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TMI Blog1957 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee failed to file the necessary returns as required by the provisions of the Bihar Sales Tax Act, 1944 (hereinafter referred to as the Act), which was the Act in force during the material period; therefore, the assessee was assessed for those three quarters under sub-section (4) of section 10 of the Act. For the remaining four quarters, the assessee did file returns. The Sales Tax Officer rejected those returns as also the books of account filed by the assessee for all the seven quarters and assessed the assessee under clause (b) of sub-section (2) of section 10 of the Act. The Sales Tax Officer passed separate orders assessing the tax for all the seven quarters simultaneously on 9th October, 1947. He assessed the tax on a taxable turnover of Rs. 2,94,000 for each of the five quarters ending 31st December, 1945, 31st March, 1946, 30th September, 1946, 31st December, 1946, and 31st March, 1947; for the other two quarters ending on 30th June, 1946, and 30th June, 1947, he assessed the tax on a taxable turnover of Rs. 3,92,000. The assessee then moved in appeal the Commissioner of Commercial Taxes, Tirhut Division, but the Commissioner dismissed the appeals by his order dated 23rd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt is to start with the statement of the case as the final statement of the facts and to answer the question of law with reference to that statement. The provisions of the Indian Income-tax Act are in pari materia with the pro- visions of the Act under our consideration, the main scheme of the relevant provisions of the two Acts being similar in nature, though the wording of the provisions is not exactly the same. Under section 21 of the Act, the High Court exercises a similar advisory jurisdiction, and under sub-section (3) of that section, the High Court may require the Board of Revenue to state a case and refer it to the High Court, when the High Court is satisfied that the refusal of the Board to make a reference to the High Court under sub-section (2) is not justified. Under sub-section (5) of section 21 the High Court hears the reference and decides the question of law referred to it, giving in a judgment the grounds of its decision. In the case under our consideration, the question which was referred to the High Court related to the assessments made under section 10(2)(b) of the Act; in other words, the question related to those four quarters only for which the assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions contained in sec- tion 23 of the Indian Income-tax Act. Sub-section (1) of section 10 of the Act corresponds to sub-section (1) of section 23 of the Indian Income-tax Act; clause (a) of sub-section (2) of section 10 of the Act corresponds to sub-section (2) of section 23 of the Indian Income-tax Act; and clause (b) of sub-section (2) of section 10 of the Act corresponds to sub-section (3) of section 23 of the Indian Income-tax Act, though there are some verbal differences between the two provisions. Sub-section (3) of section 23 of the Indian Income-tax Act requires the Income-tax Officer to assess the total income of the assessee and determine the sum payable by him on the basis of such assessment, by "an order in writing"; but clause (b) of sub-section (2) of section 10 of the Act requires the Commissioner to assess the amount of tax due from the dealer and does not impose any liability as to "an order in writing." In spite of these differences, the two provisions are substantially the same and impose on the assessing authority a duty to assess the tax after hearing such evidence as the dealer may produce and such other evidence as the assessing authority may require on sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3)." In our view, the aforesaid observations clearly show that the High Court was in error in answering the question in the affirmative. Firstly, the High Court treated the question referred to it as a pure question of fact; if that were so, then the High Court should have rejected the reference on the ground that it was not competent to answer a question of fact. Then, the High Court proceeded to consider certain decisions relating to the interpretation of sub-sections (3) and (4) of section 23 of the Indian Income-tax Act, and held that there was no difference between an assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30th June, 1946, and the accounts filed in support of it; the return showed a gross turnover of Rs. 2,28,370-12-0 while the accounts revealed a gross turnover of Rs. 1,48,204. All these we must accept as correct. Having rejected the returns and the books of account, the assessing authorities proceeded to estimate the gross turnover. In so estimating the gross turnover, they did not refer to any materials at all. On the contrary, they indulged in a pure guess and adopted a figure without reference to any evidence or any material at all. Let us take, for example, the assessment order for the quarter ending 30th June, 1946. The Sales Tax Officer said: "I reject the dealer's accounts and estimate a gross turnover of Rs. 4,00,000. I allow a deduction at 2% on the turnover and assess him on Rs. 3,92,000 to pay sales tax of Rs. 6,125." For the quarter ending on 30th September, 1946, the Sales Tax Officer said: "I reject his irregular account and estimate a gross turnover of Rs. 3,00,000 for the quarter and assess him on Rs. 2,94,000 to pay tax of Rs. 4,593-12-0. " These and similar orders do not show that the assessment was made with reference to any evidence or material; on the contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To use the words of Lord Russell of Killowen again, "he must make what he honestly believes to be a fair estimate of the proper figure of assessment" and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. In the case under our consideration, the assessing officer did not do so, and that is where the grievance of the assessee arises. The next decision is Ganga Ram Balmokand v. Commissioner of Income-tax, Punjab [1937] 5 I.T.R. 464. It was held therein that where the Income-tax authorities were not satisfied with the correctness or completeness of the assessee's account and, taking into consideration the state of affairs in general, and the fact that the assessees had a large business and the profit shown by them was abnormally low in comparison with that of other persons carrying on the same business in the locality, calculated the taxable income by applying a flat rate of 7 per cent., the authorities were justified in applying such a flat rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fair- ness disclose to the assessee the material on which he is going to found that estimate; (3) he is not however debarred from relying on private sources of information, which sources he may not disclose to the asses- see at all; and (4) in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible. The decision does not lay down that it is open to the Income-tax Officer to make an estimate on pure guess and without reference to any material or evidence before him. The last decision to which we have been referred is the decision in Malik Damsaz Khan v. Commissioner of Income-tax [1947] 15 I.T.R. 445. That again is a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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