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A. Appathurai Nadar and ors. Vs. Deputy Commercial Tax Officer, Srivaikuntam Ii - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case Number Writ Petition Nos. 887 and 888 of 1966
Judge
Reported in[1972]29STC681(Mad)
AppellantA. Appathurai Nadar and ors.
RespondentDeputy Commercial Tax Officer, Srivaikuntam Ii
Appellant Advocate K. Srinivasan and ; K.C. Rajappa, Advs.
Respondent Advocate K. Venkataswami, First Assistant Government Pleader
Disposition Petition allowed
Excerpt:
.....of the turnover of business of a dealer has for any reason escaped assessment to tax. this explanation should be deemed to be in the file when the first assessment was made in march, 1962, or september, 1962. but invoking the general rule that official acts are to be presumed to be done regularly, the slips as well as the explanation given by the assessee in december, 1961, should reasonably be presumed to be available to the assessing authority when it reviewed the situation when passing the first order of assessment in 1962. the explanation of the assessee when the revised notice was given in 1966 was that these slips were considered and action was dropped. in the peculiar circumstances of this case, though there is an alternative remedy available for the petitioner, as the order..........secured in 1961 were examined and action was dropped and also repeated the contention that the excess cash balance as worked out from the recovered slips did not have any bearing or relationship with his trading activity. nevertheless, the assessing authority, namely, the respondent in this case, pursued action under section 16 of the act and completed the revised assessments for both the years on 10th february, 1966. it is as against these orders of assessment that the present writ petitions have been filed seeking for writs of certiorari.4. learned counsel for the petitioner rightly urges that the respondent had no jurisdiction to reopen the assessment under section 16 of the act and even if he had, he had no material to act under section 16 of the act and treat the sum total of.....
Judgment:
ORDER

Ramaprasada Rao, J.

1. The petitioner is a dealer in grocery articles and pulses and carries on business at No. 137, Great Cotton Road, Tuticorin. On 23rd October, 1961, the place of business of the petitioner was inspected by the. Special Deputy Commercial Tax Officer, Tirunelveli, and others. Four pieces of paper containing certain cash balances and relatable to the period from 6th February, 1961, to 20th October, 1961, were recovered thereunder. In connection with the said recovery of the slips disclosing certain cash balances, an explanation was called for from the petitioner on 24th October, 1961, The petitioner explained in December, 1961, stating that the figures mentioned in the slips were not and could not be any turnover relating to any business of his and the said figures represented advances or loans to third parties. The revenue's case is that there was a notice calling for an explanation regarding the slips and the explanation as above was rendered by the petitioner to the Special Deputy Commercial Tax Officer and not to the assessing officer. But the records, however, do not show or support this suggestion. It is not disputed that such explanations though addressed to the special staff are expeditiously sent to the assessing authorities. The natural presumption is that when an inspecting staff recovers incriminating material in the course of inspection or search made by them, it is their duty to pass on such material and the explanation, if any, secured by them from the assessee to the assessing authority who is obviously the person primarily interested in assessing and bringing to tax such escapement of turnover if it is ultimately found to have escaped. But in the instant case, it is not clear as to who called for the explanation ; but it appears that in December, 1961, the petitioner explained to the authorities concerned that the excess balance disclosed in the recovered slips over and above such cash items already disclosed in the account books do not have anything to do with his trading or commercial activity, but that such amounts were recoveries made by him from third parties to whom he advanced loans. This explanation was not considered by the assessing authority when it passed the original orders of assessment for the years in question. The original assessing authority normally concluded the assessments and passed the relative orders for the year 1960-61 on 31st March, 1962, and for the year 1961-62 on 30th September, 1962.

2. It appears that in 1964, the residential premises of the petitioner was raided once again and cash to the tune of Rs. 65,505 was recovered. On the basis of such recovery, the petitioner was sought to be assessed on the foot, that the said amount represented 'escaped turnover' in his business. The petitioner came up to this court and obtained relief, and the amount collected from him by way of tax on the ground that the sum of Rs. 65,505 had everything to do with his trade and business was not accepted by this court and the amount collected by way of tax was returned.

3. Long after the first incident which took place in 1961 and the second -which took place in 1964, which, however, did not have any nexus with the first inspection in 1961, the assessing authority sought to exercise jurisdiction under Section 16 of the Tamil Nadu General Sales Tax Act, 1959, and issued a notice of revised assessment on 12th January, 1966, and called for objections. In the objections, the petitioner raised a specific plea that these slips which were secured in 1961 were examined and action was dropped and also repeated the contention that the excess cash balance as worked out from the recovered slips did not have any bearing or relationship with his trading activity. Nevertheless, the assessing authority, namely, the respondent in this case, pursued action under Section 16 of the Act and completed the revised assessments for both the years on 10th February, 1966. It is as against these orders of assessment that the present writ petitions have been filed seeking for writs of certiorari.

