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M.A. Unnerikutty Vs. State of Kerala - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKerala High Court
Decided On
Case NumberT.R.C. No. 52 of 1976
Judge
Reported in[1979]44STC94(Ker)
AppellantM.A. Unnerikutty
RespondentState of Kerala
Appellant Advocate P.C.B. Menon and; V.P. Mohankumar, Advs.
Respondent AdvocateGovernment Pleader
Cases ReferredSankunny Nair v. State of Kerala
Excerpt:
.....made to the best of judgment. after the said period, the assessment order was passed by the sales tax officer on 19th april, 1972. though there is reference to the objections raised by the assessee, we fail to find any consideration of these objections. it is as good as a statement by the officer that somebody told him something which he recorded. the veracity of the statement as well as the competency of the person who has given the statement to depose on behalf of the assessee were both disputed. in these circumstances, we think, the proper course would be to set aside the order of the appellate tribunal as well as the order of the appellate assistant commissioner and the sales tax officer to enable the assessee to present his case in the light of what we have said here,..........of the premises by the sales tax officer on 29th may, 1969. as to the assumption that the slips related to the business, what was said in the said reply was: 'your assumption that the slips related to my business transaction was wrong. i have not maintained any such slips.' though there was no categorical denial that one mr. bharathan was not present in the premises at the time of inspection, it was contended that the petitioner had no employee by the name bharathan. in this context what is seen stated is: 'the information given by a.p. bharathan cannot be taken against me. i have no employee by name a.p. bharathan. the information given by him may not be taken against me.' the petitioner applied for certified copies of the slips. the certified copies were issued to him, and.....
Judgment:

P. Subramonian Poti, J.

1. This revision is against the order of the Sales Tax Appellate Tribunal allowing an appeal by the State and vacating the order of the Appellate Assistant Commissioner. By the order of the Tribunal the order of assessment was restored. The revision petitioner is an assessee under the Kerala General Sales Tax Act. In the assessment of the petitioner for the year 1969-70, an addition of 60 per cent was made to the turnover of copra crushed in the Prabhat Oil Mills as disclosed in the books of the assessee and sales of oil and cake resulting from the crushing of the said copra was also taken into account in assessing the petitioner. This was based upon recovery of three slips of paper from the premises of the Prabhat Oil Mills when there was inspection by the Sales Tax Officer on 29th May, 1969. The Prabhat Oil Mills admittedly belonged to the petitioner. According to the Sales Tax Officer, at the time the premises of the oil mills were inspected by him the person in-charge of the business was one Bharathan, said to be an employee of the petitioner. The said Bharathan is said to have given a statement to the said Sales Tax Officer, but when it was taken down by the officer and Bharathan was asked to sign he is said to have declined that request. The receipt drawn up for the three slips taken from the premises is said to have been offered to Bharathan but he is said to have declined to receive it. Based on the three slips of paper it was proposed that the books of account of the assessee were to be rejected and the assessment made to the best of judgment. These slips, it is said, noted transactions in copra, oil and oilcakes which were not reflected in the regular accounts of the assessee. The slips, it is said, indicated suppression of a larger turnover on 21st May, 1969, 24th May, 1969, 26th May, 1969, 27th May, 1969, and 28th May, 1969. Based on what was assumed as such suppression of the turnover of the copra, oil and oilcakes during the abovesaid five days, the turnover for the whole year, assuming suppression of the same pattern for the year, was estimated by the assessing authority. To the preassessment notice issued to the petitioner, he filed a reply on 21st February, 1972. In the reply, the petitioner-assessee did not deny the fact of inspection of the premises by the Sales Tax Officer on 29th May, 1969. As to the assumption that the slips related to the business, what was said in the said reply was: 'Your assumption that the slips related to my business transaction was wrong. I have not maintained any such slips.' Though there was no categorical denial that one Mr. Bharathan was not present in the premises at the time of inspection, it was contended that the petitioner had no employee by the name Bharathan. In this context what is seen stated is: 'The information given by A.P. Bharathan cannot be taken against me. I have no employee by name A.P. Bharathan. The information given by him may not be taken against me.' The petitioner applied for certified copies of the slips. The certified copies were issued to him, and further the Sales Tax Officer informed him that he may file further objection, if any, within five days after perusing these certified copies. No such objection was filed within five days nor was any time asked for on the expiry of the period of five days. After the said period, the assessment order was passed by the Sales Tax Officer on 19th April, 1972. Though there is reference to the objections raised by the assessee, we fail to find any consideration of these objections. In fact, without considering these objections, what is found is that the assessment is being made on a taxable turnover determined in the manner mentioned in the order. The Appellate Assistant Commissioner, considering the three slips taken possession of by the inspecting officials, observed that they contained nothing more than a few scribblings jotted down by somebody in the mill, and found that the statement said to have been made by Bharathan was not binding on the assessee, that he was not shown to be an employee in the mill, that even reliance on such slips would be of no consequence as they would not reveal anything adverse to the statement of accounts of the assessee and that, for these reasons, the rejection of the books of account of the assessee and estimation of turnover was uncalled for. In the appeal by the State against the decision of the Appellate Assistant Commissioner, the Appellate Tribunal took the view that the materials gathered at the time of inspection can be made use of against the assessee and further that the addition made was proper and reasonable since a pattern of suppression had been disclosed.

