Delhi High Court
Chowdhary Chemical Works vs Commissioner Of Sales Tax, New Delhi on 22 February, 1991
Author: B.N. Kirpal
Bench: B.N. Kirpal
JUDGMENT B.N. Kirpal, J.
1. The Sales Tax Appellate Tribunal has referred the following question to this Court for its decision :
"Whether, on the facts and in the circumstances of the case, this Tribunal was justified in holding that the Deputy Commissioner had correctly revised suo motu the appellate order dated October 30, 1973, in respect of the assessment year 1969-70 ?"
2. Briefly stated the facts are that the dealer is engaged in the business of manufacture and sale of Chemicals and acids. Assessments under the Bengal Finance (Sales Tax) Act, 1941, as then extended to the Union Territory of Delhi, hereinafter to be referred to as "the local Act" and under the Central Sales Tax Act, 1956, were framed for the year 1969-70 by Shri T. C. Rana, Sales Tax Officer, Ward No. 25, by two separate orders both dated August 31, 1973. During the course of assessment proceedings, it was revealed that the dealer did not maintain purchase vouchers, cash-book, ledger or any other books except sales vouchers and sales register. The dealer was a manufacturer and processor. The assessing authority held that in the absence of purchase vouchers, it was impossible to find out to what extent the dealer made purchases and whether he had utilised those purchases properly or not and that without purchases it was also difficult to know the expenditure of the dealer. The assessing authority failed to understand how the dealer could properly maintain his income and expenditure and he was of the opinion that without stock register it was very difficult to know how much raw material was in stock and how much he had purchased and how much he had manufactured and processed and what was the balance in the stock register. The assessing authority, therefore, rejected the sales version of the dealer and made an addition under the local Act by 100 per cent. The assessing authority was of the opinion that the dealer had made sales in the local market but had not shown them in his returns. A penalty of Rs. 5,000 was also imposed for filing incorrect returns. Thus a demand of Rs. 5,000 was created under the local Act in the year 1969-70.
3. Under the Central Sales Tax Act, the learned assessing authority accepted the turnover of the dealer, but as the "C" forms for Rs. 28,213.31 had not been produced, the dealer surrendered the claim for concession in tax in respect of that amount and the same was taxed at 10 per cent. Under that Act a demand of Rs. 2,592.96 including a penalty of Rs. 200 imposed for late filing of the return for the second quarter was created.
4. The dealer went up in appeal against the assessment order passed under the local Act and Shri H. L. Mittal, Assistant Commissioner, Sales Tax by his order dated October 30, 1973, set aside the enhancement.
5. The order of Shri Mittal was, however, revised suo motu by Shri K. B. Shukla, Deputy Commissioner, Sales Tax, by his order dated October 9, 1975, under section 20(3) of the local Act. The learned Deputy Commissioner was of the view that the true assessment could be maintained only if the purchases and sales of dealer were duly vouched, but as the dealer did not maintain purchase vouchers much less the other principal books namely cash-book, ledger and stock register, the sale vouchers could not reflect a true account of purchases and sales. He was firmly of the view that the account produced by the dealer before the assessing authority did not inspire confidence and they were rightly rejected by him.
6. As regards the enhancement the learned Deputy Commissioner felt that the assessing authority had not established any nexus for purposes of making enhancement and, therefore, the assessment order in that respect was arbitrary and could not be sustained. According to him there was a normal increase of about 15 per cent in a business in the absence of any adverse circumstances in a year. There was nothing on record to show that there were any adverse circumstances faced by the dealer during the year 1969-70. He, therefore, thought it fair and reasonable if the turnover as declared by the dealer for the year 1969-70 was enhanced to the extent of 15 per cent only over and above the gross turnover of the preceding year 1968-69. He accordingly set aside the order of Shri Mittal dated October 30, 1973 and enhanced the turnover returned for the year 1969-70 to the extent of 15 per cent.
7. In the year 1970-71, the assessment orders under both the Acts were passed by Shri T. C. Rana, Sales Tax Officer, by two separate orders both dated November 15, 1974. The dealer produced only two books namely party ledger and day book before the assessing authority on August 23, 1974, but the day book had been written only up to May 18, 1970. In the ledger the dealer had not maintained separate consolidated sales account and purchase account. The sales of the dealer had decreased considerably as compared to the preceding year. The dealer admitted that he had not maintained the regular account books due to the fact that he had not been able to do so in his life. He further stated that he was slave of his nature and in spite of his best efforts he had miserably failed in maintaining the proper books of account for which he also suffered in the matter of realisation of payment from his customers as well. The explanation offered by the dealer was not accepted by the learned assessing authority. In the absence of the trading account, purchase vouchers, cash-book and ledger having been produced by the dealer for examination of the returned version, reliance on the sales vouchers produced by the dealer was not placed at all by the learned assessing authority. He, therefore, proceeded to assess the dealer to the best of his judgment and made out addition under the local Act by 50 per cent. No enhancement was made under the Central Act.
