Jain Trading Co. Durg v. State of M. P. — 1983 DIGILAW 27 (MP)

ORDER G.P. Singh, C.J. The petitioner M/S Jain Trading Co., a dealer registered under the Madhya Pradesh General Sales Tax Act, 1958, carries on business of buying and selling paddy, rice, kanki, bran and oilseeds. For the Diwali year 1967-68 the petitioner filed only two quarterly returns and the returns for the last two quarters were not filed. For the Diwali year 1968-69 the petitioner submitted all the returns. There was a raid of the petitioner's premises in which some account-books and loose papers were seized. The Regional Assistant Commissioner of Sales Tax assessed the petitioner to the best of his judgment for these two years by orders passed on 26th April 1972 and 28th April 1972. The gross turnover for the year 1967-68 was assessed at Rs. 56,84,152.32 and the tax at Rs. 1,57,200.47. For the year 1968-69 the gross turnover was assessed at Rs. 1,00,00,000.00 and the tax at Rs. 2,22,471.00. The petitioner filed two revisions to the Commissioner of Sales Tax. By order passed on 11th October 1973, the Commissioner decided to hold further enquiry and remitted the cases to the Regional Assistant Commissioner for making a report after holding further enquiry into the matter. After receipt of the report of the Regional Assistant Commissioner and after further hearing the petitioner the Commissioner decided the two revisions by his order passed on 3rd February 1976. The gross turnover for the year 1967-63 was assessed by the Commissioner at Rs. 32,00,214.00 and the tax at Rs. 94,646.8. For the year 1968-69 the Commissioner assessed the gross turnover at Rs. 71,80,152.00 and the tax at Rs.1,86,589.00. The petitioner then filed this petition for challenging the orders of assessment passed by the Regional Assistant Commissioner and the order in revisions passed by the Commissioner. In assessing the gross turnover for the year 1967-68, the Commissioner took into account cash credit entries amounting to Rs. 3,55,735.00. Similarly, in assessing the gross turnover for the year 1968-69, the Commissioner took into account cash credit entries amounting to Rs. 30,06,475.00. The learned counsel for the petitioner submitted before us that these cash credit entries were not taken into account in estimating the gross turnover in the orders of assessment passed by the Regional Assistant Commissioner and that in revisions filed by the petitioner it was not open to the Commissioner to take into account these entries. 30,06,475.00. The learned counsel for the petitioner submitted before us that these cash credit entries were not taken into account in estimating the gross turnover in the orders of assessment passed by the Regional Assistant Commissioner and that in revisions filed by the petitioner it was not open to the Commissioner to take into account these entries. The learned counsel in this connection draws our attention to section 39 (1) and submits that in a revision filed by the petitioner under that section the Commissioner could not make an order prejudicial to the petitioner and that by taking into account the cash credit entries in estimating the gross turnover the Commissioner passed an order prejudicial to the petitioner which is forbidden under that section. The argument of the learned Deputy Advocate General is that it is wrong to say that the cash credit entries taken into account by the Commissioner were not taken into account by the Regional Assistant Commissioner in passing the orders of assessments. It is further submitted that the order of the Commissioner in disposing of the revisions is not prejudicial to the petitioner because the revisions were partly allowed and the tax assessed for both the years was reduced in revision. It is also submitted that in any case the Commissioner under section 39 (2) could have passed orders prejudicial to the petitioner. We do not think it necessary to go into the details, for, in our opinion, the learned Deputy Advocate General is right in contending that even if the Regional Assistant Commissioner did not take into account the cash credit entries in estimating the gross turnover for the two years, it cannot be said that the order passed by the Commissioner in revision was prejudicial to the petitioner because the tax liability assessed by the Regional Assistant Commissioner was reduced for each year by that order. Section 39 (1) reads as follows: 39. Section 39 (1) reads as follows: 39. Power of revision by Commissioner-(1) The Commissioner may, either of his own motion or on application by a dealer or person made within the prescribed period from the date of the order, call for the record of the proceeding in which any order was passed, and on receipt of the record may make such inquiry to be made, as he considers necessary and subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the dealer or person as he thinks fit. We have already mentioned that the gross turnover assessed by the Regional Assistant Commissioner for the year 1967-68 was Rs. 56,84,152.00 and the tax assessed was Rs. 1,57,200.00. In revision the Commissioner reduced the gross turnover to Rs. 32,00,214.00 and the tax to Rs. 94,646.89. Similarly, for the year 1968-69 the gross turnover assessed by the Regional Assistant Commissioner was Rs. 1,00,00,000.00 and the tax assessed was Rs. 2,22,471.00 but the Commissioner in revision reduced the gross turnover to Rs. 71,80,152.00 and the tax to Rs. 1,86,589.00. It will thus be seen that in both the years the final order passed in revision was not in any manner prejudicial to the dealer. The order of the Commissioner in respect of both the years was beneficial to the dealer for the reason that the tax liability for both the years was reduced by the Commissioner. The words "may pass such order thereon, not being an order prejudicial to the dealer" as they occur in section 39 (1) refer to the final order passed by the Commissioner in revision. They do not refer to the steps leading to the final order but to the final order itself. If the final order in revision reduces the tax liability of the dealer by modifying the order of assessment, it cannot be said that the Commissioner has passed an order prejudicial to the dealer even though certain items which may not have been taken into account in assessing the gross turnover by the assessing authority are taken into account by the Commissioner in revision. So long as the final order of the Commissioner does not enhance the tax assessed by the