it seems that after the conclusion of proceedings under Section 10 the total taxable turnover of the dealer for the year 1951-52 was found to be Rs. 28,000. This included the taxable turnover of Rs. 4,071-4-0 determined earlier. What the assessing authority should have done was to find the turnover of the dealer which escaped assessment during the year in question and then assess the dealer on that turnover. The taxable turnover of Rs. 4,071-4-0 found earlier and the tax on it could not be revised in those proceedings.
4. The second question is whether best judgment assessment under Section 8 can be made in proceedings under Section 10. There is nothing in Section 10 to indicate that best judgment assessment cannot be made in proceedings for the assessment of any escaped turnover. Indeed, the provision in Section 10 that the escaped turnover shall be determined after issuing a notice to the dealer and after making necessary inquiry contemplates that a notice in conformity with Section 8 should be given and that the inquiry should be held in accordance with Sub-sections (2) and (3) of Section 8. If, therefore, when a notice is issued to the assessee under Section 8 and he is also called upon to produce his account books and other relevant records for scrutiny, and if the assessee fails to appear in response to this notice and fails to produce the material required of him, the assessing authority has jurisdiction to determine the escaped turnover to the best of his judgment. Under Section 10 the burden of proving that any turnover has escaped assessment or that there has been under-assessment is no doubt upon the department; but this only means that in order to justify initiation of proceedings under Section 10 it is necessary for the assessing authority to establish at least one transaction the turnover of which was not included in the previous assessment. Once that is done, it is for the assessee to satisfy that no turnover has escaped assessment or that the escaped turnover is of a certain magnitude. If the assessee fails to discharge this burden by failing to appear or failing to produce his account books despite a notice under Section 10, then the assessing authority is entitled to form its own opinion about the escaped turnover. In this connexion it will be pertinent to refer to the decision in Rosette Franks (King Street), Ltd. v. Dick (H. M. Inspector of Taxes) 36 Tax Cas. 100. That was a case in which additional assessment was made by the Commissioner according to his own estimate, after finding that the account books of the assessee could not be relied upon to show the whole of the trading profits. The Commissioner was able to prove only one incident of escaped assessment. In these circumstances, it was observed by Danckwerts, J., as follows :
It is perfectly true that this is only one incident, and the one incident only, which the Inspector of Taxes was able to establish before (1) 36 Tax Cas. 100. the Commissioners ; but it was open to the Commissioners, as it seems to me, to conclude that this was not merely an isolated transaction 'but showed the kind of thing which was going on, and they were, in my view, entitled to come to the conclusion to which they did come from this incident, though one only, that there must have been other similar incidents and, therefore, that the accounts of the company could not be relied upon to show the whole of the trading profit of the company.
5. These observations show that an estimate of escaped turnover or income can be made if the assessee fails to produce his account books or if the account books are found to be unreliable by the taxing authority. The best judgment assessment, therefore, made in the present case is justified under Section 8(4) (a) of the Act.
6. The last question is whether in proceedings under Section 10 it is incumbent on the assessing authority to bring to the notice of the assessee specific items of the turnover which has escaped assessment and to give to the assessee an opportunity of rebuttal. What we have stated earlier in regard to the onus resting on the assessing authority under Section 10 is sufficient to indicate that it is not necessary for the assessing authority to prove affirmatively each and every specific item in the escaped turnover. If the turnover of a single transaction is found to have escaped assessment and is established by the assessing authority, then it is for the assessee to show that no turnover of his escaped assessment or that, if it did, it was not of the alleged extent. It is clearly impossible for the assessing authority without examining the accounts and relevant records of the assessee to state at the very beginning the extent of the escaped turnover. If the assessee appears and produces his account books and the assessing authority on an examination of the account books provisionally determines the escaped turnover at a certain figure, then, no doubt, the assessee is entitled to an opportunity to show that the items did not escape assessment in the turnover previously determined. If, on the other hand, the assessee's account books are discredited or if he fails to produce the account books, then the assessing authority has no other alternative but to make its own estimate of the escaped turnover and tax the assessee accordingly. In such a case, the question of the assessee being given an opportunity of leading rebuttal evidence cannot arise.
7. Our answers to the questions referred to for decision are as follows :
(1) Under Section 10 of the Act the assessing authority has no jurisdiction to reopen the whole assessment ; it can only assess the tax payable on the turnover which has escaped assessment.
(2) The best judgment assessment made in the present case is according to law.
(3) It is not necessary for the assessing authority to prove affirmatively each and every specific item of the escaped turnover determined according to its best judgment, and as the assessee here did not appear and produce his account books the question of the assessee being given an opportunity of producing rebuttal evidence does not arise.
8. There will be no order for the costs of this reference.