State Taxation Tribunal - West Bengal
Radhanath Patra vs State Of West Bengal And Ors. on 20 November, 1997
Equivalent citations: [2001]123STC75(TRIBUNAL)
JUDGMENT
J. Gupta, Judicial Member.
1. By the instant application under Section 8 of the West Bengal Taxation Tribunal Act, 1987, the applicant has challenged an assessment order for the four quarters ending on December 31, 1987. At the very outset it may be mentioned that the application has not been drafted happily. The repetitive statements, perhaps to clarify the applicant's position, have created more confusion than clarification. However, from the annexures to the application and other documents filed the applicant's case appears to be as follows :
The applicant is a proprietor of the business concern run in the name and style Visco Engineering Works and is engaged in manufacture of machine parts as well as in machining job on materials against labour charges. Because of drop in the sales of manufactured goods, the applicant's business has remained confined mostly to machining job. For the period of four quarters ending on December 31, 1987 the applicant submitted his returns showing the gross receipt for the year as Rs. 92,854.84, comprising labour charges of Rs. 68,259.13, delivery charges of Rs. 2,492.50, sales to the registered dealers of Rs. 7,558.81 and labour charges of Rs. 14,544.40 effected outside West Bengal. But according to the books of accounts of the applicant the corresponding figures for the same year are Rs. 92,295.44, Rs. 70,339.93, Rs. 7,970.51 and Rs. 13,985 respectively. The small difference of Rs. 559.40 between the return-figure and the figures available from the books of accounts are due to the fact that through inadvertence the applicant charged sales tax in the cases of labour charges for the work effected outside West Bengal. On December 3, 1991, the date fixed for hearing of the assessment, none on behalf of the applicant could appear before the Commercial Tax Officer (C.T.O.) due to wrong noting of date, and the C.T.O. made ex parts assessment on his best judgment because the assessment was going to be barred by limitation on December 31, 1991. In assessment the gross turnover was fixed at Rs. 3,50,000 disallowing labour charges of Rs. 70,339.93 under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act") and enhancing other figures along with inclusion of interest of Rs. 1,000. The applicant preferred an appeal before the respondent No. 4, produced all books of accounts, declaration forms and papers and also reconciled the minor discrepancies apparent in the books of accounts. But the respondent No. 4 sustained the estimate of turnover at Rs. 3,00,000 against admitted amount of Rs. 7,970.51 and of taxable purchase price at Rs. 50,000 as against admitted amount of Rs. 9,006.25. Against this appellate order the applicant preferred a revision before the West Bengal Commercial Taxes Revisional Appellate Board (in short, "the Board"). The Board affirmed the appellate order so far as estimation of gross turnover of Rs. 3,00,000, imposition of penalty of Rs, 1,000, disallowance of labour charges of Rs. 84,324.93 (including the part related to Central sales tax) and the claim of exemption of Rs. 13,985 under Section 5(2)(a)(v) of the Act are concerned. The Board however, set aside the levy of interest of Rs, 29,492. The applicant has, therefore, moved the instant application before this Tribunal alleging, inter alia, that the purported best judgment assessment by the respondent No. 2 is arbitrary and is not based on any material whatsoever and that the estimation of gross turnover has been made several times more than the gross turnover as evident from the books of accounts. It is further contended that though Rs. 13,985 constituted the labour charges for the job-works done for the customers outside West Bengal, the respondents have treated this as part of intra-State transaction and have assessed tax on the same.
2. The applicant on the aforesaid ground prays for a declaration that the order of the taxing authorities in the matter of assessment for the aforesaid period are illegal and improper. The applicant also prays for quashing the assessment order dated November 7, 1987 of the respondent No. 5 and for restraining the respondents from further proceeding with the said impugned orders.
3. The case of the respondents as made out in their affidavit-in-opposition is that since the period of limitation was coming to a close, the respondent No. 5 had no other alternative than to complete the assessment ex parte, without further adjournment, and that since the applicant did not produce the books of accounts on the date fixed (December 3, 1991), the respondent No. 1 had to make on the next date, i.e., on December 4, 1991 the best judgment assessment without having opportunity to go through the books of accounts or to reconcile the discrepancies apparent in the returns or to find justification for exemption claimed in respect of alleged labour charges. Their further case is that penalty was imposed on account of the applicant's failure to furnish the return within prescribed time and that the applicant's plea of invalidity of the demand notice on the ground of non-affording 30 days' statutory period for making payment, is an innovative stance since such plea was never taken before the appellate or the revisional forum, According to the respondents the best judgment assessment was made bona fide with due application of mind.
4. The debated question here is whether the assessment in question can be said to be the best judgment assessment with due application of mind.
5. Section 11(1) of the 1941 Act contains the provision authorising the assessing authority "to assess to the best of his judgment the amount of tax due from a dealer when such dealer fails to furnish any return by the prescribed date or if the authority is not satisfied that the returns furnished are correct and complete". The expression "the best of his judgment" appearing in section sets the tone of the nature of assessment. The assessing authority must make an assessment which in his own judgment is the best one in the given circumstances. The term "judgment" within the meaning of this section dispels the idea of capricious or arbitrary conclusion and indicates that in making an assessment under this section the assessing authority must apply his mind, must come to a logical conclusion giving an express reasoning leading to the decision. It is true that in the instant case the books of accounts of the applicant were not made available for scrutiny by the assessing authority and consequently the assessing authority could not but go for a surmise in arriving at the gross turnover, and for that matter, in estimating the tax payable. But such liberty does not give a leverage to the Assessing Authority to make a wild assessment divorced from a ken of logic. The concluded assessments for the previous years may provide the clue for coming to a logical assessment. It is worth-while to refer to the observation of the Supreme Court made in the case of Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770 (SC). The relevant observation of the court is quoted below :
"No doubt, it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess ; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of Killowen again, 'he must make what he honestly believes to be a fair estimate of the proper figure of assessment' and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. In the case under our consideration, the assessing officer did not do so, and that is where the grievance of the assessee arises."
