TMI Blog1957 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... at Laheriasarai in the district of Dar- bhanga in the State of Bihar. The assessee was assessed to sales tax for seven quarters ending 31st December, 1945, 31st March, 1946, 30th June, 1946, 30th September, 1946, 31st December, 1946, 31st March, 1947, and 30th June, 1947, respectively. For three of the aforesaid quarters, namely those ending on 31st December, 1945, 31st March, 1947, and 30th June, 1947, the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter of income-tax references is an advisory jurisdiction and under the Income-tax Act the decision of the Tribunal on facts is final, unless it can be successfully assailed on the ground that there was no evidence for the conclusion on facts recorded by the Tribunal or the conclusion was such as no reasonable body of persons could have arrived at. It is also well settled that the duty of the High Court 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes clause (b) of sub-section (2) which must be quoted in extenso: "(b) On the day specified in the notice or as soon afterwards as may be, the Commissioner, after hearing such evidence as the dealer may produce, and such other evidence as the Commissioner may require on specified points, shall assess the amount of tax due from the dealer." These provisions are similar to the provisions 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 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision in sub-section (3) of section 23 of the Indian Income-tax Act, there is a decision of this Court which, in our opinion, answers the question before us. The decision is that of Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal [1949] 1 S.C.R. 941, 949; 26 I.T.R. 775. This Court observed: "As regards the second contention, we are in entire agreement with 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions with a Bombay firm known as Messrs. Kishundas Lekhraj, which were not mentioned in the books of account; and finally, the assessee was importing silver in the name of five confederates in order to suppress the details of the trans- actions etc. The assessing authorities further pointed out that there was a discrepancy between the return filed for the quarter ending 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations made in Dhakeswari Cotton Mills' case [1955] 1 S.C.R. 941; 26 I.T.R. 775. No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase [1955] 26 I.T.R. 775. The decision of the Lahore High Court in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab [1944] 12 I.T.R. 393., was specifically approved by this Court in Dhakeswari Cotton Mills' case [1955] 26 I.T.R. 775. The rules laid down in that decision were these: (1) While proceeding under sub-section (3) of section 23 of the Income-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 ..... 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