1. The disputed turnovers in this case are (1) a sum of Rs. 1,10,836.95 said to represent the sale price of the forest produce and (2) a sum of Rs. 37,314.05 said to be the sale price of bamboos supplied by the assessee to M/s. Seshasayee Paper & Boards Ltd., during the assessment year 1964-65.
2. The assessee is a firm carrying on business as forest contractors having its head office at Anthiyur and a branch at Mettur. It has taken in auction the lease of bamboo coupes from the forest department of the Government of Tamil Nadu. The lease taken was for one year ending with 31st of March, and the lease amounts paid are termed as kist. According to the terms and conditions of the lease, the lessee has to deliver a particular quantity of bamboos collected from the coupes to M/s. Seshasayee Paper & Boards Ltd., Pallipalayam, and the balance of the bamboos alone can be disposed of by the contractor. So far as the bamboos delivered to M/s. Seshasayee Paper & Boards Ltd. is concerned, no payment is to be made and only the cutting and freight charges are payable to the assessee by the mills. It appears that during the assessment year, instead of delivering the bamboos as soon as they were cut and collected from the forest, the assessee took the bamboos to its godown and only from the stocks in the godown, it supplied the required quantity of bamboos to the paper mills. The assessing authority has assumed that as the bamboos have been supplied by the assessee from the stocks in its godown, it would amount to a sale of bamboos by the assessee to the paper mills. The assessee contended before the assessing authority that there is no sale involved in the delivery of bamboos to the paper mills and that the supply of the bamboos from out of the stocks held by the assessee in its depot cannot be construed as an outright sale to the paper mills. This controversy is in respect of the sum of Rs. 37,314.05.
3. The assessee has also taken some other coupes for collecting forest produce for various lease amounts, and the assessing authority found that the quantity of forest produce sold by the assessee during the year is too small when compared with the lease amounts, that, therefore, the turnover disclosed in the accounts cannot be taken to be true or correct, and that an estimate of the turnover at five times the amount of lease paid will be reasonable. The assessee is aggrieved against the addition to his disclosed turnover on both the above counts. On appeal, the Appellate Assistant Commissioner as well as the Tribunal upheld the assessment in respect of both the items.
4. The learned Counsel for the assessee contends that the addition of Rs. 1,10,836.95 as suppressed turnover in sales of forest produce is not justified at all, and that there is no finding by any of the authorities below that the account books are not acceptable. According to the learned Counsel, unless the account books are rejected as not reliable, the turnover disclosed in the accounts should normally be accepted, and that, in this case, the only reason for the authorities below to ignore the book turnover and make an addition on the basis of best judgment was that in comparable cases, the turnover has been found to be more than four or five times the kist paid in relation to each coupe contract and that, therefore, five times the kist paid in relation to each coupe contract should be adopted as the turnover of sales of forest produce. It is true that in respect of two contracts out of the four, the sales turnover of the forest produce is very much less than the kist amounts paid and, in one case, it is just equal to the kist amount, and only in one case, the sales turnover happens to be about two times the kist paid. Therefore, the authorities chose to compare the sale figures in this case with other comparable cases. But, in so doing, the authorities have not taken into account the closing stock of the forest produce in the assessee's hands at the end of the year. As a matter of fact, in the working sheet filed before the Tribunal, the assessee has shown that Rs. 9,500 worth of forest produce is lying in its head office and at the depot. If the closing stock is also taken into account along with the quantity of forest produce sold by the assessee, then the total quantity of forest produce collected by the assessee will be something more. Learned Counsel for the assessee points out that the actual stocks at the end of the year could be verified from the account books of the assessee and the account books of the assessee were in fact produced before the Tribunal at the time of the hearing. Having regard to the fact that the Tribunal has affirmed the assessment on the ground that in comparable cases the sale amounts were five times the kist paid, it has to be actually found out whether the assessee had stocks at the end of the year and if so, the value of such stocks has to be added to the sales turnover as disclosed in the assessee's books to find out as to what is the total quantity of forest produce collected by the assessee as against the kist payment. Then alone a proper comparison may be made between the produce collected and the kist payments. We, therefore, think that the Tribunal has to consider the matter afresh after taking into account the closing stock of the forest produce at the end of the assessment year for the purpose of correlating the kist payments with the quantity of forest produce collected by the assessee.
5. As regards the second item of Rs. 37,314.05 said to be the sales effected by the assessee to M/s. Seshasayee Paper & Boards Ltd., the learned Counsel for the assessee contends that there has been in fact no sale, but the delivery of the bamboos was in pursuance of the terms of the lease and that the supply was not in the course of any sale. It is pointed out by the learned Counsel that no price has been received for the bamboos and that the only thing that has been realised was the cutting and the labour and transport charges. A perusal of the contract will make it clear that the assessee is bound to deliver certain quantity of bamboos to M/s. Seshasayee Paper & Boards Ltd., and that no price has been fixed for such supplies. It is not the case of the revenue that any payment was received for the bamboos supplied by the assessee. The only fact that has been relied on by the authorities below is that the bamboos have not been directly delivered from the forest to the Seshasayee Paper & Boards Ltd., but the supply was made only from the stocks in the godown and, therefore, the delivery must be construed as sale by the assessee to the paper and board mill. We are of the view, in the circumstances of the case, it is not possible to infer a sale of bamboos by the assessee to M/s. Seshasayee Paper & Boards Ltd. Whether delivery was effected directly from the forest or from the assessee's godown, it will not change the legal position that the assessee is discharging the obligation which he has entered under the coupe contract in supplying bamboos to M/s. Seshasayee Paper & Boards Ltd. We do not, therefore, agree with the Tribunal that the sum of Rs. 37,314.05 represents the sales effected by the assessee during the assessment year. We, therefore, set aside the assessment on this item of turnover.
6. As regards the first item, we direct the Tribunal to dispose of the appeal afresh in the light of what has been stated above. The tax case is partly allowed and there will be no order as to costs.
7. It is open to both the parties to adduce any additional evidence, if any, in support of their respective cases.