TMI Blog1972 (3) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ,72,903-11-6 under section 5(2)(a)(ii) and Rs. 22,464-4-0 under section 5(2)(a)(v) of the Act. An amount of Rs. 2,203 was voluntarily deposited as sales tax. The assessing authority issued a notice in form S.T. XIV to the dealer on 4th December, 1954. On behalf of the assessee, Shri Pahar Chand's statement was recorded by the assessing authority on 28th November, 1955, which revealed that inter-State sales amounting to Rs. 22,464-4-0 had been made by the applicant-firm to the following dealers: 1.. M/s. Amir Chand Faquir Chand, Rs. 5,088 Aut, Himachal Pradesh. 2. M/s. Ram Singh Jaswant Singh, Rs. 8,751-4-0 Phagwara. 3. M/s. Gurpal Singh Jaswant Singh, Rs. 8,625 Phagwara. On enquiries conducted by the assessing authority it was held that the deductions amounting to Rs. 22,464-4-0 on account of these sales being inter-State sales could not be allowed under section 5(2)(a)(v) of the Act. The reason was that these sales were made to the purchasing dealers at Amritsar and the property in goods had passed at Amritsar and there was nothing to prevent them from reselling the goods at Amritsar. The claim of the dealer for deductions in respect of sales made to registered dealers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the reasons that the dealer had failed to prove his sales to registered dealers and exports outside the State for which the deductions have already been disallowed. For the same mistake the appellant cannot be penalised twice. I, therefore, hold that the enhancement of the gross turnover is not justified." So far as the matter in controversy in the present reference is concerned, it will be proper at this stage to revert back to the decision of the assessing authority. On this matter the assessing authority observed: "Departmental enquiries conducted in early 1954 revealed that the concern never transacted any business and closed down almost immediately after taking out the registration certificate. During the course of enquiries it also transpired that the proprietor of the concern Shri Sohan Singh was a poor man who was handicaped in his business by lack of capital and a prolonged illness from T. B. In the end Shri Sohan Singh fell a victim to the disease. Statements of persons of the locality, i.e., Dal Mandi, in which area the shop of the alleged purchaser was supposed to exist were recorded. They testified to the effect that M/s. Gurdial Singh Sohan Singh obtained a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im and that is one relating to the closure of M/s. Gurdial Singh Sohan Singh. It is not readily explained why a concern which has closed down and whose proprietor is not available to the department should be openly making purchases from the assessee. Yet another factor which lends very serious doubt to the authenticity of the transactions is the economic hardship of the alleged purchasers. All enquiries by the department and my personal investigation from various sources lead me to believe that Shri Sohan Singh was virtually a pauper who took to the ghee trade as a last resort to earn something. As a result of his reputation and other factors it is unimaginable that he should be in a position to make four figure purchases in single lots and for ready cash too. Under these circumstances, I hold that the alleged sales to Messrs. Gurdial Singh Sohan Singh never took place and that the signatures on the counterfoils produced before me are wholly fictitious. As observed in the earlier part of this order, sale vouchers are the original book of entry in respect of all transactions relating to sales by the assessee. As a result of the foregoing conclusions quite a few of the sale vouch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res were sought to be proved by the petitioner or his ex-employee. The assessing authority has given good reasons why he could not accept their evidence. No doubt, it is none of the job of the petitioner to indicate where the purchaser took the goods, but in the context of this case, the point to be determined is whether or not a sale took place at all. Because the petitioner knew that Joginder Singh would contradict it and Joginder Singh's connection with M/s. Gurdial Singh Sohan Singh is not there at all, the petitioner tried to support these apparently unreliable and concocted declarations by other men. These sales were rightly rejected." The assessee then preferred a further revision petition to the Financial Commissioner. The Financial Commissioner by his order dated 22nd March, 1962, rejected the petition and observed: "Mr. Bhagirath Dass has argued while the deductions claimed on account of sales to the firm Gurdial Singh Sohan Singh have been disallowed in the present case, these have been allowed by the departmental officers in other cases concerning this very firm of Gurdial Singh Sohan Singh, e.g., in Appeal No. 390 of 1957-58, Messrs. Amar Nath Khurana and Sons, Amrit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's brother, i.e., Joginder Singh, had stated that Sohan Singh and his firm never worked in 1952-53 or 1953-54. However, from the record, I cannot locate any direct statement to this effect by Joginder Singh, although at page 45 of the file, part C, the notice issued to the petitioners mentions that the department had understood this from Joginder Singh during the enquiries in the case. But as has been mentioned above, Joginder Singh, whose signatures were claimed to be genuine by the petitioners, was never produced in evidence himself by the petitioners, although he had the opportunity to do so. The assessing authority's order shows that he went into details regarding the reliability or otherwise of the evidence about the genuine character of the firm Gurdial Singh Sohan Singh and for the reasons given in his order dated 27th February, 1956, the assessing authority arrived at the conclusion that the alleged sales in question had never been made to Messrs. Gurdial Singh Sohan Singh. This really is a finding of fact, and 1 see no reason for differing with it. It seems correct that in the other case mentioned by the learned Advocate for the petitioners before me, sales to this firm of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that the sales were not genuine. The learned counsel for the department, on the other hand, has vehemently contended that the finding arrived at by the departmental authorities that the sales to Messrs. Gurdial Singh Sohan Singh were not genuine, is a finding of fact. Therefore, it is urged that in view of this finding, it cannot be said that any illegality has been committed by the assessing authority in holding that the sales to the said firm were not genuine. It is conceded that certain material used in order to arrive at this finding was collected behind the back of the assessee and was not shown to him on demand. It is further stressed by the learned counsel that it was the duty of the assessee to prove that the sales to the said registered