1. The appellant, a dealer in grocery articles had reported total and taxable turnovers for the year 1970-71 at Rs. 3,79,718.26 and Rs. 2,16,223.58 respectively, in their form No. A-2 returns claiming exemption on a turnover of Rs. 1,63,494.68 towards the sales turnover of foodgrains, second sales of oil-seeds and sale of exempted goods. On a surprise inspection made on 18th December, 1970, certain slips of papers relating to transactions of business of the assessee were recovered. After issuing notice and calling for explanations on the discrepancies found in the accounts as also on the turnover covered by the slips, the assessing officer rejected the accounts and proceeded to estimate the turnover. The slips recovered during inspection covered a period of 15 days and the sales suppressed as disclosed in the slips worked out to Rs. 9,087. On the basis that the slips showed that the assessee should have resorted to suppression continuously during the earlier periods as well and adopting the sales suppression for a fortnight at Rs. 9,087, estimated the omission at Rs. 1,54,479, which is 16 times of Rs. 9,087 plus Rs. 9,087. This multiple of 16 times was taken by the assessing officer on the ground that prior to the period covered by the slips there were 16 fortnights from the beginning of the assessment year. This estimated sales suppression was added to the turnover disclosed in the returns and the assessment was made. The assessing officer also levied a penalty of Rs. 408 being 1 1/2 times the tax payable on Rs. 9,087, the actual suppression found with reference to the slips.
2. The assessee preferred an appeal to the Appellate Assistant Commissioner. Though the Appellate Assistant Commissioner accepted the finding of the assessing officer that the account books of the assessee should not be relied on and that a best judgment assessment was called for and also accepted that there was a suppression of sales turnover to the extent of Rs. 9,087 within a fortnight immediately preceding the date of inspection, held that there was no justification for an addition of 16 times of Rs. 9,087. This was on the ground;
'The slips do not disclose any continuity of transactions. There are no grounds to hold that similar suppressions could have ruled during the previous part of the year also. Hence the estimation of turnover for the previous sixteen fortnights and its addition are not called for.'
3. In that view he deleted the addition of Rs. 1,45,392 and sustained the addition only to the extent of Rs. 9,087. The Appellate Assistant Commissioner also reduced the penalty to an amount equal to the tax due on the turnover of Rs. 9,087 and the penalty thus reduced came to Rs. 272.
4. The Board of Revenue took suo motu proceedings under section 34 of the Tamil Nadu General Sales Tax Act and after issuing notice to the assessee, set aside the order of the Appellate Assistant Commissioner and restored that of the assessing officer considering the suppression noticed during a fortnight as justifying the conclusion that the dealer should have indulged in similar suppressions during the earlier fortnights of the assessment year. The Board of Revenue also restored the penalty levied by the assessing officer. It is against this order of the Board of Revenue that the present appeal has been filed under section 37 of the Act.
5. The learned counsel for the assessee contended that there are no grounds to hold that the suppression could have pervaded the period of 16 fortnights prior to the inspection, that there was no proof to sustain the estimated suppression and that in any case the estimate made by the assessing officer was based on irrelevant considerations and that the decision of the Appellate Assistant Commissioner should not have been interfered with.
6. The Supreme Court had occasion to consider estimation on the best judgment basis of escaped turnover and the principles to be applied in such circumstances, in the decision reported in Commissioner of Sales Tax, Madhya Pradesh v. H. M. Esufali H. M. Abdulali : 90ITR271(SC) . In that case, the assessee was a dealer both under the State Act as well as the Central Sales Tax Act. It is not necessary for us to state the facts relating to the Central sales tax assessment. The assessee was a dealer in iron and steel. For the period from 1st November, 1959, to 20th October, 1960, the assessing officer determined the gross turnover at Rs. 3,97,357 and the taxable turnover at Rs. 1,21,567. Subsequently, on surprise inspection of the business premises of the assessee, a bill book for the period from 1st September, 1960, to 19th September, 1960, was recovered and that showed that the assessee had effected sales of iron and steel during that period of the value of Rs. 31,171.28. These sales had not been entered in the books of account maintained by the assessee. On the basis of the information provided in this bill book reassessment proceedings were initiated and ultimately the assessing officer estimated the assessee's escaped turnover at Rs. 2,50,000 adopting the sale of Rs. 31,171.28 as the escaped turnover for a period of 19 days as the basis. Dealing with the legality of this estimation of the suppressed turnover, the Supreme Court held :
'So long as the estimate made by him (the assessing officer) is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an over-estimate or an under-estimate. But that is no ground for interfering with his 'best judgment'.'
