SHREE NARSINGH TRADING CO Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE Member, Sales Tax Tribunal, has referred the following question under section 24(1) of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the Act), for determination of this court :

(2.) THE finding that the assessee had suppressed transactions from his accounts is not in dispute. In fact, the question which has been referred to this court has been framed on the footing that as suppressions were found, accounts became liable to be rejected and best judgment assessment could be completed, but the attack is against the quantum of enhancement, which is described to be 20 per cent the suppressions found. Mr. Mohapatra for the assessee, however, contends that within the ambit of the question - particularly as the question has been framed with reference to the facts and circumstances of the case - whether there can be a best judgment assessment under section 12(2) of the Act is contained and has to be examined. It is settled law that the reference jurisdiction of this court is advisory and has to be confined to questions of law arising out of the appellate order and referred to it for determination : (see Income-tax Commissioner v. S.S. Navigation Co. Ltd. ([1961] 42 I.T.R. 589 (S.C.); A.I.R. 1961 S.C. 1633)). The learned counsel for both the sides have, however, argued at some length on the question regarding completing an assessment under section 12(2) of the Act by adopting the best judgment method. We have, therefore, agreed to discuss about that position in law.

(3.) MR . Mohapatra contends that the assessing authority is not entitled to adopt the best of judgment method except in cases covered by sub-sections (3) and (4). In the instant case, those sub-sections have no application because the assessee had made a return and complied with the terms of the notices issued under sub-section (2) of section 12. Since the power to make assessment according to the best of judgment is conferred only in cases covered by sub-sections (3) and (4) and not by sub-section (2), in the present case, where the assessments have been completed under sub-section (2) of section 12, the assessing authority was not entitled to reject the books and proceed to complete the assessments according to the best of his judgment. Reliance is placed upon a decision of the Patna High Court in Raghu Nath v. Commissioner of Income-tax [A.I.R. 1925 Pat. 694], which was under the Income-tax Act and some other cases under the Sales Tax Act. We do not find it necessary to examine all the cases cited by Mr. Mohapatra for the assessee, as, in our view, when the notice or notices issued under sub-section (2) of section 12 are not complied with to the satisfaction of the assessing authority a situation arises to which sub-section (3) would apply. It is not the physical presence of the assessee or the physical production of the books of account in answer to notices under sub-section (2) of section 12 that would amount to compliance with the terms of the notice/notices as provided in sub-section (3) of section 12. It is for the assessing authority to decide whether there has been compliance with all the terms of his notice/notices and where he finds that there has been no proper compliance, he is to proceed to complete the assessment on the footing that the assessee has failed to comply with all the terms of his notice/notices. The assessee could not have been made the final arbiter in the matter under the scheme of the Act. The Division Bench decision of the Patna High Court in Kaniram Janki Das v. State of Bihar ([1952] 2 S.T.C. 230) directly supports this view of ours. This court has also taken similar view in Silla Krishna Murthy v. Commissioner of Sales Tax ([1961] 12 S.T.C. 584) and Jami Biswanath Prusthy v. Commissioner of Sales Tax ([1961] 12 S.T.C. 606). Though not specifically indicated, even acceptance of this principle can be culled out from the decision of the Supreme Court in Raghubar Mandal Harihar Mandal v. State of Bihar ([1957] 8 S.T.C. 770 (S.C.)) There an assessment under section 19(2)(b) of the Bihar Sales Tax Act in a similar situation had been sustained.