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TMI Blog1977 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... Kgs - 118 Kgs Horsegram 2300 Kgs 1980 Kgs - 320 Kgs Rice 5 bags 12 bags 7 bags - Paddy 25 bags Nil - 25 bags Mohua flower 29 bags 29 bags - - Nigher seeds 3 bags 420 Kgs 195 Kgs - These discrepancies were confronted and as the appellant's explanation was not acceptable, the learned AO estimated the escaped turnover at Rs. 50,000. But as Rs. 5,000 was already enhanced during the original assessment the net estimation of escaped turnover is confined to s. 45,000. On such estimate, he issued additional demand note for Rs. 2204.16 which includes a penalty of Rs. 750. 2. Being aggrieved by this order of assessment, the appellant filed an appeal before the first appellate Court. The learned appellate Court after hearing the appellant was of opinion that the estimate of the ecaped turnover is not correct. He therefore issued a notice of enhancement. After discussion of the discrepancies found at the time of inspection, he thought to apply the principles of the case reported in CST, Madhya Pradesh vs. H.M. Esuf Ali. (1973) 32 STC 77 (MP) The positive findings of the appellate Court are as follows: "The suppression of purchase turnover of goods declared under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the other hand contended that there was an inspection when the Inspector verified the physical stock with reference to the stock register available than in the business premises. The appellant did not produce that stock register which was found by the Inspector. At the time of inspection he produced a make believe stock register which has been rejected. The excess stocks were found which will go to show that the appellant was carrying on business out of accounts. Further more it has been found that he has suppressed sales and also despatching articles in the name of other persons. In view of that of that the estimate made by the first appellate Court is correct and it should be upheld. 5. In view of the argument the first point for determination is whether there is escapement of the turnover so that the assessment completed under s. 12(4) will be reopened. It is an admitted fact that the assessment under s. 12(4) was completed on 21st Oct., 1970, when the returned GTO was raised from Rs. 79,338.57 to Rs. 84,568.57 and TTO was also raised from Rs. 47,869.50 to Rs. 53,629.00. Further it is admitted there was an additional demand of Rs. 146.08 which was paid by the dealer before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these, while estimating the excess stock found on 17th Feb., 1970, the stock of paddy found which has been valued at Rs. 1,500 must be deleted from consideration. Therefore, the stock found excess will be valued at Rs. 6,175.40 and not Rs. 8,253.00 as estimated by the appellate Court. 7. The other materials discovered are 2 chits. The first chit is written by one P. Purusottam Rao on 17th Jan., 1970 wherein he was mentioned that he is sending 5 bags of till seeds and one bag of mustard an further request that the assessee should send him 3 bags of rice in exchange. It is the explanation of the assessee that as he had no rice than he did not retain the til and mustard. But this explanation has been rejected by the Appellate Officer with the following remark: "Had the transaction not been effected, the chit would not have been in the possession of the appellant, the cart man must have taken it back from him." This reasoning appears to be queer. Had he sold rice on 17th Jan., 1970 excess stock could not be found on 17th Feb., 1970. It is on this reasoning I hold that this chit is not material to estimate the escaped turnover and it must be deleted from consideration. 8. The sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case has not been properly appreciated by the forums below. In view of that I will refer to some other case law where the principle of best judgment assessment has been indicated. In the case of P. Verghese vs. State of Kerala (1971) 27 STC 459 the question arose as to what will be the principle in estimating the suppressed turnover after certain excess were found out after surprise visit. The Full Bench formulated the following formula for making the estimate and they are as follows: "An inference that there has been a pattern of continuos suppression for any period depend on existence of material or circumstance which offers a reasonable nexus to the inference. This means that there must be material to indicate suppression and material to indicate that there was the pattern of suppression". In that particular case it has been found out that for five continuous days there was suppression of sales. In view of that the High Court accepted the principle that the pattern is established and the inference that be must have made similar sale suppression all throughout the year was accepted. Hence the principle from that case is that material should be there to indicate that the suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst see whether the accounts maintained by the assessee are rightly rejected as unreliable. if they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the Courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed." From the above observation, it becomes clear that so long as the estimate was not arbitrary and had reasonable nexus with the facts discovered, it could not be questioned by the Court. But in Esuf Ali's case it has been found as a fact that there has been a continuous suppression of sales in a methodical manner for 19 continous days. In view of that findings, the AO estimated the escaped suppression for the whole year. That estimate was interfered by the High Court which disproved by the Supreme Court. In order to apply the principle of estimate as has been resorted to in Esuf Ali's case, materials must be first collected that there has been not only suppression but the suppression is met ..... X X X X Extracts X X X X X X X X Extracts X X X X
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