Kerala High Court
Deputy Commissioner Of Sales Tax (Law), ... vs Sri G. Gopinatha Pillai on 6 November, 1985
Equivalent citations: [1986]61STC314(KER)
Author: T. Kochu Thommen
Bench: T. Kochu Thommen
JUDGMENT T. Kochu Thommen, J.
1. The revenue is the revision petitioner. It challenges the order of the Sales Tax Appellate Tribunal allowing in part the assessee's appeal against the order of the Appellate Assistant Commissioner whereby he affirmed the order of the Sales Tax Officer. The Sales Tax Officer rejected the assessee's books of account and completed the assessment on best judgment by making an estimate on the basis of consumption of current for the relevant year and fixing the turnover accordingly at Rs. 1,81.200. This is what the Sales Tax Officer says in his order :
The quantity of 2,230 units of current furnished is found not correct. This is the consumption from 10th April, 1976, onwards only. This is evident from the consumption details noted at the time of inspection on 21st April, 1976. Hence the current consumption for the period up to 10th April, 1976, is propose to be estimated at 300 units based on the actual consumption between 10th April, 1976, to 21st April, 1976. Hence the total current consumption is estimated at 2,530 units. The maximum current consumption that is required is 10 units per quintal of copra. This is the usual rate allowed in the case of similar units. Allowing 10 units per quintal the total quantity of copra that can be crushed is 253 quintals as against 185.10 quintals of copra (including cooly crushing of 12 quintals) accounted to have been crushed. Hence there is a suppression of 67.90 quintals of copra, its oil and cake. The purchase value of copra and sale value of oil and cake thus suppressed is proposed to be estimated at the average rate as per accounts.
The estimate made by the Sales Tax Officer was on the basis of the practice recognised in a number of decisions of this Court. In K.T. Antony v. State of Kerala [1976] 37 STC 148 this Court stated :
...This Court has dealt with several cases of estimates made on the basis of current consumption. A consumption rate of 9 units to 11 units had been upheld by this Court in several tax revision cases. This has been the practice for over a decade now and in the light of these decisions of this Court and the practice followed, it will be difficult to say that 10 units current for crushing one quintal of copra has no basis other than the imagination of the assessing authority....
See also K.S. Joseph v. State of Kerala [1976] 37 STC 152. This well-accepted practice which the Sales Tax Officer followed and which was confirmed in appeal by the Appellate Assistant Commissioner was reversed by the Tribunal stating :
...As contended by the learned counsel the consumption of current may vary due to several reasons and it is not possible to make a fool-proof estimate of current consumption for a short period. According to us, therefore, some other method should have been resorted to by the assessing authority in this case taking stock of the facts and circumstances of the case for estimating the turnover of the appellant. On going through the assessment records we find that the appellant has business only for 6 months in the financial year. Considering the facts and circumstances of the case and also the stock discrepancy noticed in the 3rd week of the beginning of the financial year we feel that an addition of 25 per cent to the total quantity of copra admitted to have been crushed in the year would be quite sufficient to cover up the omissions and short credits in the accounts in respect of his transaction as manufacturer of oil and cake...
2. The Tribunal thus reversed the finding of the Sales Tax Officer by adopting a divergent method of making an estimate. It is contended by the Government Pleader that the Tribunal ought not to have reversed the finding of fact made by the assessing authority. Counsel points out that the Tribunal ignored the principle laid down in Commissioner of Sales Tax v. H.M. Esufali H.M Abdulali [1973] 32 STC 77, (SC) where the Supreme Court stated :
...The task of the assessing authority in finding out the escaped turnover was by no means easy. In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the 'best judgment' assessment, no doubt, should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his 'best judgment' and not of anyone else. The High Court could not substitute its 'best judgment' for that of the assessing authority....
The Supreme Court in that case relied on the following observation of Lord Russell of Killowen in Commissioner of Income-tax v. Laxminarain Badridas [1937] 6 ITR 170 at 180 (PC) :
The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstanses, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary.
3. The principle is that, except where the assessing authority acted dishonestly, arbitrarily, vindictively, capriciously or unreasonably, the High Court, in exercise of its revisional or discretionary power, should be extremely slow to interfere with pure findings of fact.
4. The same principle in terms will not apply to the Appellate Tribunal which is the highest authority of facts. Its jurisdiction is co-extensive with that of the assessing authority (see Section 39 of the Kerala General Sales Tax Act). Nevertheless, the appellate authority should not lightly discard findings of fact based on evidence. The principle that a fact-finding authority should not act unreasonably or irrationally by reaching a conclusion contrary to law or in total disregard of evidence or by making a guess-work totally devoid of any evidence, albeit in cases of best judgment assessment, is applicable with equal force to an appellate authority.
5. Where the assessing authority made the estimate on the basis of a well-accepted method as recognised by this Court in K.T. Antony v. State of Kerala [1976] 37 STC 148 and other cases, the Tribunal, in our view, ought not to have, without intelligible reasons based on some material, reversed the finding of the assessing authority.
6. It is open to the appellate authority to reappreciate facts and reach a conclusion at divergence with that of the lower authority. But to ignore the estimate made by the assessing authority on the basis of a well-accepted method and supported by available material, merely because the Tribunal thought that a different method, such as addition of a percentage to the accepted quantity of copra consumed, in the absence of any evidence to justify such deviation, was to act arbitrarily : see Commissioner of Income-tax v. S.P. Jain [1973] 87 ITR 370 (SC).
7. Although we are satisfied that on principle the decision of the Tribunal cannot be supported for the reasons stated, in view of the fact that the difference between the tax determined by the Sales Tax Officer and the tax determined by the Tribunal is a trifle sum not exceeding Rs. 300, we do not propose to allow this revision petition as it would involve remand and fresh determination which, in the circumstances, would be sheer waste of time and money. Subject to the principle stated by us, the tax revision case is dismissed. No costs.