Best judgment assessment permits treating unexplained despatches as sales when the assessee cannot disprove taxable ownership or exemption.
In a best judgment assessment, unexplained despatches supported by forwarding notes, despatch registers and employee signatures may be treated as sales where the assessee produces no genuine accounts or material to show that the consignments were made for others or were exempt. On that basis, the jute despatches were correctly brought to sales tax, and the gunny bag despatches were also rightly treated as business sales because no accounts distinguished them from Government supplies. The penalty for failure to apply for registration under section 13(5) was upheld, as no prior penalty was proved and the objection was not raised before the taxing authorities.
Issues: (i) Whether the despatch of 31,500 maunds of jute constituted a sale by the assessee liable to sales tax; (ii) whether the despatch of gunny bags to the value of Rs. 15,000 constituted a sale by the assessee liable to sales tax; (iii) whether the penalty imposed for failure to apply for registration under section 13(5) was legally valid.
Issue (i): Whether the despatch of 31,500 maunds of jute constituted a sale by the assessee liable to sales tax.
Analysis: The assessment was made to the best of judgment because no return was filed and the accounts produced were found not genuine. The forwarding notes and despatch registers, many of which bore signatures of the assessee's employees, supported the conclusion that the jute was despatched by the assessee. The assessee failed to produce the books of the alleged separate firms or any material showing that the despatches were made on behalf of others. The principle that property in goods may pass under a contract of sale even when despatched to the consignor's own address supported the inference that the consignments were sales. No material established any exemption.
Conclusion: The despatches of jute were rightly treated as sales, and the assessee was liable to sales tax on the estimated sale value.
Issue (ii): Whether the despatch of gunny bags to the value of Rs. 15,000 constituted a sale by the assessee liable to sales tax.
Analysis: The gunny bag despatches were admittedly made by the assessee. Although letters had been issued for supply of gunny bags on Government account, there was no proof that the assessee actually received them on such account or that the bags despatched were excluded from its trading stock. No accounts were produced to distinguish Government supplies from business sales. In a best judgment assessment, the taxing authorities were justified in treating the despatches as sales.
Conclusion: The gunny bag despatches were rightly held to be sales, and the assessee was liable to tax on Rs. 15,000.
Issue (iii): Whether the penalty imposed for failure to apply for registration under section 13(5) was legally valid.
Analysis: The challenge to the penalty rested only on an alleged earlier penalty for non-registration, but no material showed that any previous penalty had in fact been imposed. The objection was not taken before the taxing authorities and could not be raised for the first time in the reference.
Conclusion: The penalty imposed under section 13(5) was legally valid.
Final Conclusion: All the referred questions were answered against the assessee and the assessment, tax liability, and penalty were sustained.
Ratio Decidendi: In a best judgment assessment, the taxing authority may rely on surrounding documentary circumstances and draw reasonable inferences from unexplained despatches, and the burden lies on the assessee to prove that the consignments were not sales or were exempt.
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TaxTMI 
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