CHANDUNNY NAIR SON Vs. STATE OF KERALA

JUDGEMENT

(1.) THE revision petitioner carries grocery business at Big Bazaar,Kozhikode,and had for the assessment year 1955 -56 shown the gross turnover of Rs.7,38,458 -3 -10.He had then claimed deduction of Rs.75,191 -5 -11,leaving Rs.6,63,266 -13 -11 as the net turnover for purposes of the tax.The Deputy Commercial Tax Officer has rejected the aforesaid returns,because - (1)The accounts had disclosed the gross turnover of Rs.7,47,943 against Rs,7,38,458 -3 -10 shown by the petitioner, (2)The total of what been claimed to be exempted came,as per the accounts,to Rs.73,079 -5 -6,whereas the dealer had stated it to be Rs.75,191 -5 -11, (3)The accounts did not show the value of stock at the beginning and end of the assessment year, (4)The secret book of clandestine transactions in the shop had not been produced, (5)The stock of goods in the shop had disclosed suppression of purchases and sales,and (6)Commission sales had also been suppressed. The last three of the grounds can be understood only after some facts concerning the officers ™surprise visit to the dealer's shop are narrated.The Deputy Commercial Tax Officer,accompanied by the Assistant Commercial Tax Officer,Kozhikode,inspected the dealer's shop on March 2,1956.The accountant in the shop then hurriedly removed an account book,which the officers wanted to be shown,but the employee handed it to another,asked him to make good his escape,who obeyed.After the dealer,who was then absent,came,the officers complained,but the petitioner also did not take any notice.The Deputy Commercial Tax Officer later summoned the account book at his office,the accountant appeared,but without the book.Moreover,the inspection of the stock of goods in the shop at the time showed the following suppression: Name of commodity Suppression of Purchases Suppression of sales Mambayar &hellip ;.. 4 bags Corriander &hellip ;.. 165 bags Horsegram 52 bags &hellip ;.. Perunjeerakam &hellip ;.. 4 bags Jeerakam &hellip ;.. 4 bags Turmeric &hellip ;.. 4 bags Uluva &hellip ;.. 8 bags Mustard seed &hellip ;.. 14 bags Tamarind &hellip ;.. 8 bags Garlic &hellip ;.. 16 bags Chillies 26 bags &hellip ;.. Also the account of chillies showed unloading charges for larger number of bags,and only a part having been purchased.The details of commission sales found having been thus suppressed on February 13,1956 are as below: Sale book page Date of Receipt of goods Number of bags brought to accounts Correct Number of bags as noted in pencil Unloading charges paid Rs.A.P. 342 13 -2 -1956 10 20 1 4 0 342 ;.. 8 18 1 2 0 343 ;.. 4 10 0 10 0 343 ;.. 7 25 1 9 0 346 ;.. 6 20 1 4 0 352 ;.. 25 41 2 9 0 353 ;.. 9 14 0 14 0 354 ;.. 4 14 0 14 0 355 ;.. 30 40 2 8 0 356 ;.. 14 25 1 9 0 373 ;.. 12 72 4 8 0 129 299 18 11 0 On the aforesaid facts,the Deputy Commercial Tax Officer had found that there was a secret book of clandes­tine transactions in the shop,the stock of goods in the shop disclosed suppression of purchases and sales,and the commission sales were also suppressed.The officer,thereafter,fixed the turnover at Rs.10,00,000 as during the previous year the dealer's turnover had been Rs.9,99,833 -0 -0,and rejected the assessee ™sexplanation of the grounds,on which his returns been held not satisfactory.These explanations were that: (1)In adding the numerous figures of the bills,mistakes may have arisen;and the account books may be looked into for correct figures;that (2)Arithmetical or clerical error may have arisen,in adding the numerous figures for purposes of exemption for onions and potatoes,the accounts may be looked into and the correct figures adopted; (3)The opening and closing stocks had been shown according to the Malayalam year,as that year has been taken for the purposes of the income -tax to be the assessee's accounting year; (4)Buyers in the local market examine and take goods,promising to bring in cash;should they bring cash during the day the bills would be written up and issued,but if they do not,as promised,and on the accounts being closed for the day,the credit bills are written up;which trade practice explains the difference between the opening stock on the day of inspection and the bags shown as sold at 4 -15 p.m .,that being the time of the inspection; (5)The principals bring goods mostly in lorries,and when the principals find that some other commis­sion agents,to whom the goods are handed over,may be able to sell the goods more speedily,they take back portion or whole of the goods handed over to the other commission agents with a view to sell the goods as speedily as possible,which explains the difference noted on February 13,1956. The Deputy Commercial Tax Officer,as already stated,did not believe the story,and the Appellate Assistant Commissioner found it to be bunkum.The aforesaid appellate authority has further found the