2. Two questions urged by the revision petitioner's counsel here are: (i) that the statement of Sri Bharathan ought not to have been relied on to connect the petitioner with the slips of paper said to have been recovered from his premises and further that the assertion made that the slips of paper so recovered would lead to the assumption that the books of account of the assessee were incorrect or incomplete would not be warranted in the circumstances of the case and (ii) that even assuming that the slips indicate some suppression for five days, in the absence of any material to show that there is a pattern of suppression for the whole of the year, the addition made on the assumption of such pattern of suppression for the whole year may not be sustainable in law.

3. We find from the order of the Sales Tax Appellate Tribunal that the slips recovered from the premises of the appellant have been related to the accounts of the assessee by reference to the statement said to have been made by Sri Bharathan, but not signed by him. Particular mention is made of this in paragraph 10 of the Appellate Tribunal's order, as also in paragraph 12, wherein the relevant part of the statement said to have been made by Bharathan is extracted. The Tribunal has evidently felt that, in the absence of denial of the fact of inspection, it has to be assumed that the inspecting officer who inspected would have acted regularly in the discharge of is official duties and, that when he says he had recovered the slips from the premises, it must be taken to be so. It has been assumed that, read with the statement of Bharathan, it would be evident that there was suppression.

4. It is true that in the objection filed by the assessee the fact of inspection on 29th May, 1969, is not disputed. It is also true that there is no statement in the objection that the slips were not recovered from the business premises of the assessee. Merely because they were so recovered, they need not necessarily relate to the assessee. The question is on whom the burden lies to show that these slips do not relate to the business of the assessee. There may be cases where a dealer may maintain a second set of accounts and may jot down undisclosed transactions in slips of paper. Recovery of such slips may go a long way in establishing that the accounts are incorrect and incomplete. But the paper received must be such as to indicate the factum of suppression. If the entries therein are not intelligible and they cannot be rationally treated as indicating any business transactions they may be of no use even if the assessee fails to explain these. But if the slips can be taken as reflecting business transactions and are taken from the business premises of the assessee it is up to him to explain them. It will be difficult, if not impossible, for the inspecting authorities to establish that the papers recovered relate to the business of the assessee himself. Normally account books, papers and records relating to business transactions found in the business premises of the assessee must be taken as relating to his business. It is possible that some other person might have entrusted or left such accounts or papers in the premises of the assessee. But that would be a fact within the peculiar knowledge of the assessee and, therefore, he alone would be able to plead so and prove it. Therefore, it should be taken as a prudent rule that when books of account or papers indicating business transactions are recovered from the business premises of any assessee the presumption, to start with, is that these relate to the business of the assessee. This, of course, is a presumption which can be rebutted by showing that they relate to some other transaction or business of some other person or by explaining how they happened to be in the business premises of the assessee despite the fact that they do not relate to the assessee's business. When the assessee fails to prove this, the assessing authorities would be right in assuming that they relate to the business of the assessee. This Court had, in a situation as envisaged above, observed in Raman Nambudiri v. Deputy Commercial Tax Officer [1958] 9 S.T.C. 261 at 265.:

