PAPAYYA Vs. COLLECTOR OF VIZAGAPATAM

JUDGEMENT

(1.) The interpretation of Sec. 9 of'the Madras General Sales Tax Act and rules 6, 8, 9 and 11 of the Turnover and Assessment Rules framed thereunder is involved in these two appeals. Since the controversy in both the appeals is the same, they can be disposed of together. A. S. No. 809 of 50 arises out of O. S. No. 58 of 48 on the file of the Sub Court Srikakulam and A. S. No. 736 of 50 out of O. S. No. 10 of 49. These two suits were filed for refund of sales-tax illegally and arbitrarily levied by the Deputy Commercial Tax Officer and paid by the plaintiffs under protest. The assessment year is 1946-47. To appreciate the conflicting contentions in these appeals, it is necessary to set out the salient facts of the cases.

(2.) The plaintiffs in both the suits are dealers in ground-nut, ground-nut products and other commodities. In addition, the plaintiff in O. S. No. 58 of 48 is the proprietor of Sri Krishna Vizaya Ground-nut Oil Mills, Pondur. The Plaintiff in O. S. 58/48 submitted a return showing a turnover of Rs. 11,36, 317-6-9 while the plaintiffs in the other suit made a return for Rs. 20,79, 821 -2-8 on 24-9-1947. A few days later, a provisional assessment was made on the basis of these returns. On 22-10-1947, the Deputy Commercial Tax Officer, Bobbili, issued notices to these assessees calling upon them to produce their accounts, bills, pattis, Income-tax orders and trading accounts for 1946-47 and 1947-48 on or before 4-11-1947 in default of which the turnover would be determined to the best of his judgment without further notice. The assessees produced some account-books with a list thereof but not the pattis, bill-books or the Income-tax orders etc. A request was made on their behalf for extension of time for the production of the other records required by the Department, and they were permitted to do it in the first case before the 21st and in the second before the 20th of December 1947. But, nothing was done by either of them within the time allowed. On behalf of the plaintiff in O. S. No, 58 of 1948, a letter was written to the Deputy Commercial Tax Officer containing a representation that the vouchers for purchases and report-books for the years 1946-47 and 1947-48 were not available and that the contracts and the railway receipts relating to 1946-47 and 1947-48 would be filed in four or five days. The same day another letter was written on his behalf to the effect that he did not have the contracts with him, that he would submit a list of waggons and other relevant records for the year 1946-47 such as copies of loan and stock statements from the Imperial Bank. Time was PAPAYYA v. COLLeCTOR OF VIZAGAPATAM (Chandra Reddy, J.) 87 extended up to 10-3-1948 finally for the production of the other records. As the assessee in the other case remained silent a demand was made again upon him to produce the statements furnished by the Imperial Bankall the accounts, stock books, pattis and bills and the contracts. But, neither of them did anything further in the matter. Thereupon, notices were issued to them separately on the 15th and 16th of March 1948 intimating that on verification of transactions reported in the note-books of one Sadhu Suryam a broker employed by them, with their accounts it was seen that they omitted to account for several purchases and sales of commodities and that the rates of the several commodities recorded in their accounts were less than those noted in the note-books of the said Suryam. It was added : "In view of the wilful omission, I am convinced that the accounts maintained by you are incorrect and 1 therefore reject the reported turnover as incorrect." In one case i. e., O.S. 58 of 1948 the omitted turnover was estimated at Rs. 5,10,000 and in the other at Rs. 8,00,000. The assessees were told that if they had any objection to be assessed on this basis, they could produce the relevant accounts, contracts, bills and patties within a week for comparison with Suryam's books. A list of the alleged omissions was annexed to each of the notices. In reply, both the assessees stated that their accounts were correct and that no weight could be attached to the entries found in the diaries or other records recovered from Suryam as they did not represent the real state of affairs. The assessing authority was also requested to furnish certain particulars and to call upon the said Suryam to prove the correctness of the entries in his books by documentary evidence. Immediately, the officer concerned gave the particulars asked for and gave them once again an opportunity to prove the correctness of their returns and the allegations that they had no transactions with the individuals shown in the list of omissions. Beyond reiterating their earlier statements, nothing further was done.

(3.) Thereupon, the Deputy Commercial Tax Officer made the orders of assessment in question estimating the turnover at Rs. 11,89,000-0-0 in O.S. 58 of 1948 and Rs. 22,01,960-0-0 in O. S. 10 of 1949. The sales-tax levied on this basis was paid by both the plaintiffs under protest. This was carried in appeal to the District Commercial Tax Officer who confirmed the assessment order after hearing the parties. The plaintiffs in O.S. 10 of 1949 filed a revision petition in the Board of Revenue but that was dismissed with the result that the turnover estimated by the Deputy Commercial Tax Officer became final. The present suits are brought to declare the assessments to be illegal and to recover the amounts paid in excess of the admitted tax. The basis of the claim in both the suits is that the account-books of the plaintiffs should have been accepted as correct and complete and that the records obtained from Sadhu Suryam could not form the basis of an estimate either under rule 8 or 11 of the Turnover and Assessment Rules as the entries therein were fictitious, that no opportunity was gives to them to prove the correctaess and completeness of the return and that the assessing authority had not examined the merchants noted in the list of omissions attached to the communication dated 15-3-1948 and verified their accounts with those of the plaintiffs. The suits were resisted by delivering an answer which is mutatis mutandis common to both. It was stated inter alia that the account books of the plain tiffs were on scrutiny found to be incorrect and incomplete, that the records from Sadhu Suryam were genuine and reliable, that every opportunity was afforded to the assessees to prove the correctness and completeness of their returns and that no obligation was cast on him to examine any of the merchants mentioned in Suryam's books. The estimate was arrived at only after following the procedure prescribed in the relevant rules.