KALYANI OIL MILLS Vs. STATE OF MADRAS

JUDGEMENT

(1.) THE assessee in this case is a manufacturer and dealer in groundnut oil. For the assessment years 1963-64 and 1964-65, he was assessed on a taxable turnover of Rs. 5,19,349.92 and Rs. 4,98,647.59 respectively by the assessing authority. In making those assessments, the assessing authority made certain additions towards suppression of sales of groundnut oil and also the purchases of groundnuts to the turnover returned by the assessee in respect of both the years. THE assessee was aggrieved against the additions made to the taxable turnover returned by him in respect of both the years and went in appeal before the Appellate Assistant Commissioner. Having failed in the appeals, he approached the Tribunal by filing the further appeals. THE Tribunal also sustained the additions made by the assessing authority to the taxable turnover returned by the assessee in respect of the years in question. In these revisions, the orders of the Tribunal in respect of both the assessment years are challenged by the assessee. On behalf of the assessee, it is contended that the additions came to be made by the assessing authority are quite arbitrary and there was no justification for making the additions in both the years. According to the learned counsel, the assessing authority has proceeded to make the additions only on the basis of the consumption of electricity without any other material to doubt the correctness of the accounts produced by the assessee, or the returns filed by him. THE learned counsel refers to the decisions in St. Teresa's Oil Mills v. State of Kerala ([1970] 25 S.T.C. 497], Mahabir Prasad Jagdish Prasad v. Commissioner of Sales Tax ([1971] 27 S.T.C. 337) and Mahashakti Oil Mill v. Commissioner of Sales Tax ([1972] 30 S.T.C. 390), in support of his contention that the electricity consumption cannot be adopted as the sole basis for rejecting the accounts of the assessee and for making an estimate of the taxable turnover of the assessee. In St. Teresa's Oil Mills v. State of Kerala ([1970] 25 S.T.C. 497), the only circumstances relied on by the assessing authority for the rejection of the accounts was that there was wide disparity in the consumption of electricity. Dealing with this question, the court said : "In our opinion, this factor by itself without any other supporting circumstances does not justify the rejection of the accounts. Such variation in the consumption of electricity can be due to various factors outside the control of the assessee. It is unsafe to categorically say that because there is variation in the consumption of electricity the accounts are incorrect or unreliable. It sometimes happens that current supply falls far below the usual voltage and on such occasions the output will necessarily be much lower than the normal rate. THE efficiency of the crushing machines and also the moisture content in the copra would also be relevant factors to be taken into account in arriving at the output. It is, therefore, unsafe to uphold the rejection of the accounts purely on the ground that there has been divergence in the consumption of electricity."

(2.) IN Mahabir Prasad Jagdish Prasad v. Commissioner of Sales Tax ([1971] 27 S.T.C. 337) also, a similar question was considered. There also, the assessing authority did not find any material to show that the account books maintained by the assessee were not reliable. But the account books were rejected only on the ground that the consumption of electricity showed that the assessee would have suppressed his production. IN dealing with the question of estimate based on the electricity consumption without any reason for rejecting the assessee's accounts, the court stated that the fact that there was sizable disparity between the electricity consumption shown by the assessee and the report by the expert merely led to a suspicion that the entire production could not have been brought into the books. But suspicion, however strong it may be, cannot take the place of positive material and, therefore, unless the assessing authority was able to detect at least one instance where the assessee might have understated its sales, he would not be justified in rejecting the accounts and making an estimate of the escaped turnover, only on the basis of the consumption of electricity. This decision was followed by the same High Court in Mahashakti Oil Mill v. Commissioner of Sales Tax ([1972] 30 S.T.C. 390).