The normal presumption to be drawn in respect of the other accounts and records that may be found at the place of business is that they also relate to the same business. To say that the inspecting officer can insist on their examination only after proving that they also relate to the business is to expect the officer to perform an impossible task because before the examination of those records the officer will not be in a position to say whether they relate to the business in question or whether they relate to the private affairs of the dealer. It is for the dealer to rebut the presumption arising out of the presence of these records at the business place that they also relate to the business by showing their contents to the inspecting officer and satisfying him that those records are unconnected with the business and that they relate only to his private affairs.

Of course, that was a case where the learned Judge referred to the possible explanation that the accounts related to the private affairs of the assessee.

5. A Division Bench in the decision in Sankunny Nair v. State of Kerala [1961] 12 S.T.C. 758 at 763 observed thus in regard to the very same question:

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.

6. In the case before us, there was no material before the Sales Tax Officer to rebut the presumption that the slips of paper did relate to the business of the assessee. But that by itself may not be sufficient to determine the controversy in this case. It has to be established that these slips are relevant. They would be relevant only if they would serve to discredit the account books of the assessee. The entries in the slips must be shown to be inconsistent with the state of affairs reflected in the books of account. The Tribunal has evidently utilised the statement of Sri Bharathan to explain the entries in the slips and, based upon that explanation, attempted to relate these entries to the entries in the books of account. Reference is made in the order to the stock position on the date of inspection. To determine the stock position at the time of inspection it is necessary to know the quantum of copra taken for crushing till that time on that day and the quantum of oil that had been produced till the time of inspection. For that too, it is the statement of Sri Bharathan that is depended on. Therefore, these slips assume relevance only in relation to the statement of Sri Bharathan and, if the statement cannot be relied on, the order of the Tribunal relying upon such statement cannot be sustained.

7. The assessee categorically stated that Sri Bharathan is not his employee. Bharathan had not signed any statement before the Sales Tax Officer. The statement taken down by the officer to which the deponent had not subscribed his signature cannot be taken as a statement by the deponent himself. It is as good as a statement by the officer that somebody told him something which he recorded. The veracity of the statement as well as the competency of the person who has given the statement to depose on behalf of the assessee were both disputed. There was no attempt to cite Bharathan as a witness and examine him by giving the assessee an opportunity for cross-examination. In fact, even the copy of the statement so extensively quoted in the order of the Appellate Tribunal was not furnished to the assessee. In the preassessment notice, no reference is seen made to any such recorded statement. It may not even appear from the preassessment notice that there was such a statement made by Sri Bharathan, a statement to which he did not subscribe his signature. What is mentioned is that Bharathan mentioned about the quantity of copra received and oil crushed till the time of inspection. For all these reasons, the reliance on the statement of Bharathan may not be justified. Whether, even without reference to the statement of Bharathan, the sales tax authorities could connect the slips recovered with the business of the assessee is a different matter. That has not been shown or attempted to be shown in the order of the Sales Tax Officer or in the order of the Appellate Tribunal. The conclusion as it has now been reached cannot be justified. We find that opportunity has not been granted to the revision petitioner to meet the case based on the statement of Sri Bharathan. There was also no proper opportunity given to the assessee to rebut the presumption that the slips related to the business of the assessee. In these circumstances, we think, the proper course would be to set aside the order of the Appellate Tribunal as well as the order of the Appellate Assistant Commissioner and the Sales Tax Officer to enable the assessee to present his case in the light of what we have said here, adducing such evidence as he deems necessary. The department will also be free to adduce evidence, if so adduced. In the view we have taken on the first of the two questions posed by us, it is not necessary to consider the question whether there is a pattern of suppression for the whole year. That is left open. Disposed of as above. No costs.


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