books secreted away to contain clandestine transactions.The Appellate Tribunal has also treated the explanations to be unsatisfactory,and hence the revision petition.There are,Therefore,three Tribunals concurrently holding the explanations to be not satisfactory;and we have in this revision petition to determine how far the aforesaid orders are correct. But before doing so,we would emphasise two rules,which have not been adequately appreciated by the taxing authority.The first is that the taxing authorities,when even making the best judgment assessment,are but discharging judicial function,and,therefore,their decisions must rest on material.In this connection Baghubar Mandal Harihar Mandal v. State of Bihar 8 S.T.C.770,where the Supreme Court was dealing with section 10(2 )(b)of the Bihar Sales 'Tax Act,has observed as follows: The provisions of section 10(2 )(b)of the Bihar Sales Tax Act,1944,and section 23(3)of the Indian Income -tax Act,1922,are substantially the same and impose on the assessing authority a duty to assess the tax after hearing such evidence as the dealer may produce and such other evidence as the assessing authority may require on specified points.In making an assessment under section 10(2 )(b)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.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. That proposition has been followed in Jami Narayana Prusti and Brothers v. State of Orissa 9 S.T.C.648,where the assessee's returns did not include the sum for the sale amount of five watches,and the officer add Rs.15,000 covering the period,during which the watches were sold.In that context it was held that the assessment should be quashed inasmuch as they were based upon mere guess work.We have also followed the same rule in Ravjee Anand Goray and Sons v. Sales Tax Officer,Kozhikode 1960 K.L.J.1931. The next proposition is that the decisions on facts by taxing authorities are not always immune from the scrutiny of courts,and if such decisions be what no reasonable man can arrive,their binding nature ceases.The court would then be justified to intervene,and that has been held in Variathu v. State of Kerala 1960 K.L.J.315,where authorities on the point are collected.We think that proposition,though the case was under the income -tax,would apply to assessments for sales -tax as well. It follows that should the best judgment assessment in the petition before us be based on conjectures,or such as no reasonable man would arrive at on the materials on record,we would be justified in interfering.Even assum­ing the explanations by the assessee to be incorrect,we do not see how the suppression of purchases or sales dis­covered on the day of inspection,or of February 1956,can be taken as sufficient basis for sales and purchases on other days being also suppressed without further evidence.The dealer has stock registers,which would show what been brought and what remain;so that sales or purchases cannot be suppressed with entries in the register being proper;and all the taxing authorities do not say anything about the entries in the registers being irregular or false.Nor do we see how commission sales can be suppressed on other days without principals ™accounts concerned in the suppressed sales with the dealer's being falsified,or dealer's cash books becoming incorrect,and yet there is no word about such accounts being incorrect.Nor do we see how the same bags of chillies would be sent on other days,nor how the market value would be the same.Nor do we see how entries in pencil on a day for unloading charges would justify the inference of unloading charges having been incurred on other dates.We equally fail to understand how secret book not produced would justify the conclusion of the turnover being suppressed to that extent to which the taxing authorities have held in this case.We are afraid taking what had happened on a few days as the basis for holding suppression to have happened on other days in the assesssment year,without any false entries in the stock registers,or in the principals ™accounts,or in other accounts of the dealer's are incorrect conclu­sions,because no reasonable man would arrive at them.We further see little force in rejecting the dealer's income -tax assessment as not correct when there be no evidence to support the conclusion.We would,therefore,vacate the assessment and direct the Appellate Tribunal to work out the assessment on the figures of the assessee's accounts except for March 2,1956,and on February 13,1956,on which days the entries have been found to be incorrect and best assessment for the aforesaid dates would stand.The revision petition is accordingly allowed,the Tribunal is directed to work out the figures accordingly and make proper assessment and the assessee will be entitled to costs,with advocate fee at Rs.50.The petition is accordingly allowed.