Judgment

GROVER, J.: The appellant in these appeals is a registered dealer under the Bihar Sales Tax Act, 1947.The assessment order relating to the year 1958-59 was made on 31st May, 1962. That is governed by the provisions of the aforesaid Act and has given rise to Civil Appeal No. 576 of 1967. The assessment order in respect of the year 1959-60 was also made on the same date but that is governed by the provisions of the Bihar Sales tax Act, 1959 which came into force on Ist July, 1959. However, the points are common and the provisions of the two statutes do not materially affect the decision of the appeals.

2. While showing his total turn-over, the assessee had sought to deduct certain amounts on the ground that sales to registered dealers had been made. The assessee produced declarations for all these sales to registered dealers. The Additional Superintendent of Sales Tax who made the order of assessment disallowed deductions claimed on account of sales, to certain registered dealers on the ground that those dealers were bogus and had not been shown to be genuine. It was observed that the assessee had failed to exercise the required degree of diligence and had not taken adequate steps to satisfy that the transactions were with genuine dealers. It was held that the declarations could not be said to be true as required under Rule 18 of the Bihar Sales Tax Rules, 1949.

3. The assessee filed appeals to the Appellate Commissioner of Sales Tax. It was argued before him that in the presence of the declarations as required under the law, there was absolutely no ground for disallowing the deductions which had been claimed. It was stated that the firms, in question, were in existence and had furnished valid declarations at the time of the transactions and even if it was found that they did not exist on a subsequent date, the deductions could not be disallowed. The Appellate Assistant Commissioner did not find that the dealers to whom the sales had been effected had not been registered or that the valid declarations as required by Rule 18 had not been filed. All that was held was that there was no evidence on the record to suggest that the assessee had exercised ordinary prudence in trying to find out as to whether the purchasing dealers were firms in existence. The appeal was consequently dismissed but certain penalty which had been imposed by the original assessing authority was set aside.

4. The assessee took the matter to the Commercial Taxes Tribunal. Before the Tribunal, the statement of the assessee does not appear to have been disputed that the dealers in question had been duly registered and the registration number had been shown against the name of each dealer and further that they had purchased goods from the assessee and had given the requisite declaration to the effect that they were registered dealers and were entitled to purchase goods free of sales tax. After considering the relevant provisions of the Sales Tax Act and the Rules, the Tribunal observed that although the law did not cast on the assessee any responsibility to be satisfied about the correctness of the certificate of registration but if he did not make further inquiries, he ran the risk of losing his claim for deduction if the department showed that the purchasing dealers were bogus and fictitions. As the present assessee had not exercised proper diligence to be satisfied about the transactions being with genuine dealers and not with bogus and fictitious persons, the claim for deductions was bound to fail.

5. The assessee after having failed to persuade the Tribunal to state a case to the High Court then moved the High Court under the appropriate provisions giving all the relevant facts and praying that the following two questions of law be referred to the High Court:

(1) Whether on the facts and in the circumstances of the case the Tribunal was justified in disallowing the deduction of Rs. 106,306.08 from the gross turnover of the dealer on account of sales to v