N. Raja Pullaiah vs Deputy Commercial Tax Officer And Anr. on 4 February, 1969
brought to our notice the decision of the
Ahdhra Pradesh High Court in N. Raja Pullaiah
v. Deputy Commercial Tax Officer,
[1969] MANU/AP/0166/1969 : 73 I.T.R. 224
and contended that the consumption of
electricity by itself cannot form a reliable test
for determining the yield of oil, that the yield
depends upon various factors like the
condition of the machine, the quality of
copra--whether it was dried or moist--the
nature of the electric supply and other similar
factors and that the consumption of electricity
is affected by these and various other factors.
It was also contended that no test-crushing
had been done in this case and the
department itself had accepted in other cases
figures varying from 10 to 12 units per quintal
of copra. In the petitioner's case, the average
works out to 12 units per quintal. On behalf
ofthe revenue it was urged that the rejection
of the accounts was justified since there was
very wide divergence in the consumption of
electricity and that it was indicative of the
unreliability of the petitioner's accounts. The
proposition is well-settled that accounts
regularly maintained in the course of business
have to be taken as correct unless there are
strong and sufficient reasons to indicate that
they are unreliable. The department has to
prove satisfactorily that the account books
are unreliable, incorrect or incomplete before
it can reject the accounts. The rejection of
accounts is not a matter to be done light-
heartedly, though it may not be possible to
lay down in general terms the exact
circumstances in which the accounts should
be considered as unreliable or incorrect. The
accounts could be rejected as unreliable if
important transactions are omitted therefrom
or if proper particulars and vouchers are not
forthcoming or if they do not include entries
relating to one particular class of business. In
this connection, it has to be pointed out that
the rejection of accounts and assessment to
the best of judgment are two distinct and
separate processes and should not be
confused as one, although there will be no
overlapping in the materials used for applying
(35 of 44) [ITA-2/2018]
both processes. The initial step of rejecting
the accounts will be justified when the
account books are found for valid reasons
unreliable, incorrect or incomplete. The
assessee at this stage has to be given
reasonable opportunity for offering
explanations regarding the defects in the
accounts and on his failure to satisfactorily
explain the defects, the department will be
justified in rejecting the accounts. The
subsequent step of assessment to the best of
judgment, as has been uniformly recognised
by the courts, involves some guess-work and
necessarily has to be done on the materials
available in each case. The Privy Council had
occasion to consider the exact import of the
expression "to the best of his judgment"