dealer were genuine. The department did give ample opportunity to the assessee in this behalf. Thus, the respective contentions urged at the Bar have to be examined in order to answer the question referred to us. Before I proceed to deal with the contention of the learned counsel, it would be proper to set out a few relevant provisions of the Act, Section 5(2)(a)(ii) at the relevant time stood as under: "Sales to a registered de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided that in the latter case the total value of sales to one registered dealer in one quarter does not exceed ten thousand rupees. (5) The dealer to whom the declaration forms have been issued shall be responsible for their proper custody and use. If a declaration form, whether blank or completed, is lost either from the custody of any dealer or from the purchasing dealer in transit, he shall report the loss to the authority from whom he obtained it. (6) On receipt of report referred to in sub-rule (5) above the said authority shall call upon the dealer to furnish a reasonable security by way of an indemnity bond in respect of each lost form separately to safeguard against the misuse of the same. (7) If the duly completed and signed declaration form is lost by the purchasing dealer in transit or from the custody of the selling dealer, the selling dealer shall obtain a duplicate form from the dealer, to whom he sold the goods. In the absence of such duplicate form, he will not be entitled to the deductions. (8) Where any purchasing dealer issues to the selling dealer a duplicate form referred to in sub-rule (7), he shall give the following certificate in red ink across t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased for the purpose mentioned at (1) above are duly specified in my aforesaid registration certificate. ------------------------------------------------------------------------- Description of goods Quantity Price No. and date of cash memo or bill issued by the selling registered dealer. ------------------------------------------------------------------------- ------------------------------------------------------------------------- Place-----Full signatures and complete address of the purchasing dealer or his authorised agent. Strike out whichever is not applicable. (To be retained by the purchasing dealer)." Before I proceed further I wish to highlight the fact that the sales made by the assessee were sales to a registered dealer and the provisions of section 5(2)(a)(ii), rule 26 and form S.T. XXII must have been complied with. There is no finding by any of the relevant authorities that these provisions were not complied with. In this connection, it will be of some significance that a provision has been made in section 5(2)(a)(ii) penalising a purchasing registered dealer where he commits a default. It will also have to be noted that there is no finding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumentary evidence in possession of the assessee." The learned judges for this opinion placed reliance on the following observations of the Supreme Court in A. K. Kraipak and Others v. Union of India and OthersA.I.R. 1970 S.C. 150. "The dividing line between an administrative power and a quasijudicial power is quite thin and is being gradually obliterated. For determining whether a power is an administrative power or a quasi-judicial power one has to look to the nature of the power conferred, the person or persons on whom it is conferred, the framework of the law conferring that power, the consequences ensuing from the exercise of that power and the manner in which that power is expected to be exercised. In a welfare State like India which is regulated and controlled by the rule of law, it is inevitable that the jurisdiction of the administrative bodies is increasing at a rapid rate. The concept of rule of law would lose its validity if the instrumentalities of the State are not charged with the duty of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to act justly and fairly and not arbitrarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opportunity to rebut the materials found against him. A question has been raised as to the ambit and amplitude of this opportunity. In Raghubar Mandal's case(2), the Supreme Court approved Gunda Subbayya v. Commissioner of Income-tax, Madras[1939] 7 I.T.R. 21., and Seth Gurmukh Singh v. Commissioner of Income-tax[1944] 12 I.T.R. 393. In the Madras case, their Lordships of the Full Bench enunciated that the principle of natural justice had application to an assessment proceeding under a taxing statute where particular materials were proposed to be used against the assessee. In the language of their Lordships, the assessing authority should draw the assessee's attention and give him an opportunity to show that the officer's information is wrong. In the Lahore case, four propositions were laid down. They are: (i) The taxing officer is not bound to rely on evidence produced by the assessee which he considers to be false. (ii) If he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee the materials on which he is going to found that estimate. (iii) He is not, however, debarred from relyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted 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). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab[1944] 12 I.T.R. 393. In this case, we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him." In Dhirajlal Girdharilal v. Commissioner of Income-tax, Bombay[1954] 26 I.T.R. 736 (S.C.)., it was held while dealing with the order of the Income-tax Tribunal: "When a court of fact acts on material, partly relevant and partly irrelev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kh Singh v. Commissioner of Income-tax, Punjab[1944] 12 I.T.R. 393. and Malik Damsaz Khan v. Commissioner of Income-tax[1947] 15 I.T.R. 445 (P.C.)., did not run counter to the decision of the Supreme Court in Dhakeswari Cotton Mills' case[1954] 26 I.T.R. 775 (S.C.). The learned counsel for the department relied upon Madugula Papayya and Others v. Province of Madras[1956] 7 S.T.C. 180., Adarsh Bhandar v. Sales Tax Officer, Aligarh[1957] 8 S.T.C. 666., and Rajab Ali Pirani v. State of Andhra Pradesh[1967] 19 S.T.C. 312. These decisions so far as they run counter to the Dhakeswari Cotton Mills' case[1954] 26 I.T.R. 775 (S.C.). would be bad law. In any case the decision in Madugula Papayya and Others v. Province of Madras[1956] 7 S.T.C. 180. does not deal with the matter now in controversy, namely, whether material privately collected by the assessing authority and used against the assessee without the assessee being afforded an opportunity to meet it and show that either that material is unreliable or is otherwise inadmissible can be used against the assessee. In this case, the only question was whether the best judgment assessment had been based on any material and the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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