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M. Sankunny Nair Vs. the State of Kerala - Court Judgment

LegalCrystal Citation
Subject Sales Tax
CourtKerala High Court
Decided On
Case Number Tax Revision Case No. 43 of 1960
Judge
Reported in[1961]12STC758(Ker)
AppellantM. Sankunny Nair
RespondentThe State of Kerala
Appellant Advocate P.K. Subramania Iyer,; C.S. Ananthakrishna Iyer and; N.N
Respondent AdvocateThe Government Pleader
Disposition Petition dismissed
Cases ReferredIn Jiyajeerao Cotton Mills Ltd. v. Commissioner of Income
Excerpt:
- - 170. lord russell of killowen in delivering the judgment of their lordships made the following observations as respects a 'best judgment' assessment within the meaning of section 23(4) of the indian income-tax act: the officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. 9. judged in the light of these well settled principles we will see whether in this particular case there was material for the taxing authorities to arrive at the turnover fixed by them. 16. the power of revision to the high court is thus limited and confined to interference only on the ground that the appellate tribunal either decided erroneously or failed to decide any question of law......office at lakkadi. for the year of assessment 1956-57 the assessee had filed a return before the sales tax officer, perintalmanna, showing a net turnover of rs. 45,985-8-2. the accounts were accepted and the tax assessed was duly paid by the assessee.2. the assessee has a fuel depot at kanjikode with a depot-keeper in charge of it. on 18th august, 1958, the sales tax officer of alathur paid a surprise visit to the depot and recovered two rough account books, one for the period 18th january, 1957, to 13th july, 1957, and the other for the period 2nd august, 1958, to 17th august, 1958, marked as exhibits 'a' and 'b' and seven g.v.r. form books maintained under the provisions of the motor vehicles act in respect of two lorries k. l. p. 1040 and m. d. m. 4559. on the basis of the details.....
Judgment:

Govinda Menon, J.

1. This is a revision by the assessee against the decision of the Sales Tax Appellate Tribunal in respect of the assessment for the year 1956-57. The assessee is a dealer in firewood and timber having his head office at Lakkadi. For the year of assessment 1956-57 the assessee had filed a return before the Sales Tax Officer, Perintalmanna, showing a net turnover of Rs. 45,985-8-2. The accounts were accepted and the tax assessed was duly paid by the assessee.

2. The assessee has a fuel depot at Kanjikode with a depot-keeper in charge of it. On 18th August, 1958, the Sales Tax Officer of Alathur paid a surprise visit to the depot and recovered two rough account books, one for the period 18th January, 1957, to 13th July, 1957, and the other for the period 2nd August, 1958, to 17th August, 1958, marked as Exhibits 'A' and 'B' and seven G.V.R. form books maintained under the provisions of the Motor Vehicles Act in respect of two lorries K. L. P. 1040 and M. D. M. 4559. On the basis of the details gathered from these books the Sales Tax Officer, Perintalmanna, took proceedings against the assessee on the escaped turnover. Notice, enclosure B, was issued to the petitioner proposing to estimate his suppressed turnover as follows :-

Actual sales turnover from 18-1-57 to31-3-57 as per book 'A' ... Rs. 17,247-1-0Estimated value of 1379 tons firewood atRs. 30 per ton for the period from September,1956, to March, 1957 ... Rs. 41,400-0-0Estimated turnover suppressed fromSeptember, 1956, to March, 1957 ... Rs. 58,647-1-0Add estimated turnover suppressed for theremaining 5 months of 1956-57 at Rs. 8,378per mensem ... Rs. 41,890-0-0-----------------Turnover suppressed ... Rs. 1,00,537-1-0or Rs. 1,00,537-0-0----------------

3. The assessee filed objections that the account books and the G. V. R. forms do not relate to his business. The objections were overruled and the petitioner was assessed to a turnover of Rs. 1,00,537. Enclosure C is the order of the Sales Tax Officer. An appeal was filed before the Appellate Assistant Commissioner who confirmed the order by his proceedings dated 10th June, 1959. Enclosure D is the order. The assessee took up the matter in appeal to the Kerala Sales Tax Appellate Tribunal and the Tribunal refusing to interfere, he has come up in revision to this Court.

4. In this Court the main point urged by the learned Advocate for the petitioner is that the estimated turnover is based on no materials, that there is nothing to connect the account books and the G. V. R. forms to the assessee's business and that the turnover has been fixed arbitrarily without reference to any evidence or material.

5. The learned counsel referred to some decisions bearing on this question. The first decision is the Privy Council decision in Commissioner of Income-tax, U. P. & C. P. v. Badridas Ramrai Shop [1937] 5 I.T.R. 170. Lord Russell of Killowen in delivering the judgment of their Lordships made the following observations as respects a 'best judgment' assessment within the meaning of Section 23(4) of the Indian Income-tax Act:

The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously, because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate ; and though there must necessarily be guess-work in the matter, it must be honest guess-work.

6. The next decision to which reference was made is that of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal [1955] 26 I.T.R. 775 where their Lordships of the Supreme Court observed :

As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends ; because it is equally clear that in making the assessment under Sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh and Anr. v. Commissioner of Income-tax, Punjab [1944] 12 I.T.R. 393.

