TMI Blog2012 (4) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be that his estimate was an over-estimate or an under-estimate, but it cannot be said that the estimate was without any basis. In making that estimate, there was an element of guess-work which was inevitable in the circumstances of the case. If the Sales Tax Officer was compelled to adopt a rule of thumb which in a sense is an arbitrary rule, the assessee was entirely responsible for that situation. Thus view taken by the learned single judge quashing the order of assessment as upheld by the first appellate authority and the Tribunal cannot be upheld. Appeal allowed - W.A. No. 60 of 2007 - - - Dated:- 30-4-2012 - GOEL A.K. C.J. AND TALAPATRA S., J. For the Appellants : J. Majumder For the Respondent : S.C. Saha The judgment of the court was delivered by A.K. GOEL C.J. This appeal has been preferred against the order of the learned single Judge quashing the order of assessment as upheld by the first appellate authority and the Tribunal under the provisions of the Tripura Sales Tax Act, 1976 ( the Act ). The petitioner is a dealer registered under the Act and engaged in dealing with the electronic goods. It filed its return for the assessment year 1994- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at higher side during the assessment years 1991-92, 1992-93 and 1993-94 and the dealer had earned higher margin of profit at 8.87 per cent, at 9.87 per cent and 10.87 per cent, respectively, in the similar market condition as it was in the instant assessment periods. 13. There is a constant hiking of price of all goods in the market due to pressure of inflation. As earning of profit at such low rate and at a diminishing rate or the period under assessment in comparison to previous year (1993-94) is quite unreasonable and unbelieved. 15. In absence of stock register in a classified manner indicating the value of goods it makes difficult to cross-examine the transactions and to ascertain the margin of profit on the cost of at 12 per cent, at 15 per cent and at 20 per cent taxable goods sold separately. The nonmaintenance of stock register in classified manner by the dealer giving all such details makes his account hazy and opaque. 19. Considering all facts and circumstances narrated above I do not accept the turnovers returned by the dealer as correct and complete and after careful consideration of all facts and circumstances it is decided to add back at four per cent of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealer. The non-acceptability of the turnover returns of the dealer has also been supported on the basis that the dealer had not maintained his books in a 'classified manner'. In the opinion of the court, neither of the aforesaid reasons in the facts of this case could warrant the conclusion reached by the assessing authority or by the appellate authorities. The assessing authority decided to add back four per cent of the returned turnover to decide on the profit margin of the dealer without explaining how that figure of four per cent was reached. No reasons are discernible to indicate why the profit figure of 7.36 per cent or a figure proximate thereto declared by a similar dealer, was not accepted. This court also finds that there was no requirement of law to maintain books by a dealer in a 'classified manner' as was contended by the Revenue authorities as no such method/form has been indicated under the provisions of section 34 of the Act and rule 41 of the Rules. We have heard Mr. J. Majumder, learned counsel, appearing for the appellants as well as Mr. S.C. Saha, learned counsel appearing for the respondent and perused the record. Question for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but the margin of profit was disproportionately lower to the consistently higher margin of profit in the preceding three years without there being any valid explanation for the same. There is no dispute with the proposition that mere lesser profit could not be the ground for rejecting the books of accounts if there was explanation showing that lesser profit was genuinely declared. Whether or not in a given case lesser margin of profit could be a ground not to accept books of account has to be decided in overall fact-situation. It cannot be held that in no situation lesser margin of profit could be questioned in the course of assessment. In a given case, the dealer may give satisfactory explanation. Primarily, the question whether the books of accounts are genuine or not is question of fact to be determined from case to case on settled principles of law. The books of accounts have to be accepted unless there is ground to question them. If there are valid reasons to suspect the correctness thereof, the assessee can be required to explain the same and if the explanation is not satisfactory, the assessing authority can reject the books of accounts and make assessment on reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering with the same. 9. The law relating to 'best judgment' assessment is the same both in the case of income-tax assessment as well as in the case of sales tax assessment. The scope of 'best judgment' assessment under the income-tax law came up for consideration before the Judicial Committee as early as 1937 in Commissioner of Income-tax, Central and U.P. v. Laxminarain Badridas [1937] 5 ITR 170 (PC) at page 180; MANU/PR/0046/1937. Therein Lord Russell of Killowen, speaking for the Judicial Committee, observed: '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 his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te made by the Sales Tax Officer. It may be that his estimate was an over-estimate or an under-estimate, but it cannot be said that the estimate was without any basis. In making that estimate, there was an element of guess-work which was inevitable in the circumstances of the case. If the Sales Tax Officer was compelled to adopt a rule of thumb which in a sense is an arbitrary rule, the assessee was entirely responsible for that situation. 12. In State of Kerala v. C. Velukutty [1966] 17 STC 465 (SC) at page 470; [1965] 60 ITR 239 (SC) at page 244, this court speaking through Subba Rao, J. (as he then was), observed: 'The limits of the power are implicit in the expression best of his judgment . Judgment is a faculty to decide matters with wisdom, truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guess-work in a best judgment assessment, it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case.' 13. The question before us is whether there is a reasonable nexus between the basis adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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