Court Quashes Assessment Order, Directs Recomputation

The court quashed the assessment order in part, directing the respondent to re-compute the turnover and tax after excluding the disputed amount. The writ application was allowed, with costs awarded to the petitioner. The court highlighted that arbitrary assessments infringe on the right to conduct business and violate constitutional provisions on tax collection.

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Issues Involved:
1. Adequacy of alternative remedy.
2. Rejection of accounts and best judgment assessment.
3. Addition of 10% to net taxable turnover.
4. Principles of natural justice.

Detailed Analysis:

1. Adequacy of Alternative Remedy:
The preliminary objection raised was that the petitioner had an adequate alternative remedy under the statute, and therefore, the writ application should not be entertained. The court examined this issue and concluded that the existence of an alternative remedy is not an absolute bar to the issuance of a writ of certiorari, especially when there has been a violation of the principles of natural justice or an infringement of a fundamental right. The court cited several Supreme Court decisions to support this proposition, including *State of U.P. v. Mohammad Nooh* and *State of Bombay v. United Motors (India) Ltd.*

2. Rejection of Accounts and Best Judgment Assessment:
The Sales Tax Officer rejected the accounts and proposed to complete the assessment to the best of his judgment by adding 10% to the net taxable turnover. The court assumed for the purpose of the proceeding that the accounts were rightly rejected. However, the court scrutinized whether the addition of 10% was arbitrary and capricious. The defects cited for rejecting the accounts included discrepancies between the turnover as per returns and accounts, unjustified cash balances for loans, and unrecorded transactions found in the secret accounts of third parties (Messrs. Vasu and Janardhanan).

3. Addition of 10% to Net Taxable Turnover:
The petitioner contended that there was no discrepancy between the turnover as returned and as seen from his books of account. He provided explanations for the loans and asserted that the transactions were entered in his account books. The court found that the addition of Rs. 27,60,883.60 was based on entries in the secret books of Messrs. Vasu and Janardhanan, which indicated transactions amounting to Rs. 3,531.21. The court deemed this addition arbitrary and capricious, noting that the Sales Tax Officer's reasons, such as the improbability of borrowing unless hard-pressed, were not substantiated by any factual findings.

4. Principles of Natural Justice:
The court emphasized that principles of natural justice require a fair determination by quasi-judicial authorities. The court noted that merely providing an opportunity to explain does not satisfy these principles; there must be a judicial consideration of the representations and materials. The court found that the assessment order lacked a judicial approach and was guided by the whim and fancy of the assessing authority. The court cited decisions from the House of Lords to underline the necessity of acting in good faith and fairly listening to both sides.

Conclusion:
The court quashed the assessment order (exhibit P6) insofar as it related to the addition of Rs. 27,60,883.60, directing the respondent to re-compute the turnover and tax after deleting this amount. The writ application was allowed, and the respondent was ordered to pay the costs of the petitioner, including an Advocate's fee of Rs. 300. The court underscored that arbitrary assessments infringe on the fundamental right to carry on trade or business and violate Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law.

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