TMI Blog1968 (12) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be confined only to the quantum of proved or admitted escaped turnover was the penalty of Rs. 2,000 imposed on the footing of the revision of the assessment for the whole year legal and justified?" The question which has been referred to us for decision at the instance of the Commissioner of Sales Tax is: "Whether on the facts and circumstances of the case the imposition of a penalty under section 19(1) of the Madhya Pradesh General Sales Tax Act, 1958, read with section 9(3) of the Central Sales Tax Act was not legal?" 2.. The material facts are that the assessee M/s. H.M. Esufali H.M. Abdulali is a registered dealer engaged in the business of sale of iron and steel. For the period from 1st November, 1959, to 20th October, 1960, the assessee's taxable turnover under the Madhya Pradesh General Sales Tax Act, 1958 (hereinafter referred to as the local Act) was determined at Rs. 1,21,567 and a tax of Rs. 3,743.34 was levied. The assessee's taxable turnover for the same period under the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act) was determined at Rs. 22,916 and the assessee was held liable to pay a tax of Rs. 252.04 under the Central Act. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Act could be imposed only under rule 12 of the Madhya Pradesh Sales Tax (Central) Rules, 1957, for a breach of any of the rules and the department had failed to show the breach committed by the assessee. In the appeals which the assessee preferred before the Appellate Assistant Commissioner and the Board of Revenue, the assessee contended that the escaped assessment could at the most be that shown by the bill-book which the Flying Squad discovered and that there was no justification whatsoever for estimating the escaped assessment for the entire period from 1st November, 1959, to 20th October, 1960, adopting Rs. 31,171.28 as extra turnover for a period of 19 days during the period from 1st September, 1960, to 19th September, 1960, as the measure of escaped assessment. 5.. It would be convenient to consider first the second question which the Board of Revenue has referred. The question has to be answered with reference to section 19 of the local Act and sub-rules (1) and (2) of rule 33 of the Madhya Pradesh General Sales Tax Rules, 1959. Section 19(1) is as follows: "19. Assessment of turnover escaping assessment-(1) Where an assessment has been made under this Act or any Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other suitable order." It will be seen from the aforestated provisions that the escaped turnover has to be determined after giving a notice to the dealer in Form XVI specifying the escapement or concealment and calling upon him to show cause why he should not be reassessed to tax and after making such enquiry as the Sales Tax Officer may think it necessary. Rule 33(1) also says that the assessee shall be called upon to produce the books of accounts and other documents which the assessing authority may require and any evidence which he may wish to produce in support of his objection. When such a notice is issued to the dealer, he either appears before the assessing authority on the date fixed in the notice issued under sub-rule (1) to prefer his objections and produce such evidence as he may think it necessary or he does not appear. If he appears, then as provided in sub-rule (2) of rule 33 the assessing authority is required to make the reassessment after considering the objections raised by the dealer and examining such evidence as may be produced by him and after taking such evidence as may be available. It is important to note that in the notice which is issued to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there has been under-assessment is no doubt upon the department; but this only means that in order to justify initiation of proceedings under section 10 it is necessary for the assessing authority to establish at least one transaction the turnover of which was not included in the previous assessment. Once that is done, it is for the assessee to satisfy that no turnover has escaped assessment or that the escaped turnover is of a certain magnitude. If the assessee fails to discharge this burden by failing to appear or failing to produce his account books despite a notice under section 10, then the assessing authority is entitled to form its own opinion about the escaped turnover." With reference to these observations, Shri Adhikari, learned counsel appearing for the assessee, said that it was impossible for the assessee to prove that no turnover of his escaped assessment; that he could only prove positively his turnover. In order to understand the real import of these observations it is necessary to remember that in the notice which is issued to the assessee to show cause why he should not be assessed in respect of any escaped turnover, the amount of escaped turnover provisiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In a best judgment assessment the quantum of escaped turnover would be that which the assessing authority thinks is proved or established. In other assessments the quantum of escaped turnover would be the one which the assessing authority finds proved whether on the admission of the assessee or on the material produced at the enquiry in which the assessee has participated. 9.. The real point to be considered in connection with the first question is the correctness of the escaped turnovers under the local Act and the Central Act determined by the assessing authority for the period from 1st November, 1959, to 20th October, 1960, by adopting the measure of Rs. 31,171.28 as the escaped turnover for a period of 19 days. The assessee no doubt first denied that the bill-book which was found by the Flying Squad disclosing an escaped turnover of Rs. 31,171.28 during the period from 1st September, 1960, to 19th September, 1960, was its billbook. Later on, the Munim of the assessee when examined by the Sales Tax Officer admitted that the bill-book was of the transactions effected by the assessee. The assessee is undoubtedly liable to pay tax under the local Act and the Central Act on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire period taking Rs. 31,171.28 as the escaped turnover for a period of 19 days as the yardstick, the assessing authority assumed that the assessee continued to effect in the entire period of assessment extra transactions, which were suppressed, on the same scale as disclosed by the bill-book found by the Flying Squad. There is no basis for such an assumption. The assessee is a dealer in iron and steel, a commodity for which there is no uniform market day after day. The sales of iron and steel depend on the extent of constructional activity. The sales tax authority made no attempt to find out whether having regard to the constructional activity during the material period the assessee could effect transactions in iron and steel day after day on the same scale. Again, iron and steel being a controlled commodity, it should have been easy for the Sales Tax Officer to find out the quantity of iron and steel secured by the dealer under permits and the quantity sold from the assessee's stock registers. But nothing of the kind was done; and the Sales Tax Officer made estimates of the sales of iron and steel by the assessee on the basis of escaped turnover of Rs. 31,171.28 for 19 days treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot exceed the amount of tax determined payable on reassessment. The amount of Rs. 2,000 as penalty was imposed on the assessee on the footing that the escaped taxable turnover under the local Act was Rs. 2,50,000 and that under the Central Act was Rs. 1,00,000 for the period from 1st November, 1959, to 20th October, 1960. If, as we have endeavoured to point out, the taxable turnover for the period is only that comprised in the escaped turnover of Rs. 31,171.28, then it follows that the amount of tax payable on reassessment would be proportionately reduced and consequently the amount of penalty would also be reduced. The penalty of Rs. 2,000 imposed on the assessee cannot, therefore, be held to be legal and justified. 14.. The answer to the question referred to us by the Tribunal at the instance of the Commissioner of Sales Tax is to be found in section 9(3) of the Central Act itself. That sub-section reads thus: "The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of Rs. 31,171.28 as the escaped turnover for a period of 19 days was illegal and unjustified. The escaped turnover proved in the present case is only Rs. 31,171.28 and the assessee is liable to be assessed under both the Acts only on the taxable turnover comprised in the escaped turnover of Rs. 31,171.28. Our answer to the second question is that there can be a best judgment assessment under section 19(1) of the local Act. In a best judgment assessment the quantum of escaped turnover would be that which the assessing authority thinks is proved or is established. In other assessments the quantum of escaped turnover would be the one which the assessing authority finds proved whether on the admission of the assessee or on the material produced at the enquiry in which the assessee has participated. The third question is answered by saying that the imposed penalty of Rs. 2,000 is, in view of our answer to the first question, not legal. Our answer to the fourth question is that a penalty for escaped assessment under the Central Act can be imposed under section 19(1) of the local Act. 16.. As the assessee has substantially succeeded in the present reference, we direct that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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