4. Learned counsel for the petitioner rightly urges that the respondent had no jurisdiction to reopen the assessment under Section 16 of the Act and even if he had, he had no material to act under Section 16 of the Act and treat the sum total of the excess cash balance in the slips as relatable to the business of the petitioner as a dealer under the Act.

5. Regarding the first contention, it is well-founded ; the jurisdiction which can be assumed by a taxing authority under Section 16 of the Act is conditioned by the fact that it must be found that the whole or any part of the turnover of business of a dealer has for any reason escaped assessment to tax. The stress is upon the primordial requirement which would vest jurisdiction on the assessing authority, namely, escapement of turnover. 'Turnover' is not a word of art, but it is defined in the Act itself as meaning the aggregate amount for which goods are bought or sold, or supplied or distributed, by a dealer, either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration. Unless, therefore, the record discloses or a reasonable conclusion is plausible that an amount which is characterised as 'turnover' would fit in with a commercial activity, which naturally involves a sale, supply or distribution, then such an amount cannot rightly be characterised as 'turnover' and much less 'escaped turnover'. In the instant case, the slips were compared with the account books of the assessee and many of the items in the slips did accord with the entries in such books. There was, however, an excess of cash noticed in the slips so recovered. One knows not as to whether this excess cash as disclosed in the slips is normally attributable to the commercial activity of the dealer and whether the sum total of such excess cash could be authoritatively characterised as 'turnover'. As a matter of fact, in the order impugned, the assessing authority would say :

This excess amount would relate to either unaccounted sales turnover or to profit earned on such unaccounted sales.

6. It took five years for the assessing authority to discover this and record this as an opinion of his. This was available to the assessing authority even in December, 1961, when the petitioner gave his explanation as stated in paragraph 3 of the affidavit to the writ petition. This explanation should be deemed to be in the file when the first assessment was made in March, 1962, or September, 1962. But invoking the general rule that official acts are to be presumed to be done regularly, the slips as well as the explanation given by the assessee in December, 1961, should reasonably be presumed to be available to the assessing authority when it reviewed the situation when passing the first order of assessment in 1962. The explanation of the assessee when the revised notice was given in 1966 was that these slips were considered and action was dropped. The suggestion of the assessee that such was the attitude of the assessing authority when it finalised the original assessment in 1962 is not an unreasonable one. Thus, it is seen that excepting for conjecture, opinion and surmise, on which alone the impugned order of assessment is based, there does not appear to be any clinching or acceptable material on record or in the files for any taxing authority to come to the conclusion that there has been an escapement of turnover in the case which would warrant the reopening of the assessment under Section 16 of the Act. There is, therefore, the initial want of jurisdiction when the reassessment proceedings were processed through.

7. The second contention of the learned counsel is that there is no finding at all by the assessing authority that the amount represents unaccounted sales turnover and, therefore, escaped turnover ; this is not so very prominent as it ought to be. The assessing authority is not sure whether it related to unaccounted sales or profit earned on such account of sales. Though prima facie such an inference could be drawn, yet in the peculiar circumstances when this material was available on the files even in 1961 and when no such impression was then gained by the first assessing authority, it is for the second assessing authority when it reopened the assessment under Section 16 to be more decisive and clear and to give a finding and the reasons for finding that the excess cash disclosed in the slips do relate to escaped turnover and nothing else.

8. In the view that I have taken that the respondent had no jurisdiction to reopen the assessment as the amount said to have escaped assessment is not relatable to the commercial activity of the petitioner and, therefore, not equatable to escaped turnover in the eye of law, it is unnecessary for me to consider the merits arising in this writ petition. In fact, Mr. Srinivasan, the learned counsel for the petitioner stated that it is not clear as to why the sum of Rs. 37,951.47 which represented the excess balance for the period, between 6th February, 1961, to 31st March, 1961, was multiplied by the figure '6' to arrive at the so-called escaped turnover. Even here, there is an element of arbitrariness since even the processing of assessment under Section 16 must be tempered by prudence and the ultimate result should be justified by material. Even in this respect, the impugned order suffers from an error apparent. In the peculiar circumstances of this case, though there is an alternative remedy available for the petitioner, as the order impugned was passed without jurisdiction and as it has not satisfied any of the prerequisites laid down under Section 16 of the Act, the rule nisi is made absolute and the writ petitions are allowed. No costs.


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