7. In Raghubar Mandal Harihar Mandal v. State of Bihar A.I.R. 1957 S.C. 810 the Supreme Court dealing with Section 10(2) (b) of the Bihar Sales Tax Act, 1944, observed as follows :-

The provisions of Section 10(2) (b) of the Bihar Sales Tax Act, 1944, and Section 23(3) of the Indian Income-tax Act, 1922, are substantially the same and impose on the assessing authority a duty to assess the tax after hearing such evidence as the dealer may produce and such other evidence as the assessing authority may require on specified points. In making an assessment under Section 10(2)(b) the Sales Tax Officer is not. fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a Court of law ; but he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. When the returns and the books of account are rejected, the assessing officer 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. He must make what he honestly believes to be a fair estimate of the proper figure of assessment and tor this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate.

8. Reference was also made to a recent decision of this Court in K. M. Alikoya & Co. v. State of Kerala 1961 K.L.J. 553 to which one of us was a party, where also the principles laid down in the above cases were followed.

9. Judged in the light of these well settled principles we will see whether in this particular case there was material for the taxing authorities to arrive at the turnover fixed by them. It is admitted that the account books of the assessee which he had produced before the taxing authorities do not show the sales of firewood as disclosed in the account book 'A' and do not take in the firewood despatched by the assessee through lorries as seen in the G. V. R. forms. So the main question for decision was whether these account books and the G.V.R. forms refer to the assessee's business. If it is found that they do refer to his business then in the absence of explanation it would afford sufficient material for the taxing authorities for rejecting the petitioner's accounts and basing the estimate on such material.

10. There is no dispute that Krishnankutty Nair who produced these records before the Sales Tax Officer of Alathur is the depot-keeper of the petitioner. A scrutiny of the account book 'A' shows beyond doubt that it is an account book maintained for the assessee's business. The boo'ks show entries of amount spent for purchase of petrol for lorry K. L. P. 931. This lorry belongs to the assessee and it is evident that the books should belong to him. Various sums are seen to have been paid to 'M.S.' who could be none other than the assessee whose name is M. Sankunni Nair. Some of the entries found in the G. V. R. forms are brought into the account books A and B. In respect of the 1379 tons of firewood mentioned in the notice, the assesse is the consignor. No attempt has been made to explain any of these circumstances. Neither the assessee nor his servant had any explanation to offer as to how these books happened to be in the depot if it were really not connected with his business. The depot-keeper has not denied that they are not account books maintained by him.

11. The normal presumption that could be drawn in respect of the records and books that are found in the business place of a person is that they relate to his business. It is a matter which must be within his special knowledge and it is up to him to rebut the presumption by satisfying the officer that these records are unconnected with his business. The Sales Tax Authorities were, therefore; justified in drawing the legitimate inference that these books recovered from the depot refer to the petitioner's business.

12. It is common knowledge that a trader would have a stock register showing the receipt and despatch of firewood from his depot entrusted to the depot-keeper. No such register is produced. It is too much to believe that large quantities of firewood were entrusted to the depot-keeper without any record. The story that Other lorry owners would have used his name as consignor in their G. V. R. forms is incredible. No explanation has been given why these G. V. R. forms were kept in the assessee's depot.

13. The argument that the petitioner was not given an opportunity to explain these books is equally untenable. All that is demanded by natural justice is that the attention of the assessee should be drawn to the material which shows that the return submitted by the assessee is incorrect and incomplete. In this case the necessary particulars were furnished in the notice and the assessee had access to the account books and G. V. R. forms on which reliance was placed by the assessing authorities. If the assessee wanted he could have examined Krishnan-kutty Nair, his depot-keeper and tried to explain the presence of the account books and the G. V. R. forms or the entries contained therein. But he did not avail of the opportunity. There was only a bald denial that they were his books. The assessee was, therefore not denied opportunity to prove the correctness and completeness of his returns.

14. We find from the assessment records that the turnover estimated by the Sales Tax Officer is based on the details gathered from the records taken from the assessee's depot. The matter has been fully discussed in the order of the Tribunal and no objection can be taken that there is no material on which the assessing officer could have proceeded or that the assessment of the turnover is arbitrary or based on suspicions and surmises not supported by any evidence on record. The decisions relied on by the learned counsel for the assessee has, therefore, no application to the facts of this case.

15. Whether the books recovered from the assessee's place of business relate to his business is a matter of appreciation of evidence on what is essentially a question of fact. On this the Tribunal has given a clear finding on a consideration of all the available materials and that finding is not open to challenge in this revision proceedings. No doubt it will be open to a party to challenge the conclusions of fact drawn by the Tribunal on the ground that it is not supported by any legal evidence or that the impugned conclusion drawn from the relevant facts is not rationally possible and if such a plea is established the Court may consider whether the conclusion in question is not perverse and should not, therefore, be set aside. It is only within these narrow limits that there should be interference by this Court.

16. The power of revision to the High Court is thus limited and confined to interference only on the ground that the Appellate Tribunal either decided erroneously or failed to decide any question of law. In Jiyajeerao Cotton Mills Ltd. v. Commissioner of Income-tax and Excess Profits Tax, Bombay [1958] 34 I.T.R. 888 his Lordship Venkatarama Aiyar, J., dealing with how the Supreme Court should approach such cases observed:

We should examine the record, not indeed with a view to decide whether the Tribunal has properly appreciated the evidence, or whether its conclusion is a right one to come to on that evidence, but with a view to see whether there is evidence to support its finding and whether that finding is one which could, on that evidence be reasonably reached.

Approaching the question from this stand-point, we are unable to say that the reasons given by the Tribunal for finding that the books and the G.V.R forms refer to the assessee's business are without any foundation. It is, at any rate, a reasonably possible view and it cannot be said that there is no evidence to support it or that it is unreasonable and perverse. It follows, therefore, that the assessment was validly made and cannot be impuguned. In the circumstances the revision petition is dismissed with costs. Advocate's fee Rs. 50.


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