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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and G. P. Singh, J.
H.M.ESUFALI, H.M.ABDULALI SIYAGUNJ - Appellant
Versus
COMMISSIONER OF SALES TAX, M.P., INDORE - Respondents
Misc. Civil Case 84 Of 1968
Decided On : 12/02/1968
It is no doubt true that neither section 19 (1) nor rule 33 (1) and (2) provides in so many words that if a dealer does not appear or does not produce any evidence in response to a notice issued to him under rule 33 (1), then the assessing authority shall assess the dealer to the best of its judgment but from this omission it does not follow that if the dealer does not appear and show that no turnover of his escaped assessment, or that if it did, it was not of the alleged magnitude, then the assessing authority cannot make an assessment even on the basis of the escaped turnover determined by itself.
In the notice which is issued to the assessee to show cause why be should not be assessed in respect of any escaped turnover, the amount of escaped turnover provisionally determined by the assessing authority has to be stated. When this figure is stated in the notice there should be no difficulty for the assessee to show that the alleged escaped turnover did not really escape in his previous assessment or that it was not of the extent alleged.
Even in the absence of an express provision enabling the assessing authority to make a best judgment assessment, the assessment made by it when the assessee does not appear in response to a notice issued to him would none the less be a best judgment assessment. Such an assessment is no doubt on the basis of the quantum of escaped turnover determined by the assessing authority itself the quantum is one 'proved' in the judgment of the assessing authority though not admitted by the assessee who failed to appear. That being so, the assessment would be one made by the assessing authority to the best of its judgment.
(Para 7)
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 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 assessee or on the material produced at the enquiry in which the assessee has participated. 1961 JLJ 29=1961 RN 87 relied on. (1965) 16 STC 54 dissented from.
(Para 8)
In making an assessment under that provision the Sales Tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a Court of law, but he 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 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 and for this purpose he must take into consideration such materials as he has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which he thinks will assist him in arriving at a fair and proper estimate. (1957) 9 STC 770 (SC) relied on, (1958) 9 STC 648 & (1961) 12 STC 567 followed.
(Para 9)
(2) Sales Tax-General Sales Tax Act, 1958 (MP)-S.19 (1)-penalty under-cannot exceed amount of tax payable on escaped assessment-assessment reduced-penalty to be reduced accordingly.
Under section 19 (1), the penalty that can be imposed for escaped assessment cannot exceed the amount of tax determined payable on assessment. Where the amount of escaped turnover is reduced, the penalty should be reduced accordingly.
(Para 13)
(3) Sales Tax-Central Sales Tax Act, 1956-S. 9 (3)-escaped assessment under the Central Act-can be imposed under section 19 (1) of the M.P. General Sales Tax Act, 1958.
The effect of section 9 (3) of the Central Act is that the procedure of making an assessment, collection of tax and enforcement of payment of any tax including penalty under the Central Act is the very same procedure as laid down in the local Sales-tax Act. Therefore, the provisions contained in section 19 (1) of the local Act including the provisions for the imposition of penalty for escaped assessment would apply for assessment and imposition of penalty for escaped assessment under the Central Act. 1967 JLJ 378=1967 RN 258 relied on.
(Para 12)
( 1 ) IN this consolidated reference under Section 44 of the Madhya Pradesh General sales Tax Act, 1958, the questions which have been stated for our decision at the instance of the assessee are: "1. Whether an 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 rupees 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 escape in 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?" the question which has been referred to us for decision at the instance of the commissioner of Sales Tax is:
"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 material facts are that the assessee M/s. H. M. Esufali, H. M. Abdulali is a registered dealer engaged in the business of sale of iron and steel. For the period from 1st November 1959 to 20th October 1960 the assessee's taxable turnover under the Madhya Pradesh General Sales Tax Act, 1958 (hereinafter referred to as the local Act) was determined at Rs. 1,21,567/-and a tax of Rs. 3743. 34 was levied. The assessee's taxable turnover for the same period under the Central sales Tax Act, 1956 (hereinafter referred to as the Central Act) was determined at rs. 22,916/- and the assessee was held liable to pay a tax of Rupees 252. 04 under the Central Act. The assessee did not prefer any appeals against these orders of assessment. Several months after the assessment orders were made, the Flying Squad of the Sales Tax Department "raided" the business premises of the assessee and found a bill-book for the period from 1st September 1960 to 19th September 1960 showing that during this period the assessee had effected sales of the value of Rs. 31,171. 28. These sales had not been entered in the assessee's account books which were produced before the sales tax authorities when assessments under the two Acts were made for the period from 1st november 1959 to 20th October 1960. 3. The Sales Tax Officer, Indore, therefore issued notices to the assessee under section 19 (1) of the local Act for assessment under the local Act as well as under the Central Act of the escaped turnover for the period from 1st November 1959 to 20th October 1960. The notices mentioned that a turnover of Rs. 2,50,000/escaped assessment under the local Act and a turnover of Rs. 1,00,000/-escaped assessment under the Central Act. The assessee was also called upon to show cause why penalty should not be imposed on it for suppressing the escaped turnover. In response to these notices the assessee gave an explanation saying that the bill-book discovered by the Flying Squad did not pertain to its business and the sales entered in the bill-book had not been effected by it. It was also said that the estimates of escaped assessment made by the Department were excessive and arbitrary.
( 4 ) AFTER hearing the assessee the Sales Tax Officer determined the escaped turnover of the assessee under the local Act at Rs. 2,50,000/- and imposed a tax of Rs. 6000/ -. The escaped turnover under the Central Act was determined at Rs. 1,00,000/- and a tax of Rs. 4500/-was assessed under that Act. A penalty of Rs. 2000/- was imposed on
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