TMI Blog1955 (10) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... zaya Groundnut Oil Mills, Pondur. The plaintiff in O.S. No. 58 of 1948 submitted a return showing a turnover of Rs. 11,36,317-6-9 while the plaintiffs in the other suit made a return for Rs. 20,79,821-2-8 on 29th April, 1947. A few days later, a provisional assessment was made on the basis of these returns. On 22nd October, 1947, the Deputy Commercial Tax Officer, Bobbili, issued notices to these assessees calling upon them to produce their accounts, bills, pattis, income-tax orders and trading accounts for 1946-47 and 1947-48 on or before 4th November, 1947, in default of which the turnover would be determined to the best of his judgment without further notice. The assessees produced some account books with a list thereof but not the pattis, bill-books or the income-tax orders etc. A request was made on their behalf for extension of time for the production of the other records required by the Department, and they were permitted to do it in the first case before the 21st and in the second before the 20th of December, 1947. But, nothing was done by either of them within the time allowed. On behalf of the plaintiff in O.S. No. 58 of 1948, a letter was written to the Deputy Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave them once again an opportunity to prove the correctness of their returns and the allegations that they had no transactions with the individuals shown in the list of omissions. Beyond reiterating their earlier statements, nothing further was done. Thereupon, the Deputy Commercial Tax Officer made the orders of assessment in question estimating the turnover at Rs. 11,89,000 in O.S. No. 58 of 1948 and Rs. 22,01,960 in O.S. No. 10 of 1949. The sales tax levied on this basis was paid by both the plaintiffs under protest. This was carried in appeal to the District Commercial Tax Officer who confirmed the assessment order after hearing the parties. The plaintiffs in O.S. No. 10 of 1949 filed a revision petition in the Board of Revenue but that was dismissed with the result that the turnover estimated by the Deputy Commercial Tax Officer became final. The present suits are brought to declare the assessments to be illegal and to recover the amounts paid in excess of the admitted tax. The basis of the claim in both the suits is that the account books of the plaintiffs should have been accepted as correct and complete and that the records obtained from Sadhu Suryam could not form th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s illegal. (4) No reasonable opportunity was given to the appellants to show that their returns were correct and complete. (5) Lastly, the procedure enacted in rule 9 was not followed by the Taxing Officer in estimating the turnover under rule 8. In order to appreciate these contentions, it is necessary to extract the relevant provisions of law. Section 9 of the Madras General Sales Tax Act enacts: "9. (1) Every dealer whose turnover is ten thousand rupees or more in a year shall submit such return or returns relating to his turnover in such manner, and within such periods as may be prescribed. (2) (a) If the assessing authority is satisfied that any return sub- mitted under sub-section (1) is correct and complete he shall assess the dealer on the basis thereof. (b) If no return is submitted by the dealer under sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall assess the dealer to the best of his judgment: Provided that before taking action under this clause, the dealer shall be given a reasonable opportunity of proving the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual gross and net turnover for the preceding year and the amounts by way of tax or taxes actually collected during that year. (2) On the receipt of a return in Form A the assessing authority shall, if he is satisfied after such scrutiny of the accounts and such enquiry as he considers necessary that the return is correct and com- plete, finally assess on the basis of the return the tax or taxes payable under sections 3, 5 or 8-B(2) or under the notification or notifications issued under section 6(1) for the preceding year. (3) If no return is submitted or if the return submitted appears to the assessing authority to be incorrect or incomplete, the assessing authority may, after following the procedure prescribed in rules 8 and 9, finally assess the tax according to the best of his judgment. It is thus seen that these rules are framed for giving effect to the intent and purpose of section 9. While rules 6 to 9 relate to the sub- mission of returns by the assessee at the commencement of his business, rule 11 concerns returns for subsequent periods. But the procedure indicated in rules 8 and 9 has to be adopted under sub-rule (3) of rule 11 in either of the two eventualitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed in the manner specified in the relevant rules. No standard is laid down in these rules as to the quantity or quality of this material. Of course, this does not enable him to act capriciously or freakishly. A mere suspicion that the return is incorrect is not sufficient to enable the assessing authority to proceed under rule 9. He must have reason to believe that the return is incorrect or incomplete which in its turn should be based upon some material or information and the estimate of the turnover should be based upon the material gathered by him. The phrase "to the best of his judgment" implies a consideration of some- thing that is before him. In other words, he should exercise his judgment. It should not be the result of pure guess-work. To some extent, no doubt, it is guess-work but it should be honest guess-work. In this context, the observations of the judicial Committee of the Privy Council in Commissioner of Income-tax, United and Central Provinces v. Badridas(1) are pertinent: "The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capricious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by him on their behalf. It was also elicited from P.W. 17 that Suryam was the broker for several firms and so also was he for their firm. P.W. 1 had stated that Suryam was a member of the North Vizag Millers' Association. It has also been established that Suryam was a recognised broker being a member of the Vizagapatam Millers' Association and that several other merchants had transactions through him like D.W. 2. D.W. 7 who was a clerk of the Hindustan General Produce Company, Vizianagaram, testified to Suryam being the broker of both the plaintiffs and nothing has been elicited from him to show that he was an interested witness. Incidentally, it may be stated that he proved the writing of Suryam in Exhibits B-22 to B-27 and Exhibits B-61, B-62 