1. In this tax case filed by the State, the view taken by the Tribunal is that in respect of a turnover chargeable under section 7-A of the Tamil Nadu General Sales Tax Act, there cannot be any best judgment assessment and that no estimate of the turnover could be made under section 12(2) in respect of the turnover under that section.
2. The assessee in this case is running a non-vegetarian hotel under the name and style of Sri Sampoorni Vilas Non-Vegetarian Hotel at Salem. For the year 1975-76, it declared a taxable turnover of Rs. 69,920.50 in its A1 return submitted on 25th March, 1976. The assessing authority after a check of the accounts found that the sales were not supported by bills, that 50 per cent. of the provisions purchased during the year were not supported by bills and that the gross profit as per the accounts was only 17 per cent. which was considered to be low in a non-vegetarian hotel. The assessing authority took note of the fact that there were certain purchase omissions in respect of rice, tamarind, coconuts and chillies. Hence the assessing authority rejected the accounts of the assessee as incorrect and incomplete and estimated a sales turnover of Rs. 3,55,568 and a purchase turnover of Rs. 51,940 under section 7-A of the Act for the assessment year 1974-75.
3. There was an appeal to the Appellate Assistant Commissioner who reduced the taxable turnover to Rs. 1,57,321.20. Not satisfied with the relief granted by the Appellant Assistant Commissioner, the assessee went before the Tribunal. The Tribunal found that the turnover as estimated by the Appellate Assistant Commissioner was a little bit excessive and that the correct estimate should be taken as Rs. 1,39,841 which is to be taxed at 4 per cent. under section 3(1).
4. Coming to purchase turnover, the Tribunal found that the purchase turnover as per the books as estimated by the Appellate Assistant Commissioner was only Rs. 5,145 as against the estimate of Rs. 11,576.25 under section 7-A of the Act and that since an estimate cannot be made in respect of the turnover liable to tax under section 7-A, the order of the Appellate Assistant Commissioner in so far as it related to the estimate of the turnover taxable under section 7-A cannot be sustained and tax has to be levied only on the book turnover of Rs. 5,145. According to the Tribunal, the turnover under section 7-A cannot be the subject-matter of an estimate and there cannot be a best judgment assessment in relation to such turnover. The Tribunal has not, however, given any reason for taking that view. Presumably, the Tribunal has proceeded on the basis that section 7-A is not a charging section and therefore, the turnover taxable under that section cannot be the subject-matter of an estimate of best judgment assessment under section 12(2).
5. A conjoint reading of sections 3, 4, 5, 7-A and 12(2) would clearly indicate that section 7-A should also be equated to sections 3, 4 and 5 and as sections 3, 4 and 5 are admittedly charging sections, section 7-A also should be taken as the charging section. The Tribunal has taken the view that there is no provision to estimate the turnover under section 7-A and section 12(2) which applies to the other provisions of the Act like sections 3, 4 and 5 cannot apply to section 7-A. A perusal of section 12(2) would clearly indicate that it is in general terms and it would apply to all the charging sections and not only sections 3, 4 and 5. Section 12(1) says that the assessment of a dealer shall be on the basis of the prescribed return relating to his turnover submitted in the prescribed manner within the prescribed period and section 12(2) says that if no return is submitted by the dealer under sub-section (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incomplete or incorrect, the assessing authority shall, after making such enquiry as it may consider necessary, assess the dealer to the best of its judgment. Section 12(1) enjoins a dealer to submit a return in the prescribed form in relation to his turnover. According to section 12(2), if no return is submitted relating to the dealer's turnover or if the return submitted is found to be incomplete or incorrect, then a best judgment assessment has to be made. The expression 'turnover' occurring in section 12(1) refers to the turnover of the dealer taxable either under sections 3, 4, 5 or 7-A. Therefore, the Tribunal does not appear to be right in holding that section 12 will apply only to the turnover of a dealer in respect of the tax which is payable under sections 3, 4 or 5. In our view, the expression 'turnover' of a dealer occurring in section 12 will apply also to the taxable turnover of a dealer under section 7-A which is also a charging section.
6. The scope and ambit of section 7-A came up for consideration before the Supreme Court in State of Tamil Nadu v. Kandaswami : 1SCR38 . The Supreme Court took the view that the definition of 'dealer' in section 2(g) of the Act includes not only a person who carries on the business of 'selling, supplying or distributing goods' but also one who carries on the business of buying only, that section 7-A deals with particular kind of goods and provides for levy of purchase tax in respect of certain goods under particular situations, that the focal point in the expression 'goods, the sale or purchase of which is liable to tax under the Act' in section 7-A of the Act is the character and class of goods in relation to their exigibility to tax, that section 7-A should, therefore, be taken as a charging as well as a remedial provision and that section 7-A provides for a particular situation and makes the purchase of such goods taxable in the hands of the purchasing dealer on his purchase turnover if any of the ingredients set out in sub-section (1) of section 7-A is satisfied. The Supreme Court also pointed out that the main object of section 7-A is to plug leakage and prevent evasion of tax and that in interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed.
7. In this case, the Tribunal has proceeded on the basis that the turnover taxable under section 7-A cannot be estimated and this practically defeats the object of bringing in section 7-A, i.e., to prevent evasion of tax. The Tribunal's view that so far as the turnover taxable under section 7-A is concerned, it is only the book turnover that is to be take into account and the assessing authority cannot make any estimate under section 12(2) will be inconsistent with the object sought to be achieved by bringing in section 7-A by the Legislature. We cannot, therefore, accept the view of the Tribunal in this case that in relation to turnover taxable under section 7-A there cannot be any estimate as correct. We have already held that the turnover taxable under section 7-A is also covered by section 12 and, therefore, if the assessee's account books are incorrect or incomplete, then the best judgment assessment could be made under section 12(2) and the turnover taxable under section 7-A can be estimated under that section. In this view, we set aside the order of the Tribunal and restore the order of the Appellate Assistant Commissioner so far as the turnover taxable under section 7-A is concerned. There will be no order as to costs.