1. The assessee is a manufacturer and dealer in stainlesswares. It appears that he started the manufacturing industry some time prior to 1974-75. His place of business was inspected on 10th October, 1975, by the sales tax authorities and it was found that he had effected sales to an extent of Rs. 37,975.60 during the year 1974-75 as per bills. He submitted his return after the inspection on 17th October, 1975, disclosing the total turnover as Rs. 37,975.60. This was a belated return. The assessing officer noticed that as per the books of account produced by the assessee the purchase value of the stainless steel was shown as Rs. 36,737.37 and the gross profit worked out only at 3 per cent. On the ground that the gross profit shown as per the accounts suggested sales omission, a pre-assessment notice was issued under section 12(2) proposing an addition of 20 per cent to the purchase value and determining the total and taxable turnover at Rs. 44.084.85 and calling for the dealer's objections, if any. In the reply to the notice the assessee had stated that the low percentage of gross profit by itself did not warrant an inference of suppression of sales turnover or rejection of the books of account and that there was no basis for proposing to assess at best judgment basis under section 12(2). So far as the delay in filing the return is concerned he contended that he was a new undertaking, that he was not fully aware of his liability to submit the return and that his business troubles did not allow him to attend to this legal obligation of submitting the return. He also pleaded that the non-submission of his return in time was not wilful. The assessing officer rejected this explanation observing that but for the inspection on 10th October, 1975, the assessee would not have submitted any return at all and that the objection to the best judgment is without any force. In the result, adding 20 per cent to the purchase value of Rs. 36.737.37 he determined the total and taxable turnover at Rs. 44,084.85 and demanded the tax at 8 per cent thereon. He also levied a penalty of Rs. 5,290.20 (rounded to Rs. 5,290) under section 12(3) at 1 1/2 times the tax due. The assessee preferred an appeal reiterating his contention that there was no wilful omission to file the return, that he came to know about his liability to submit the return only when the inspecting officers pointed out that in spite of the fact that the turnover had not reached Rs. 50,000 he is governed by section 3(2) and that, therefore, whatever be the turnover he had to submit a return. He also contended that there was not even a single purchase or sales omission and, in fact, the assessing officer had not pointed out any sales or purchase omission and in the circumstances, therefore, merely on the basis that the gross profit worked out at 3 per cent, there was no justification for rejecting the accounts or for best judgment assessment. But the Appellate Assistant Commissioner rejected this contention holding that through the return was submitted voluntarily, it was belated. He was also of the view that but for the inspection, probably the assessee might have suppressed the sales and would not have submitted the return at all. He also sustained the penalty. The Tribunal accepted the finding of the Appellate Assistant Commissioner that there was a belated return and that the explanation offered by the assessee for not submitting the return in time cannot be accepted. The Tribunal also held that there was no justification for interfering with the order of the assessing officer in determining the taxable turnover at Rs. 44,084.85. While accepting that the penalty is also leviable in this case the Tribunal took into consideration the fact that the assessee is a new dealer and, in the circumstances, some leniency is called for on the imposition of penalty and, accordingly, reduced the penalty to 50 per cent of the tax payable on the suppressed turnover. Treating the entire turnover at Rs. 44,084.85 as suppressed turnover, the penalty payable was determined at Rs. 1,764. It is against this order the present revision has been filed.
2. We have seen the trading account of the assessee for the year 1974-75. It showed the purchase turnover as Rs. 38,114.87 and the sales effected as Rs. 6,041.50. The manufacturing wages paid amounted to Rs. 4,664. It is in these circumstances that the gross profit is mentioned as Rs. 1,238.23. This cannot be considered to be the real gross profit of the trading account because, this is a manufacturing gross profit and, therefore, the assessing officer was not correct in stating that the trading account showed only 3 per cent gross profit. The assessing officer had not taken into account the closing stock of Rs. 6,041.50. A look at the trading account leaves us an impression that the assessing officer seems to have an unreasonable suspicion and there was no real basis for rejection of the return submitted by the assessee. It may also be pointed out that neither the assessing officer nor the appellate authorities have found any particular sale or purchase omission. It is only on the general impression that 20 per cent profit should have been derived by the assessee that the account books were rejected and the taxable turnover was determined at best of judgment basis. Even for adopting 20 per cent as the normal gross profit for such transaction, we do not have any evidence or comparable data with reference to the business of other dealers in this line. This Court has been repeatedly pointing out that even a best judgment assessment cannot be a wild guess but a reasonable and justifiable guess based on some material at least. As we have pointed out earlier, in this case there was absolutely no material by which one can justifiably say an addition of 20 per cent to the purchase turnover was reasonable. Further, in the Full Bench judgment in Kathiresan Yarn Stores v. State of Tamil Nadu 1978 42 S.T.C.121, this Court had held that the mere fact that there is a best judgment assessment, particularly when the assessment is based on the inference flowing from the inability of the assessee to establish the case pleaded by him, will not be sufficient for the purpose of imposition of penalty, for the degree of proof required for the imposition of penalty is quite different from and is of a much higher order than that required for the purpose of making a best judgment assessment. The Full Bench further observed that though an estimate made on best judgment basis may be legal, for the purpose of imposing penalty something more concrete is required which would enable the judicial mind to reach the conclusion that the dealer actually had the turnover which was fixed by best judgment. As we have already pointed out, no such material is available for us to conclude that there was any wilful suppression of the taxable turnover warranting a penalty under section 12(3). Therefore, the order of the Tribunal imposing penalty is not sustainable and accordingly we set aside the penalty and allow the tax revision case. It may be mentioned that the assessee had only questioned the penalty and not the determination of the turnover or the tax demanded on the turnover determined. The assessee will be entitled to his costs. Counsel fee Rs. 250.
3. Petition allowed.