7. The Supreme Court found the nexus in such an estimate from the fact of recovery of the bill book which showed suppression of a turnover to the extent of Rs. 31,171.28 for a period of 19 days. The Supreme Court then considered the question as to the exact turnover which should have been suppressed which called for an estimation by the assessing officer. On this aspect, after pointing out that the true facts must be within the exclusive knowledge of the assessee and if he had failed to place all the facts truthfully before the assessing officer he cannot be allowed to call upon the assessing officer to prove conclusively what turnover he had suppressed, the Supreme Court also held that it was not necessary for the assessing authority to have in his possession any correct measure to find out the escaped turnover. If in estimating the escaped turnover the assessing authority had acted bona fide and the estimation was on a rational basis, the fact that there is no fact proved in support of that estimate is immaterial. Applying this principle, in the present case the slips recovered showed actual suppression of turnover to the extent of Rs. 9,087 during a period of 15 days. This formed the nexus for rejecting the accounts and proceeding to estimate the suppressed turnover. Since there was no further material placed before the assessing officer by the assessee in order to enable him to estimate the suppressed turnover he had necessarily to proceed on best judgment basis and in this case he has adopted a multiple of 16 times the suppressed turnover for determining the total suppression on the ground that there were 16 fortnights prior to the period of inspection in the assessment year. We do not find any justification for holding that this was not reasonable or just. In fact, even if the assessing officer had adopted a different multiple, unless it is found to be so arbitrary and unreasonable we would not have interfered. As pointed out by the Supreme Court it was not necessary for the assessing officer in such circumstances to be in possession of any correct measure to find out the escaped turnover. The Appellate Assistant Commissioner, therefore, had no material on which he should have held that the assessing officer's estimation of the suppressed turnover was in any way arbitrary or illegal. In fact, the reasoning of the Appellate Assistant Commissioner that there was no ground to hold that similar suppression should have ruled during the previous part of the year is contrary to the ratio of the judgment of the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh v. H. M. Esufali H. M. Abdulali : 90ITR271(SC) .
8. The learned counsel for the assessee drew our attention to the decision of the Kerala High Court reported in P. C. Ittymathew Son v. State of Kerala 1976 37 S.T.C.184. In that case, on the basis of certain surprise inspection it was found that for a period of one month prior to 27th September, 1968, there was a suppression to the extent of Rs. 26,684. The assessing officer estimated the suppressed turnover at ten times this amount and added a sum of Rs. 2,66,840 to the turnover reported. On appeal, however, the Appellate Assistant Commissioner pointed out that the suppression was detected only on 27th September, 1968, and the suppression detected could cover only the previous six months relating to the assessment year and therefore reduced the assessment to six times the value of the suppression detected instead of ten times made by the assessing officer. The Tribunal set aside this order of the Appellate Assistant Commissioner and restored that of the assessing officer. While setting aside the order of the Tribunal, the High Court pointed out that the inspection on 27th September, 1968, and the detection of the suppressed turnover for a period of one month prior to that could only call for a determination of the suppressed turnover for the earlier six months from the beginning of the assessment year and from the mere fact that the suppression was found on 27th September, 1968, it could not be presumed that even in the future period there should have been suppression. In fact the High Court pointed out that the Tribunal had observed in its order that 'if there had been another inspection in the course of the year after 27th September, 1968, perhaps variation of this kind would have been noticed'. The High Court characterised this argument of the Tribunal as mere guess-work and cannot form any basis or material for holding that even subsequent to 27th September, 1968, there might have been some suppression of the turnover. We may put it more legally on the basis of the judgment of the Supreme Court referred to above that the inspection and recovery of the slips or the suppression of the turnover found in those slips can form the nexus only for the period earlier than the detection and it cannot be considered to give any nexus for a future transaction. The decision of the Kerala High Court, therefore, depended on the facts of that case and is not an authority for the learned counsel's contention that for the determination of the turnover suppressed also there should be some material.
9. The learned counsel for the assessee then contended that since this is a regular appeal under section 37 of the Act, this Court could redetermine the escaped turnover and then invited us to estimate the suppressed turnover afresh. But we have no material on the basis of which either we could determine the turnover or we could say that the estimate made by the assessing officer was incorrect. We are, therefore, unable to redetermine the estimated suppressed turnover.
10. The tax case (appeal) is accordingly dismissed. The respondent will be entitled to its costs, counsel's fee Rs. 250.
11. Appeal dismissed.