TMI Blog1963 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ver in respect of the coffee powder business is not in dispute and we are not therefore concerned with the turnover of that business. Originally the assessee submitted his return in respect of his coffee hotel business for 1956-57. The Deputy Commercial Tax Officer, Karaikudi, determined the net taxable turnover to the best of his judgment at Rs. 3,00,359. The assessee preferred appeals to the appellate authorities and finally when the matter came up to this Court in revision (T.C. No. 58 of 1959) this Court observed: "In the case of Pyarelal (assessee) the position was that in the assessment year the Income-tax Department substantially accepted his books as correct but made an addition of Rs. 3,000 to allow for possible leakages from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal passed a common order confirming the order passed by the taxing authorities and approving the general principle applied by them, namely, the addition of 50 per cent. to the purchase value. Now the assessee has preferred the above three revisions disputing the correctness of the principle adopted by the Tribunal of adding 50 per cent. to the purchase value, besides raising various other contentions. It is necessary for us to give some more facts before we dispose of these revision petitions. The assessee not only runs a meals hotel, but he also runs a restaurant and there is also a stall attached to the hotel. He maintains account books styled as stock registers, which show the day to day opening stock, purchases, issues for pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintains a stall account book which is maintained regularly in the ordinary and usual course of business of the assessee. This book records the daily issues of sweetmeats and savouries to the stall, the unsold sweetmeats and savouries returned from the stall at the close of the day, the quantity of sweetmeats and savouries sold on that day, their respective values and the total of the amount of sweetmeats and savouries sold and the actual cash collections in the till at the close of the day from the stall. This book was maintained during the years 1957-58 and 1958-59. The total sales from this book are taken to the allocation book from where they are taken to the daybook and posted to the sales account in the ledger. The Tribunal observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases seems to us to be unwarranted and to take no note whatsoever of the individual and special circumstances which may affect each business. The gross profit to our minds is dependent upon so many features, most of them of incalculable effect, such as the location, the nature of the clientele, the tastes catered for and the like. An inflexible rule such as laid down by the Tribunal appears to have no validity about it." In another case, T.C. No. 21 of 1958, where the taxing authority added 1 per cent. of the disclosed turnover of purchases and also added a further 40 per cent. of that to estimate the sales turnover, a Bench of this Court observed that the addition was really based upon surmises and conjectures rather than upon any definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the case law, not wholly relevant to changing economic conditions and differing sizes of hotel trade. There is no reason why 50 per cent. formula should for ever hold true, much less why it should be applied only to food materials input. The fuel and packing paper enter as much into the final value of the gross output as the flour, sugar, ghee or oil that goes into the preparation of the food-stuffs. The solution therefore lies in establishing a scientific correlation between the value of input and the value of output in the hotel trade in the State. This cannot be constant. This may vary with the value and dimensions of the initial output and the whole range of correlations will have to be worked out for inputs of different value a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rising under the Incometax Act and Sales Tax Act. The guiding principles for making such assessments were set out thus in the speech of Lord Russell of Killowen in Commissioner of Income-tax v. Laxminarain Badridas[1937] 5 I.T.R. 170 at 180.: "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 capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment and, for this purpose, he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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