6. At page 4 of the application the applicant has given a table showing therein the year wise figures of--
(i) gross turnover as per books of accounts,
(ii) receipt on account of labour charges (as claimed by the applicant),
(iii) gross turnover assessed, and
(iv) labour charges allowed by the authority.
These figures are for the period from 1984 till the financial year of 1989-90. For a ready reference I reproduce the part of the table relating to the periods for which assessments were done under Section 11, for reasons as we shall discuss in the following paragraphs :
Year Gross turnover as per books of accounts Receipt of account of labour charges Gross turnover assessed Labour charges allowed Rs. P. Hs. P. Rs. P. Rs. P. 1984 70,853.40 1,71,455.80 84,304.45 1,61,099.80 1985 2,860.40 1,17,269.54 3,760.50 1,17,269.54 1986 63,633.09 1,41,713.64 70,000.00 1,41,713.64 1987 (in dispute in this case) 1988 11,047.28 71,108.29 13,891.71 71,108.29
7. The correctness of the above figures are not in dispute. It is true that in every such year the assessing authority enhanced the figures of gross turnover and reduced the figure relating to the receipt on labour charges, to some extent ; but such enhancement or reductions, as the case may be, have remained within reasonable limits. But for the year in dispute, i.e., 1987, the assessing officer made an assessment which is widely variant with figures admitted and furnished by the applicant. According to the returns furnished by the applicant, the gross receipt for the year was Rs. 92,854.84 inclusive of labour charges of Rs. 68,259.13 received from the local customers and Rs. 14,544.40 received from the customers outside the State. But according to the books of accounts gross receipt is Rs. 92,295.44 inclusive of labour charges of Rs. 70,339.93 received from the local customers and labour charges of Rs. 13,985 received from the customers outside the State (the remaining amount of Rs. 7,970.51 is on account of sales to the registered dealer). The applicant has admitted that there is a discrepancy of Rs. 559.40 (real discrepancy is Rs. 659.40) between the figures given in the returns and the figures available from the books of accounts. The applicant explains these discrepancies by saying that wrongly four per cent Central sales tax were charged on the labour charges of Rs. 13,985 which were received from the outside customers. But such meagre discrepancies cannot justify such an inconceivable assessment as done by the assessing officer. If we cast the figures as available from the books of accounts of the applicant as well as the assessed figures, in the table shown above the position will be as under :
1987 7,970.51 70,339.93 3,50,000 13,985.
Neither the assessing officer followed the tenor of the assessments of the previous years nor did he reveal in his assessment order the grounds for such big leap in the figure particularly the assessed gross turnover. It is nowhere evident in his order what prompted him to arrive at a figure as big as Rs. 3,50,000 as the gross turnover when according to the books of accounts the figure is Rs. 7,970.51. We have already seen that according to the guideline laid down by the Supreme Court in the case of Raghubar Mandal Harihar Mandal v. State of Bihar [1957] 8 STC 770, while making ex parte best judgment assessment the assessing officer must make a fair estimate of the proper figures of assessment and in doing so he should give due consideration to the previous years' returns as well as other materials which, in his opinion, might be of any help in making fair and proper estimate. The Calcutta High Court in the case of Bachharaj Baid v. Commercial Tax Officer [1975] 36 STC 101 held that "though there must be necessarily some guess-work in the matter, it must be honest guess-work". In the case before us, the assessing officer cannot be said to have done an honest guess-work. In our opinion, the assessment is absolutely arbitrary. The appellate authority who had opportunity to examine the books of accounts only reduced the assessed gross turnover to Rs. 3,00,000 and taxable' specified purchase price to Rs. 50,000 but has rejected other contentions of the appellant (the applicant before us) on the ground of discrepancy of Rs. 559.40 and the absence of full fledged account registers for the job-work and failure to maintain manufacturing accounts. But he has not adduced any reasoning as to why the assessment should be so shockingly high. The board has only echoed the reasonings of the appellate authority without making any probe as to why such arbitrary figure of gross-turnover was assessed. It is pertinent to mention that in the returns for the four quarters of 1988 (i.e., year next to the year in dispute) the applicant has claimed a receipt of labour charges to be Rs. 71,108.29 and the assessing officer in his assessment has kept it undisturbed and has enhanced the declared gross turnover of Rs. 11,047.28 only to Rs. 13,891.71. We have already pointed out that in the years preceding the disputed year (1987) there were only marginal enhancement though there was no ground to infer that there was altogether a different system of maintaining the books of accounts during the preceding years.
8. In the result, the application is allowed. The assessment order as well as the appellate and revisional order of the respondents Nos. 4 and 3 are set aside. The matter is being sent back on remand to assessing authority to make fresh assessment on the basis of the materials available, in the light of the aforesaid observation of the Supreme Court. The applicant is directed to make all the books of accounts and materials available to the assessing officer as and when called for for the purpose of reassessment. The reassessment should be completed within three months' from the date of this order. We make no order as to costs.
M.K. Kar gupta, Technical Member.
9. I agree.