P VELLINGIRI MUDALIAR Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE assessee is a dealer in cotton seeds, oil, cake etc. carrying on business at Sukravarpet, Coimbatore. For the asst. yr. 1966-67 he returned a total and taxable turnover of Rs. 4,30,097-58 and Rs. 2,25,802-14 respectively in the monthly A-2 returns filed by him. The total turnover as per the account books amounted to Rs. 5,81,859. 40 of which he was eligible for exemption of a turnover of Rs. 3.58, 619-45. The business premises of the assessee was inspected twice, once on 23rd Aug., 1966 and again on 25th Jan., 1967. On the first of the occasions it was found that there was a stock discrepancy in respect of almost all the commodities dealt with by the assessee. The small pocket note books were also recovered which disclosed unaccounted sales of certain items. In respect of this stock discrepancy, the AO estimated the turnover at Rs. 29.140/- and in respect of undisclosed sales he estimated at Rs. 25,934-80. On the second occasion also stock discrepancy amounting to Rs. 8,593/- was noticed. The Officers also recovered one pocket note book and 13 slips of paper disclosing suppressed sales of business transactions. The actual sale consideration as per the pocket note books and the slips amounted to Rs. 13,180-91, Thus the actual depression on the second occasion was ascertained at Rs. 21,773.91. The AO estimated the suppression at 10 times the actual suppression noted on 25th Jan., 1967. Consequently he added another sum of Rs.,17,740/- to the turnover disclosed in the accounts. On appeal by the assessee, the AAC while confirming the determination of the turnover as disclosed from the accounts and the amount in respect of the defect in stock and the anamath account books recovered on 23rd Aug., 1966 , considered that multiplying the suppressed turnover of Rs. 21,773-91 was not called for and added a sum of Rs. 19,111-50 in respect of brought forward entries. Thus, in the place of Rs. 2,17,740- he added Rs. 38,223/-. The Board, in the view that once an estimation was called for, the AAC's order deleting Rs. 2,17,740/- and adding only Rs. 38,223- was not justified, initiated proceedings under S. 34 and ultimately modified the entire assessment order revising the total and taxable turnover at Rs. 7,99,599-40 and Rs. 4,40,979-95 respectively.

(2.) The learned counsel for the assessee appellant in this case submitted that the Board acted as if it were an appellate authority under S. 34 and it was not open to the Board to have revised the order of the AAC on the facts and circumstances of this case. We are unable to agree with the contention of the leaned counsel. It is not necessary for us to decide as to whether the power of the Board under S. 34 is an appellate power. Suffice it for the purpose of this case to say that on the facts and circumstances of this case, the Board was well within its power in initiating proceedings under S. 34. The Board, both in the notice calling for the objections and also in the final order, has clearly stated that once the AAC agreed with the Assessing Authority, that an estimation was necessary the estimation by it should be on a logical basis and cannot be arbitrary What the AO did was multiply stock discrepancy and the actual sales suppression as found in the pocked note book and slips and multiply it by ten times. The stock discrepancy and the sale suppression was estimated for a period of one month. Since ten months preceded the inspection of 25th Jan., 1967, the AO had multiplied the actual suppression by ten times in order to determine the total suppression during the year. On the other hand, the AAC had merely doubled the suppression noted without giving any reasons for the same. The learned counsel for the assessee pointed out that both the AAC and the Assessing Authority have added a sum of Rs. 29,140/- and Rs. 25,934.80 in respect of stock variation noticed on 23rd Aug., 1966 and the undisclosed sales as found in the two small pocket note books recovered on that day. Therefore, the AO could not have multiplied the suppressed sales at 10 times of the amount found on 25th Jan., 1967. The learned counsel is perfectly justified in this submission. The Board has noted this point and actually had deleted the sum of Rs. 29,140/- and Rs. 25,934.80 along with another sum of Rs. 15,992-41 added by the AO in respect of the defects found in the oil mill, The Board, only on the basis of the value of the suppressed transactions, found the pocket note books and 13 slips recovered on 25th Jan., 1967 and the stock discrepancy found on that day, multiplied the same at 10 times and added the turnover to the actual turnover disclosed in the accounts. This is perfectly a justifiable method of estimating the suppressed turnover. In fact in one of the judgements of the Supreme Court reported in CST vs. H. M. Esufali H. M. Abdulali 32 STC 77 (SC) the Supreme Court pointed out that it was not possible to the Officer to find out precisely the turnover suppressed such circumstances and he could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered the estimation could be justified. The Supreme Court also held in that case that unless the estimation is arbitrary or not bona fide and had no rational basis, the order could not be interfered with. As we have already noticed, the suppression in one month as disclosed by the pocket note books and the 13 slips recovered on 25th Jan., 1967 and the variation in the stock register amounted to Rs. 21,773-91. It was therefore not unreasonable for the AO to have determined the suppressed turnover at 10 times that figure. The Board, in the circumstances, was justified in revising the order of the AAC and fixing the taxable turnover at Rs. 4,40,979.95. The appeal accordingly fails and it is dismissed with costs, Rs. 250/-.