D.K. Mahajan, J.
1. The following three questions of law have been referred by the Financial Commissioner, Revenue, under Section 22(1) of the Punjab General Sales Tax Act (Punjab Act 46 of 1948) (hereinafter referred to as the Act), as amended up-to-date :-
(1) Whether the Assessing Authority was justified in law in making the best judgment assessment against the applicants?
(2) Whether the Assessing Authority did not act without jurisdiction in making the best judgment assessment against the applicants?
(3) Whether the best judgment assessment made by the Assessing Authority was not time-barred?
2. The facts giving rise to the aforesaid questions of law are that the petitioners' concern filed returns for all the four quarters of the assessment year 1952-53 before the Assessing Authority, Gurgaon. The Assessing Authority assessed the petitioners' concern to a sales tax of Rs. 144-7-0 on a taxable turnover of Rs. 4,622-10-3. It was held that the account books of the petitioners' concern had been maintained in the normal course of business and were reliable. When the assessment was made, one of the partners, Shri Manohar Lal, was present.
3. While hearing the petitioners' revision petition for the assessment year 1951-52, the Excise and Taxation Commissioner, Punjab, noticed that the Assessing Authority, while passing the order for the assessment year 1952-53, had not taken into consideration the fact that cash memos for the sales of commodities for Rs. 142-14-0 and Rs. 236-0-6 issued on 6th September, 1952, and 8th September, 1952, respectively, had not been entered in the account books of the petitioners' firm for the year 1952-53. Accordingly, the Excise and Taxation Commissioner issued a notice to the petitioners and suo motu took action under Section 21(1) of the Act. He set aside the order of the Assessing Authority for the assessment year 1952-53 and remanded the case back to it for a fresh assessment. A petition for revision against the remand order to the Financial Commissioner failed. In pursuance of the remand order, the Assessing Authority took up the case for a fresh assessment in the presence of Shri Manohar Lal, one of the partners and his counsel, and then passed the order of assessment which order has been upheld by the Additional Deputy Excise and Taxation Commissioner, the Excise and Taxation Commissioner and the Financial Commissioner. It is in this situation that the petitioners' firm made an application under Section 22(1) of the Act and the aforesaid three questions of law have been referred for our decision by the learned Financial Commissioner.
4. It may be mentioned that the Assessing Authority did not use the words 'the best judgment assessment' while passing the order of assessment dated the 17th of September, 1956 ; but the Additional Deputy Excise and Taxation Commissioner, the Excise and Taxation Commissioner and the Financial Commissioner have treated the assessment made by the Assessing Authority as 'the best judgment assessment'. There can be no dispute in the present case that the assessment was and could only be made under Section 11(3) of the Act and not Section 11(4), though in both cases, the assessment would be 'the best judgment assessment' and the difference would be only of degree. In the case of an assessment under Section 11(3) of the Act, the assessment would not be so summary as would be in the case of an assessment under Section 11(4) of the Act. In this connection, reference may be made to the decision of the Supreme Court in Raghubar Mandal Harihar Mandal v. State of Bihar A.I.R. 1957 S.C. 810, wherein their Lordships, while dealing with the provisions of the Income-tax Act-Sections 23(3) and 23(4)-which provisions correspond to Sections 11(3) and 11(4) of the Act, observed as follows :
* * * In some decisions relating to the corresponding provisions of the Indian Income-tax Act, it has been said that the difference between the two is one of degree only, the one being more summary than the other. * * *
5. And when dealing with assessment under Section 23(3), which corresponds to Section 11(3) of the Act, their Lordships further observed as follows:
* * No doubt it is true that when the returns and the books of account are rejected, the Assessing Authority must make an estimate, and to that extent he must make a guess ; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. * * *
6. Therefore, we must proceed on the basis that when the Financial Commissioner is talking of 'the best judgment assessment', he is talking of that as one under Section 11(3) and not under Section 11(4) of the Act. This may be assumed in view of the provisions of Section 11 of the Act; the relevant provisions whereof are as follows :
11. (1) If the Assessing Authority is satisfied without requiring the presence of registered dealer or the production by him of any evidence that the returns furnished in respect of any period are correct and complete, he shall assess the amount of tax due from the dealer on the basis of such returns.
(2) If the Assessing Authority is not satisfied without requiring the presence of a registered dealer who furnished the returns or production of evidence that the returns furnished in respect of any period are correct and complete, he shall serve on such dealer a notice in the prescribed manner requiring him, on a date and at a place specified therein, either to attend in person or to produce or cause to be produced any evidence on which such dealer may rely in support of such returns.
(3) On the day specified in the notice or as soon afterwards as may be, the Assessing Authority shall, after hearing such evidence as the dealer may produce, and such other evidence as the Assessing Authority may require on specified points, assess the amount of tax due from the dealer.
(4) If a registered dealer, having furnished returns in respect of a period, fails to comply with the terms of a notice issued under Sub-section (2), the Assessing Authority shall within three years after the expiry of such period, proceed to assess to the best of his judgment the amount of the tax due from the dealer. * * *
7. In the present case, the assessee filed the return and in support thereof produced the account books and appeared before the Assessing Authority with his counsel. After examining the account books and hearing the counsel and the assessee, the order of assessment was passed. Thus, the assessment was under Section 11(3) of the Act. There can be no question of the assessment being under Section 11(4) because there was no failure on the part of the assessee to comply with the terms of the notice issued under Sub-section (2) of Section 11. While passing the order of assessment, the Assessing Authority observed as follows :-.The account books produced by the dealer have been examined which reveal that from his personal khata, he made sales to the extent of Rs. 86,640-7-0 and made sales during the period under assessment on commission basis to the extent of Rs. 28,024-4-6. He has charged a sales tax of Rs. 131-5-0. The gross turnover of the dealer for the period under assessment thus comes to Rs. 1,14,796-0-6 against that of Rs. 1,13,231-5-0 shown in the returns. The perusal of the account books further reveal that he has not accounted for the sales made on 6th September, 1952, and 8th September, 1952, to the extent of Rs. 142-14-0 and Rs. 236-0-6 respectively. On a complaint that the dealer keeps double set of account books, one for his personal use and the other for the sales tax and income-tax departments, it was arranged to make test purchases against cash memos for the verification of the account books to be produced. The taxable turnover of the dealer on best judgment basis was fixed at Rs. 40,000 for the year 1951-52 against which the dealer went in appeal. The appellate court upheld the decision of the Assessing Authority and rejected the appeal in toto. The dealer went in revision against the orders of the appellate court and the revisionary court also upheld the decision of the Assessing Authority. Keeping in view the irregularities committed by the dealer and the past history of the case, I determine his turnover at Rs. 1,62,000 out of which exemption to the extent of Rs. 37,034-13-9 is allowed towards the sales made to registered dealers. Another exemption to the extent of Rs. 71,992-4-9 is allowed towards exports. The taxable turnover thus comes to Rs. 52,972-13-6. After allowing him necessary rebate under Section 5(2)(b) of the Punjab General Sales Tax Act, 1948, the net taxable turnover is determined at Rs. 51,317-7-6. The dealer is accordingly assessed to a tax of Rs. 1,603-11-0 against which a tax of Rs. 144-5-0 has already been paid....
8. On appeal by the assessee the Additional Deputy Excise and Taxation Commissioner observed as follows :-
In the instant case, the Assessing Authority had complaints of tax evasion by the appellant who was alleged to have maintained double set of books, one for his personal use and one for the Income-tax and Sales Tax Authorities. For verifying the genuineness of those complaints, the Assessing Authority made test purchases on 6th September, 1952, and 8th September, 1952, of Rs. 142-14-0 and Rs. 236-0-6 respectively. These purchases were not accounted for by the appellant. The complaints, therefore, stood proved. This, therefore, forms a material piece of evidence which is quite enough to discard the book version of the sales of the appellant and also to enhance his returned turnover. This evidence proves to the hilt the tax evasion propensity of the appellant who was complained of anti-social activities of tax evasion. I consider that the estimate of turnover arrived at by the Assessing Authority on the basis of two specific instances quoted above needs no interference by this court....
9. Against this order, the assessee went up in revision to the Excise and Taxation Commissioner. The learned Excise and Taxation Commissioner, while rejecting the revision petition, observed as follows :-.The next point urged was that the quantum of turnover fixed was excessive. Here too, I am not inclined to agree with the counsel for the petitioner-firm. The dealer was assessed at Rs. 1.48 lakhs in the previous year and his turnover assessed at Rs. 1.62 lakhs can hardly be called excessive when the dealer himself had given a turnover of about Rs. 1.14 lakhs. Considering the daily percentage of suppression, I feel that the best of judgment assessment fixes the turnover at a modest level. The reasons for determining this level, as I have mentioned above, have been given in the order of the Assessing Authority, i.e., the daily sales, the percentage of suppression indulged in by him, his last year's sales and the turnover given by the dealer himself....
10. Against the order of the Excise and Taxation Commissioner, the assessee went up in further revision to the Financial Commissioner. The Financial Commissioner, while rejecting the revision, observed as follows :-.Having examined the case carefully, I find that a suitable enquiry was made by the Assessing Authority before making the final assessment; and this assessment was made taking into consideration the daily sales, the percentage of suppression of accounts found by the Assessing Authority, the last year's sales of the present petitioners, and the turnover given by the dealer himself. I have seen on the record myself the statement dated 3rd October, 1952, of Shri Manohar Lal, the manager of the petitioners' concern, to the effect that there have been omissions for which the firm asked to be excused. It will be further seen, as has been mentioned by the Commissioner in his order dated 5th July, 1961, that the Assessing Authority had found on a point of fact that the petitioners were actually not issuing receipts to purchasers. There can be no question regarding the proposition as laid down in the Supreme Court case cited by the learned Advocate for the petitioners, that any assessment on a 'best judgment' cannot be made on mere suspicion, but must be done after proper investigation and on sound reasoning according to relevant facts. The order of the Assessing Authority in the present case dated 17th September, 1956, clearly shows that he duly took into account all the necessary relevant factors, and only then came to his conclusions on the basis of a 'best judgment assessment'....
11. It will, therefore, be seen that the 'best judgment assessment' in the present case, which admittedly is one under Section 11(3) of the Act, has been made on the basis of material and cannot be characterised either as arbitrary or without evidence. Therefore, we are clearly of the view that the Assessing Authority was justified in law in making the 'best judgment assessment' against the applicants and the first question referred to us is answered in the affirmative.
12. The answer to the first question also disposes of the second question.
13. It is not necessary to decide the third question because the learned counsel for the assessee conceded that if the 'best judgment assessment' is one under Section 11(3) of the Act, no question of limitation would arise. Question of limitation could only arise in the case of a 'best judgment assessment' under Section 11(4) of the Act.
14. The reference is accordingly answered.
15. The department will be entitled to its costs which are assessed at Rs. 200.
D. Falshaw, C.J.
16. I agree.