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TMI Blog1973 (4) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 and the taxable turnover under the Central law by Rs. 1,00,000 on the basis of the undisputed escape in the amount of Rs. 31,171.28 by adopting the said amount of escaped turnover as the measure for determining the quantum of enhancement for the whole year was illegal, unjustified or excessive? (2) Whether a best judgment assessment could at all be made under section 19(1) of the Act or whether revision of the assessment should be confined to the quantum of proved or admitted escaped turnover? (3) If the answer to the previous question is that the revision in the assessment should 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. and (4) 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?" The first three questions were referred to the High Court at the instance of the assessee and the last one was referred at the instance of the Commissioner. The High Court answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .34 on November 20, 1961. The assessee had not declared his gross or taxable turnover in respect of the year in question under the "Central Act". But the Sales Tax Officer determined his turnover under the "Central Act" by his order dated December 8, 1962, at Rs. 22,916 and levied on him a tax of Rs. 252.04. The assessee did not appeal against these orders. It appears that on September 19, 1963, the flying squad inspected the business premises of the assessee and found a bill book for the period Septemher 1, 1960, to September 19, 1960. The bill book showed that the assessee had effected sales of iron and steel during that period of the value of Rs. 31,171.28. Those sales had not been entered in the books of account maintained by the assessee. On the basis of the information provided by the bill book seized, the Sales Tax Officer initiated proceedings under section 19(1) of the "State Act" on January 15, 1964, by issuing the prescribed notices to the assessee. He also initiated proceedings under that section under the "Central Act" on March 15, 1964. The notices in question were served on the assessee on April 17, 1964, and March 19, 1964, respectively. In response to those notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on between a "best judgment" assessment and assessment based on the accounts submitted by an assessee must be borne in mind. Sometimes there may be innocent or trivial mistakes in the accounts maintained by the assessee. There may be even certain unintended or unimportant omissions in those accounts; but yet the accounts may be accepted as genuine and substantially correct. In such cases, the assessments are made on the basis of the accounts maintained even though the assessing officer may add back to the accounts price of items that might have been omitted to be included in the accounts. In such a case, the assessment made is not a "best judgment" assessment. It is primarily made on the basis of the accounts maintained by the assessee. But, when the assessing officer comes to the conclusion that no reliance can be placed on the accounts maintained by the assessee, he proceeds to assess the assessee on the basis of his "best judgment". In doing so, he may take such assistance as the assessee's accounts may afford; he may also rely on other information gathered by him as well as the surrounding circumstances of the case. The assessments made on the basis of the assessee's accounts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceptional circumstance or that they were proportionately more than his dealings outside his accounts during the remaining periods. The assessing authority could not have been in possession of any correct measure to find out the escaped turnover during the periods November 1, 1959, to August 31, 1960, and September 20, 1960, to October 20, 1960. The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the "best judgment" assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his "best judgment" and not of anyone else. The High Court could not substitute its "best judgment" for that of the assessing authority. In the case of "best judgment" assessments, the courts will have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed: " 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." (Emphasis supplied.) Proceeding further, the learned judge quoted with approval the observations of Din Mohammad J. in Ganga Ram Balmokand v. Commissioner of Income-tax: " It cannot be denied that there must be some material before the Income-tax Officer on which to base his estimate, but no hard and fast rule can be laid down by the court to define what sort of material is required on which his estimate can be founded." After quoting those observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer rejected the accounts of the assessee for all the concerned assessment years and added to the income returned half the amount of gross receipts shown by the assessee under the head "interest" for each of the years as escaped income. The Tribunal upheld the addition but the High Court to the conclusion that the additions made by the Income-tax Officer were quite arbitrary. This court agreed with that view. We do not think that the said decision lends any support to the assessee's contention. For the reasons mentioned above, we are unable to agree with the High Court that the Sales Tax Officer had arbitrarily assessed the assessee. It was next contended that in a reassessment under section 19(1) of the Act, the Sales Tax Officer was not competent to make "best judgment assessment", as no such power was conferred on him under the said section. This contention had been rejected by the High Court and the assessee had not appealed against that part of the judgment. Be that as it may even though section 19 does not in specific terms confer on the assessing authority power to make "best judgment assessment" that section specifically says that the assessment made under that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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