assessing authority, it cannot be said to be prejudicial to the dealer. So long as the final order of the Commissioner does not enhance the tax assessed by the assessing authority, it cannot be said to be prejudicial to the dealer. The second contention raised by the learned counsel for the petitioner is that the Commissioner committed an apparent error of law in holding that the cash credit entries represented undisclosed turnover because there was nothing to show that these entries were related to sales made by the petitioner. The learned counsel in support of this contention has referred to the decision of the Supreme Court in Girdharilal Nannelal v. Sales Tax Commr 1977 (39) STC 30. In Girdharilal's case there was a cash credit entry of Rs. 10,000.00 in the account-books of the dealer-firm in the name of the wife of one of its partners. The assessing authority treated this entry as income of the dealer out of concealed sales and added Rs. 1,03,003.00 to the turnover on the basis that the sum of Rs. 10,000.00 represented 10 per cent of the profit out of concealed sales. The Supreme Court held that in order to impose a liability on the dealer for payment of sales tax, two things had to be established: (1) that the amount of Rs. 10,000.00 was the income of the dealer and not of one of its partners or his wife, and (2) that the said amount represented profits from income realised as a result of transactions liable to sales tax and not from other sources. It was also held that the onus to prove these ingredients was upon the department and the mere fact that the dealer or the partner or his wife failed to adduce satisfactory evidence or reasonable explanation with regard to the source of Rs. 10,000.00 could not in the absence of some further material have the effect of discharging that burden. The facts in the instant case are, however, entirely different. The cash credit entries totalling Rs. 3,55,735.00 in the year 196 7-68 and Rs. 3,06,475.00 for the year 1968-69 are not in the name of any person. The counsel appearing for the petitioner before the Commissioner when asked about these entries stated that they were really deposits which the petitioner had obtained from others as seed capital and the sales and purchases effected were made out of this capital. 3,06,475.00 for the year 1968-69 are not in the name of any person. The counsel appearing for the petitioner before the Commissioner when asked about these entries stated that they were really deposits which the petitioner had obtained from others as seed capital and the sales and purchases effected were made out of this capital. The counsel was asked to give the names of persons from whom the deposits were obtained and the proof thereof. The counsel, however, did not even disclose the names and submitted that the "petitioner was not able to give any evidence in respect of the deposits because they were out of account transactions (described in common parlance as No.2 account)". There was, thus, absolutely no explanation given by the petitioner in respect of these cash credits before the Commissioner. As the amounts of cash credits did not disclose that they were received from any third person, it was proper to infer that the source of these deposits was the petitioner itself. Further, as the main business of the petitioner was of purchase and sale of goods it was also reasonable to infer that these cash credits represented, the sale proceeds of undisclosed sales. In Girdharilal's case (supra) the cash credit was in the name of the wife of one of the partners and prima facie the source of the amount was the partner or his wife and there was no material to show that the amount was the income of the dealer. Further, in that case, the turnover was increased by treating the cash credit as the entry of profit. In the instant case, as pointed out by us, the cash credit entries are not in the name of any person. The presumption, therefore, is that the source of these amounts is the petitioner itself in whose account books they are found and this presumption is considerably strengthened because of the failure on the part of the petitioner to disclose the names of the persons from whom deposits were obtained. Moreover, the Commissioner has not drawn the inference that the entries represent profits from sales. The inference drawn is that the entries represent the sale proceeds of undis closed sales because the principal business of the petitioner is purchase and sale of commodities from which alone such huge amounts could have been obtained. Girdharilal's case is, thus distinguishable on facts. Moreover, the Commissioner has not drawn the inference that the entries represent profits from sales. The inference drawn is that the entries represent the sale proceeds of undis closed sales because the principal business of the petitioner is purchase and sale of commodities from which alone such huge amounts could have been obtained. Girdharilal's case is, thus distinguishable on facts. In this connection we have also to keep in mind the principles relating to best judgment assessment which have been settled by the Supreme Court in number of cases. We may here only refer to the case of the Commissioner of Sates Tax, Madhyu Pradesh v. M/S. H.M. Esufali AIR 1973 SC 2266 which dealt with a best judgment assessment made under section 18 (4) of the Madhya Pradesh General Sales Tax Act. It was laid down in this case that the assessing authority while making the best judgment assessment should arrive at its conclusion without any bias and on rational basis, and 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. It was also observed that prima facie the assessing authority is the best judge of the situation, and it is his best judgment and not of any one else and that the High Court cannot substitute its best judgment for that of the assessing authority. It was further observed that if the basis adopted by the assessing authority is held to be a relevant basis even though the Courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed. Having regard to all these principles and the facts and circumstances of the case, we are unable to hold that the order of the Commissioner impugned in this petition proceeds on wrong principles and is not supported by any rational basis or that it suffers from any error of jurisdiction or apparent error of law. The petition fails and is dismissed. There shall be no order as to costs. Security amount be refunded to the petitioner. Petition dismissed.