and B-63. This was necessitated, according to the respondents, by Suryam having been gained over by the time the matter had reached a final stage before the department. On this evidence, there can be little difficulty in holding that Suryam was the broker for the appellants in both the cases and the entries in the documents referred to above represented real transac- tions. It appears from the evidence of D.W. 6 that the entries in Exhibit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the notes prepared by the counsel for the defendants is marked as Exhibit B-52. I have also carefully examined the contract books and have found that some of the papers in them were removed recently." This statement of facts makes it abundantly clear that the pages which contained the writing of the appellants were removed subsequent to the preparation of Exhibit B-52. We have no hesitation in concluding that Exhibit B-52 embodies details relating to the contracts with the signatures of the concerned parties including the appellants. Though there is no evidence sufficient to fix responsibility on any one for this removal, we may not be wrong in assuming that it must have been done at the instance of the appellants. It is to their interest to cause dis- appearance of these forms since the authenticity of the entries in Suryam's books would be vouchsafed by those contracts. The defendants would not be interested in having this done as it would be to their disadvantage. It is most regrettable that this should have happened while the records were in the custody of the court. It is difficult to believe that it would have been done without the active co-operation or connivance or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Suryam which, it may incidentally be mentioned, confirms the correctness of Exhibits B-61 to B-63. Surprising it is, that even after making the state- ments, the written contracts were not produced before the assessing authority. The inference is inevitable that the assessees omitted to do it, because they would be adverse to their case. It is thus established by overwhelming evidence that the material on which the Commercial Tax Authorities acted was of an unexceptionable kind and could safely be taken into account. There remains the contention on this topic that these books were not shown to the appellants. We do not agree that there was any obligation on the part of the assessing authority to place before the defaulting person the records they had obtained from third parties. The dictum of Chief justice Leach in Subbayya v. Commissioner of Income-tax, Madras(1), is relevant in this context: "There is nothing in the Act itself which requires the Income-tax Officer to disclose to the assessee the material on which he proposes to actor to refer to it in his order but natural justice demands that he should draw the assessee's attention to it before making the order. Information w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recovered from Suryam. The complaint in this behalf must be dismissed as being devoid of any merits. We now come to the third point. The power to make private en- quiries is implicit in rule 8 and the Taxing Officer is under no obligation to supply the assessee with copies of confidential statements. Nor could the assessees demand that the informant should be examined in their presence and opportunity given to them to cross-examine him. There is also no force in the grievance that the officer failed to examine the merchants whose names were mentioned to him in the course of his enquiry, for, neither the language of the relevant rules nor the prin- ciples of natural justice enjoin on him to do this. When holding an enquiry he is not a court within the meaning of the word. It was next pressed on us that the Deputy Commercial Tax Officer turned down the request of the appellants to summon Suryam and other merchants as their witnesses and thus violated the principles of natural justice. To say the least, there is absolutely no foundation for this com- plaint. There is not a trace of this request in the various letters written by the appellants to the Department. All that the office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectness and completeness of their returns. The argument is that the assessees were given only a week's time to prove the correctness and completeness of their return and this was hardly sufficient for that purpose. We are not impressed with this argument. For one thing, we regard that period as sufficient to comply with the notice. Even otherwise, there is no justification for this grievance. If the parties felt that more time was required, they could have certainly applied for it. This was not done. Even at the stage of appeal, they did not ask for further time, nor complained of denial of opportunity in this respect in the memorandum of grounds of appeal. No attempt was ever made by them to establish the genuineness of the entries in their accounts or the correctness of their returns. That was obviously for the reason that that would be undertaking a task which was bound to fail. The appellants have not fared better on this point also. There remains the contention that the assessment is invalid by reason of the non-observance of the procedure indicated in rules 8 and 9. According to the appellants, the notice served on them in October, 1947, was not one as required by the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rti- cular date. It is true that these two documents do not conform to the language of rule 9 in that they do not say: "Produce the accounts and prove the completeness and correctness of the return", but they recite: "If you have any objection to be assessed on the said turnover please produce relevant accounts, contracts, bills and pattis, etc., before me on 22nd March, 1948, at 11 a.m. at Bobbili failing which you will be assessed finally for 1946-47 on the said turnover without further notice". There can be little doubt that the purport of it is the same and it is not essential that the words of the rule should be copied in the notice. We have to pay attention more to the spirit of the rule rather than to the letter thereof. In the circumstances, we hold there has been no contra- vention of either rule 8 or 9. The procedure prescribed by those rules has been followed by the assessing authority. Further no such objec- tion was taken before the assessing authority. The assessment was not attacked even in the plaints on this ground. There was also no issue raised about it nor an adjudication invited. It was next urged that Exhibits B-3 and B-14 show that the Deputy Commercial Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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