MURALIMOHAN PRABHUDAYAL Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE two questions referred to this court for answer under section 24 (1) of the Orissa Sales Tax Act are as follows :

(2.) THE facts leading to this reference are clearly stated in the reference order. The quarter in respect of which the assessment has been made relates to the quarter ending with 31st December, 1958. The dealer is a wholesaler in grocery articles. He returned a profit at a rate of 4 per cent, in his account books. The assessing officer is of opinion that the normal profit in the locality in such business would be between 8 per cent. to 12 per cent. He accordingly estimated the rate of profit at 8 per cent. and enhanced the returned figures. The first appellate authority estimated the rate of profit at 6 1/4 per cent. The Tribunal upheld the order of the Assistant Commissioner. The Tribunal held that big dealers could usually maintain their accounts perfectly and yet manipulate the same showing lesser returns which could be done by showing a low rate of profit. He was of opinion that an estimation can be made by the taxing officer of the reasonable rate of profit taking into consideration the local condition of the wholesale dealers in grocery articles. It was accepted in the reference order that the source of knowledge of the general local condition of the business of the wholesale grocery dealers was not made known to the appellant. Thus the estimate was made without furnishing the materials on the basis of which the taxing authorities different from the rate furnished in returns of the dealer.

(3.) AS a necessary corollary of the aforesaid principle the assessing authority cannot declare the account books to have not been properly maintained on the basis of information not supplied to the assessee. In this case the Tribunal came to the conclusion that account books were correctly maintained. He, however, did not act upon the account books on the basis of an information obtained by the taxing officer that the rate of profit prevalent in the locality pertaining to such type of business was much higher. As this information was not supplied to the assessee for rebuttal, it was inadmissible in evidence. If this evidence is excluded, then there is no other material on the basis of which the account books could have been rejected. If from extraneous evidence allowed to be rebutted by the assessee it could be established by the assessing authorities that the account books were wrong, then the account books could be rejected even though arithmetically they were accurately maintained.