H.R. Sodhi, J.
1. The Sales Tax Tribunal, Haryana, has in pursuance of an order of this court made on 2nd December, 1970, under Section 22(3) of the Punjab General Sales Tax Act, 1948 (referred to hereinafter as the Act), referred the following two questions of law for being settled:
(1) Whether on the facts and circumstances of this case, an increase of Rs. 51,523.88 in the taxable turnover of the petitioner-firm is justified ?
(2) Whether on the facts and circumstances of this case, the imposition of the penalty of Rs. 2,000 on the petitioner-firm is justified?
2. M/s. Tara Chand Hari Ram is a firm registered as a dealer under the Act. It carries on business at Rewari in the district of Gurgaon. The dealer filed quarterly returns for all the four quarters for the year 1964-65 in which the gross turnover was shown at Rs. 2,73,476.12. After claiming deductions permissible under the law, the taxable turnover was worked out at Rs. 2,60,371.10 on which a tax of Rs. 11,286.71 was deposited. The assessing authority was not satisfied with the return and inspected the premises of the assessee. It found many irregularities on inspection of the records. A number of loose parchas relating to certain transactions were taken into possession by the Excise and Taxation Officer. Accounts were scrutinised and the account books did not appear to be regularly maintained. There was also a dasti note-book containing account of empty bardana which was returned to the dealer. The assessing authority was not satisfied with the explanation furnished by the dealer and the irregularities so discovered may be stated hereunder:
(1) That three parchas were recovered from the shop of the appellant marked as Nos. 20, 21 and 27. Parcha No. 20 related to Rs. 350 in relation to one Shri Nihal Chand while parcha No. 21 related to some figures and parcha No. 27 related to Rs. 6,000 and Rs. 1,000 and the transactions of these parchas could not be explained by the appellant.
(2) That in the note-book recovered from the shop of the dealer, the dealer admitted that the note-book related to bardana and certain transactions of sales. He has mentioned 4 such sales which were conducted on 6-8-1964, 17-9-1964 and 16-10-1964 but entries in the register were made on 21-9-1964, 1-3-1965 and 7-3-1965, respectively.
(3) That the dealer had effected 11 sales on 5-5-1964, 4-8-1964, 25-8-1964, 2-9-1964, 3-9-1964, 3-9-1964, 4-9-1964, 5-9-1964, 12-9-1964, 14-9-1964 and 17-9-1964, but they were not incorporated in his account books.
3. Keeping in view the extent of business and position, the assessing authority made a best judgment assessment determining the gross turnover at Rs. 4,25,000 as against Rs. 3,73,476.12 as returned by the assessee. Allowing the necessary deductions, the total tax assessed came to Rs. 14,070.36 against the voluntary payment of Rs. 11,286.71. A penalty of Rs. 3,928.37 which was hundred per cent, of the tax involved under Section 11(7) of the Act was imposed. New demand in a sum of Rs. 7,856.74 was thus created.
4. The assessee took an appeal to the Deputy Excise and Taxation Commissioner who did not attach much value to the first two irregularities referred to above as he did not consider them to be in any way substantial. In his opinion; 11 transactions of sale mentioned at serial No. 3 above could not be supported and the total amount of these sales comes to Rs. 653.14 as appearing from the books of account. The appellate authority maintained the increase in gross turnover at Rs. 51,523.88 as assessed by the assessing authority but reduced the amount of penalty to Rs. 2,000.
5. A further appeal to the Tribunal met with no success and the application of the assessee made under Section 22(1) of the Act was rejected. This court issued directions to the Tribunal for stating the case and it is in these circumstances that the reference is before us.
6. No doubt the irregularities in the books of account were admittedly found by the assessing authority and 11 transactions of sale as entered in the books of account created suspicion but the total amount of those sales is only Rs. 653.14. In making best judgment assessment certain amount of speculation is bound to creep in but neither the assessing authority nor the appellate authority has disclosed in the impugned orders as to how it worked out the figure at Rs. 51,523.88 as increase. The best judgment assessment, whatever be the extent of speculative element in it, has at the same time to be based on some reasonable objective data. It is not known what facts and circumstances were taken into account in fixing the amount of increase and how an overall assessment was made. There has been progressive increase in the taxable turnover of the assessee and for the previous year he had shown the gross turnover at Rs. 3,06,894.31 as against Rs. 3,73,476.12 for the year in dispute. It cannot, therefore, be positively said, in the absence of any other material, that the assessee had concealed any income. No authority is needed for the proposition that the best judgment assessment cannot be arbitrary. Even best judgment assessment implies and imports a legal and judicial consideration and the assessing authority cannot just base the same on some suspicions without there being any material on which it could rely. The assessing authority has just mentioned a figure at Rs. 51,523.88 but if it had fixed the increase at Rs. one lakh or any other amount, there was nothing to stop it. We are, therefore, satisfied that in the circumstances of the present case there is no evidence on which reliance could be placed to add a sum of Rs. 51,523.88 to the turnover.
7. In the result, the first question referred to us is answered in the negative, that is, against the department and in favour of the assessee. The second question relates to the imposition of penalty and that too must be answered in favour of the assessee when the increase in the turnover cannot be sustained. In the peculiar circumstances off the case, there is no order as to costs.