Back
SUPREME COURT OF INDIA
K.S. HEGDE AND H.R. KHANNA, JJ.
The Commissioner of Sales Tax Madhya Pradesh, Appellant
Versus
M/s. H. M. Esufali, H. M. Abdulali Indore, Respondent.
Civil Appeals Nos. 1068-1069 of 1970, D/- 18-4-1973.
The distinction between a 'best judgment assessment' and 'assessment based on accounts' submitted by an assessee must be borne in mind.
Sometimes there may be certain innocent or trival 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 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 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 assistance as the assessee's account may afford, he may also rely on other information gathered by him as well as on the surrounding circumstances of the case.
The assessments made on the basis of assessee's accounts and those made on 'best judgment' basis are totally different types of assessment.
(Para 7)
(2) Sales Tax–General Sales Tax Act, 1958 (MP) – S. 18 (4)–'best judgment assessment' for escaped turnover basis for and principles to be followed–interfere when can be made by the Courts–matters to be seen by the Courts.
The task of the assessing authority in finding out the escaped turnover is 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. The authority should not be vindictive or capracious. If the estimate made by the assessing authority is a bonafide estimate and is based on a rational basis the fact that there is no good 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 any body else's. 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 to first see whether the accounts maintained by the assessee were rightly rejected as unreliable. If they, come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the Court may think that is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. 52 ITR 170, 8 STC 770, 5 ITR 164 & 60 ITR 239 relied on. 76 ITR 719 distinguished.
(Para 9)
(3) Sales Tax–General Sales Tax Act, 1958 (MP) – Ss. 19 (1) & 18 (4) reassessment proceedings under section 19 (1)–'best judgment assessment' can be made.
While re-assessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making reassessment under section 19, the assessing authority has the power to make 'best judgment assessment'. 16 STC 54 overruled. 1969 RN 146=1969 JLJ 293 confirmed on this point.
(Para 17)
Judgment
HEGDE. J. :- These appeals by special leave arise from the decision of the High Court of Madhya Pradesh in a consolidated Reference under Section 44 of the Madhya Pradesh General Sales Tax Act. 1958 (to be hereinafter referred to as the State Act,). That reference was made by the Board of Revenue, Gwalior, partly at the instance of the assessee and partly at the instance of the commissioner of Sales Tax. Madhya Pradesh. Four questions of law were referred to the High Court for its decision. They are:
"(1) Whether on the facts and circumstances of the case the revised assessment enhancing the taxable turnover under the State law by Rs. 2,50,000/- 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 assessment should be confined only to the quantum of proved or admitted escape in turnover, was the penalty of Rupees 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 ?"
2. The first three questions were referred to the High Court at the instance of the assessment and the last one was referred at the instance of the Commissioner.
3. The High Court answered the 1st end the 3rd question in favour of the assessee and the second and the fourth question in favour of the Department. It opined:
"..............our answer to the first question is that the estimate of taxable turnover under the local Act and the Central Act made by the assessing authoritv for the period from 1st November 1959 to 20th October 1960 on the basis of Rs. 31.171.28 as the escaped turn over for a period of 19 days was illegal and unjustified. The escaped turnover proved in the present case is only Rupees 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 assesses 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. 2,000l- 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.
4. Aggrieved by the decision of the High Court, the Commissioner has brought these appeals. The assessee has not appealed against that portion of the decision which went against him.
5. The facts of the case necessary for deciding the questions of law arising for decision in these appeals, as could be gathered from the statement of the case may now be set out.
6. The assessee was a registered dealer under the State Act as well as the Central Sales Tax Act (which will hereinafter be referred to as the Central Act ). He was a dealer in Iron and Steel. In these appeals, we are concerned with his turnover for the period November 1. 1959 to October 20. 1960.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