8. Aggrieved against the assessment order under the two Acts, two appeals were preferred by the dealer and Smt. B. Jindger, Assistant Commissioner, Sales Tax, by her order dated November 20, 1975 reduced the enhancement. She held that 15 per cent increase in the turnover of the dealer as determined in the year 1969-70 should be made. She further held that proper and sufficient opportunity had been provided to the dealer to produce "C" forms under the Central Act. She, therefore, did not interfere with the assessment order passed under the Central Act. The result was that the appeal under the local Act was partly allowed and the appeal under the Central Act was dismissed.
9. The dealer filed two second appeals under the local Act one against the order of Shri K. B. Shukla, Deputy Commissioner, in respect of the assessment year 1969-70 and the other against the order of Smt. Jindger, Assistant Commissioner, in respect of the year 1970-71. The appeal against the order of Shri Shukla was dismissed by the Tribunal, but the appeal against the order of Smt. Jindger was partly allowed to the extent mentioned in the order dated August 27, 1976.
10. The dealer had also sought review of the order dated August 27, 1976, but the review petitions were dismissed by the Tribunal by its order dated August 3, 1977.
11. The Tribunal thereafter stated the case and referred the aforesaid question to this Court.
12. It is contended by the learned counsel for the dealer that the order of the Deputy Commissioner should not have been passed as the ingredients for exercising the revisional jurisdiction were not present. The submission of the learned counsel is that even though, for non-production of the books of accounts, the accounts could be rejected, but that did not mean that there would automatically be enhancement to the gross turnover. There was no warrant for the Deputy Commissioner or the Sales Tax Officer to assume that there must have been increase in the gross turnover.
13. From the facts stated hereinabove it is quite clear that the dealer was either not maintaining proper books of accounts or did not choose to produce the same before the sales tax authorities. It is pertinent to note that even the cash-book was not produced. The contention of the dealer was that he did not maintain purchase vouchers, cash-book, ledger or other books, including the stock register and the only documents which were produced were the sales vouchers and the sales register. This is what was contended before the Sales Tax Officer, who rightly, rejected the books of accounts. Thereafter he made an estimate of the gross turnover and he enhanced the same by a sum equal to the turnover declared by the dealer.
14. The Assistant Commissioner, in appeal, did not disturb the finding of the Sales Tax Officer to the effect that the books of account had to be rejected but merely said that no enquiries had been made by the assessing authority to establish that the dealer had suppressed any transaction of sales and, therefore, the gross turnover disclosed should have been accepted.
15. In our opinion, the Deputy Commissioner was right, under these circumstances, to exercise the jurisdiction of revision. The Assistant Commissioner overlooked the fact that whereas before the Sales Tax Officer it has been represented by the dealer that he did not maintain purchase vouchers but before the Assistant Commissioner it was stated that the dealer had produced "at times the purchase vouchers also". This clearly shows the contradictory stand of the dealer and also proves that whenever the dealer wanted he produced before the sales tax authorities the purchase vouchers as well. It is impossible to judge the gross turnover merely on the basis of the sales vouchers or sales register. The Deputy Commissioner was fully justified in coming to the conclusion that the order of the Assistant Commissioner had to be revised. This is more so because even if no other evidence was available the Deputy Commissioner referred to and relied upon two decisions of the Financial Commissioner in which it had been observed that there is a normal increase of about 15 per cent in business in the absence of any adverse circumstance in a year. Therefore, even if the Assistant Commissioner was not satisfied with the quantum of enhancement then he ought to have followed the decisions of the Financial Commissioner and taken into consideration the fact that there is a normal increase in the business to the extent of 15 per cent. It cannot be denied that in the absence of books of accounts being produced the gross turnover had to be estimated by the Sales Tax Officer. The question is what could be this estimate. Where no other material was available on the record then, as held by the Financial Commissioner in two of the revisions decided by him, namely, Revision Nos. 558 and 559 of 1972 dated December 21, 1972 and Revision No. 594 of 1972 dated January 11, 1973, one should regard that there was a normal increase of 15 per cent in the business. The question as to how much should be the increase of the business is a question of fact and this 15 per cent increase has been upheld by the Tribunal. The fact that the revision of the order of the Assistant Commissioner was called for cannot, in our opinion, be disputed on the facts of the present case. We have no doubt in coming to the conclusion that the action of the Deputy Commissioner was fully justified and, in fact, he may have only erred towards leniency.
16. For the above reasons the aforesaid question is answered in the affirmative and against the dealer. The respondents will be entitled to costs.
17. Reference answered in the affirmative.