1. The respondent is a dealer in brooms and tamarind. At the close of the assessment year 1959-60, he reported a turnover of Rs. 7,885. A check of his accounts proved their unsatisfactory nature. During the year, the Assistant Commercial Tax Officer had inspected the respondent's place of business on two occasions and he had found him to be trading in tamarind. Evidence was also secured to show that the respondent had been selling tamarind. The purchases and sales of tamarind found no place in his accounts. The result was that the accounts of the respondent were rejected and an estimate of his turnover both in brooms and in tamarind was made, resulting in an assessable turnover of Rs. 22,228. Against this order of assessment, an appeal was taken, which was however dismissed. The appellate authority found that the appellant had preferred no objections to the notice issued by the assessing authority proposing to fix his turnover by estimate. The contentions of the respondent that he had no transactions in tamarind and that he stopped all kinds of business including the business in brooms on 22nd March, 1960, and that it was his son who was carrying on the business in tamarind were rejected. The respondent was not able to deny that the Assistant Commercial Tax Officer had in fact inspected the business premises and found stocks of tamarind therein. It was also noticed that the respondent had invested a capital of about Rs. 3,800 for the business. Relying upon these facts, the estimate made by the assessing authority was confirmed.
2. On further appeal to the Tribunal, the Tribunal was satisfied that no credence could be given to the inconsistent versions which the respondent had made at various stages of the proceedings. It observed finally that the lower authorities were correct in rejecting the accounts and in resorting to the estimation of the turnover and that the basis on which the turnover had been computed was fair, and concluded :
We see no reason to interfere with the turnover determined, but he may be assessed Under Section 7 of the Act. The appeal is otherwise dismissed.
3. The State is the petitioner and the short question that has been raised is that the order of the Tribunal in directing an assessment to be made Under Section 7 of the Act is erroneous and unsustainable in law.
4. The contention raised by the State calls for an examination of the scope of Section 7 of the Act. This provision broadly stated enables small traders, whose turnover does not exceed Rs. 50,000, to pay tax at compounded rates, instead of at rates provided in the general charging Section 3. The scheme of the levy of tax Under Section 3(1) is that every dealer whose turnover exceeds Rs. 10,000 has to pay tax at 2 per cent, on his turnover. Certain goods mentioned in proviso (1) thereto are taxable at 1 per cent. of the turnover. We may leave out the case of dealers exclusively dealing in certain specified goods covered by proviso to Section 3(1). Section 3(1) would accordingly require every dealer to maintain accounts, displaying the turnover that would be taxable at 1 per cent. or 2 per cent. Section 7 states that notwithstanding anything contained in Sub-section (1) of Section 3, all dealers with not less than Rs. 10,000 turnover may pay tax at certain fixed rates according as their total turnover falls between certain limits, such as Rs. 10,000 to 15,000, Rs. 15,000 to 20,000 and so on up to as Rs. 45,000 to 50,000. The section states that this mode of taxation is to be at the option of the dealer.
5. Under the Madras General Sales Tax Rules, every dealer liable to pay tax who had been doing business before the commencement of the Act shall submit within 30 days of the commencement of the Act a return showing the total taxable turnover of his business separately in goods liable to different rates of tax in the 12 months immediately preceding the commencement of the Act. Form A-1 is the prescribed form. It contains columns to set out the total turnover, the taxable turnover, the tax due on the taxable turnover, the tax provisionally paid and the balance. It is seen from this that the tax is required to be paid provisionally. Rule 15(2) applies to dealers not liable to submit a return under Rule 8 but the procedure there under is in nowise different and is indicated by other sub-rules of Rule 15. Rule 10 states that on the submission of the return and after such scrutiny of the accounts and such enquiry as may be necessary, the assessing authority shall provisionally fix the tax. It follows that this provisional fixation of the tax is consequent upon the final assessment for any year ; that is to say, on the basis of a final assessment for one year, the provisional assessment for the next year also may be fixed. Rule 10 in its concluding part reads : 'He shall fix provisionally on the basis of the return the annual tax or taxes payable at the rate or rates specified in Section 3, 4, 5 or 7 or notified Under Section 17.' See also Rule 15(5) and (6).
6. If therefore a dealer is to have the benefit of a payment of compounded rates of tax Under Section 7, that also requires to be provisionally fixed, that is, for the succeeding year also the dealer has to pay tax at such compounded rates, it being understood that he has exercised his option of coming within the scope of Section 7. This conclusion is reinforced by Section 7 itself. Sub-section (2) states thus :
Any dealer who estimates his total turnover for a year to be not more than fifty thousand rupees may apply to the assessing authority to be permitted to pay the tax under this section and on being so permitted he shall pay the tax due in advance during the year in monthly or prescribed instalments and for that purpose shall submit such returns in such manner as may be prescribed.
7. This section clearly requires an application in this regard to be made and on permission by the assessing authority to enable the dealer to pay the tax at the compounded rates, the tax at such compounded rates is to be paid in advance in the prescribed manner. Even in a case where no return is submitted by a dealer which is covered by Rule 11 or Rule 15(6), the assessing authority can fix the tax payable by him provisionally and this rule and Rule 15(7) also refer to such provisional fixation in the light of Section 7. In such an event (though the rule is by no means very clear) it would appear that either at the time of submitting the return or at least on the notice being issued to the dealer with regard to the provisional fixation of the tax, he is entitled to resort to Section 7(2) to express his option and to make an applica-tion. Rule 18 relates to a special method of assessment which at the option of the dealer may be adopted in the case of dealers whose taxable turnover exceeds Rs. 20,000 a year and who have not opted to pay tax Under Section 7. This rule permits the dealer to remit into the treasury the amount of tax collected by him during the month and file a monthly return in a specified form. These returns are provisionally accepted and at the close of the year, a final computation of the tax ss.is made. This mode of assessment is available to cases of persons who have not opted to pay tax Under Section 7. Reading all of these rules together, it seems to us to be clear that the option that is given to the dealer Under Section 7(1) of the Act has to be exercised at the commencement of the year at the time the dealer submits the return. It is made dependent upon the permission being granted by the assessing authority and on the further condition that he pays the tax in advance. The conclusion therefore seems to be inescapable that it is not open to the dealer to wait till the end of the year and to ask at the time of his final assessment that his tax liability should be computed on the basis of Section 7.
8. We are, therefore, of the view that it was not open to the Tribunal to have directed the assessment of the dealer Under Section 7 of the Act when he had not exercised his option in the manner indicated above. The order of the Tribunal is accordingly set aside. The assessment of the assessee in this case will therefore follow the mode of normal assessment Under Section 3 of the Act only. There will however be no order as to costs.