COMMISSIONER OF SALES TAX Vs. IMPHALSHA MANUFACTURING CO

JUDGEMENT

(1.) THIS reference under Section 44 of the M. P. General Sales Tax Act (hereinafter called the Act) has been made at the instance of the Commissioner of Sales Tax, Madhya Pradesh. The question referred for our opinion by the Board of Revenue is as follows: Whether in making the best judgment assessment, a subsequent opportunity to show cause against the proposed best judgment estimate is to be given to the assessee over and above the one to be given to him to show cause against the proposal to assess him to the best of judgment.

(2.) THE facts giving rise to this reference may be briefly stated as follows: The non-applicant is a registered dealer engaged in the business of manufacture and sale of water for injections and some other medicines. The non-applicant started its business in 1964 and in its return for the period 25th November, 1964, to 31st March, 1965, it declared its turnover under the Act to be Rs. 57,275. 39. Its turnover was determined by the assessing authority to be of Rs. 1,00,000 and the tax assessed was Rs. 4,446. 62 and a penalty of Rs. 15 was imposed under Section 17 (3) of the Act for filing the return late. The assessee contended that there was no justification for resorting to the best judgment assessment under Section 18 of the Act and in any case the assessment of tax made was very high. This contention was rejected by the first appellate authority on the ground that the assessee did not maintain day to day quantitative manufacturing account. However, the Tribunal on appeal found that the assessee had maintained a. quantitative manufacturing account, but it was held that the best judgment assessment was justified as, there was discrepancy in the figures as per accounts and those shown in the return. In the return the sales were shown to be worth Rs. 57,275. 39 and the accounts show the sales to be worth Rs. 64,513. 85. It was further held that the assessee had failed to explain this discrepancy before the lower authorities as also before the Tribunal even though an opportunity had been given to the assessee to explain the discrepancy. The Tribunal, however, remanded the case for making fresh estimation on the view that the assessing authority had not given any reason for the actual estimate. In remanding the case the Tribunal observed that in making the best judgment there were two steps, namely, (i) the decision to resort to best judgment assessment, and (ii) the making of actual estimates. . It was further observed that it is also settled law that at both the stages the assessee should be given an opportunity to show cause against the proposed action. The Tribunal found that before making the estimates no basis was formulated and that the assessee had not been given any opportunity to plead in respect of the basis. The Tribunal also observed that this was the first order of assessment of the business of the assessee and that being so, the enhancement of nearly 50 per cent in the gross turnover and an enhancement to the extent of nearly Rs. 72,000 in the taxable turnover should have been supported by adequate reasons which was not done in the present case. The Commissioner of Sales Tax felt aggrieved by that part of the order of the Tribunal in which it is said that in making the best judgment assessment an opportunity should be given at both the stages, i. e. , before resorting to the best judgment assessment and then for making the estimate.

(3.) THE contention advanced on behalf of the Commissioner of Sales Tax is that 18 which deals with the best judgment assessment does not provide for two opportunities as stated by the Tribunal. It is stressed that once it is decided to resort to best judgment assessment, further opportunity to plead against the proposed assessment is not necessary and the assessing authority is entitled to make the best judgment assessment on the basis of material already on record. In the same connection, it has been urged that if no material has been gathered behind the back of the assessee, the assessing authority is not required to show the basis of its estimate to the assessee for adopting it. It is urged that all that is necessary for the assessing authority while making the best judgment assessment is to follow the procedure prescribed in Rule 33 which is as follows: