Burden of proving tax exemption and best judgment assessment control treatment of oil turnover as taxable sales.

Burden of proving tax exemption under the Madras Act lay on the assessee, and the assessing authority could require proof that claimed second sales fell outside the taxing provisions. Where separate stock accounts for locally purchased oil and manufactured oil were not maintained, best judgment estimation of taxable turnover was permissible. The Tribunal was criticised for accepting a bare claim that separate accounts were impracticable and for presuming the assessee would choose the non-taxable category. The lower authorities' assessment was restored, and the turnover was not treated as exempt second sales.

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Issues: Whether the Tribunal was justified in treating the turnover of Rs. 23,557.47 as second sales of oil and in reversing the assessment based on the assessee's claim that separate stock accounts were impracticable.

Analysis: Under Madras Act 1 of 1959, the burden lay on the assessee to establish that a transaction was not taxable. Sections 10 and 40, together with rule 26, required the assessee to satisfy the assessing authority that the turnover claimed as exempt did not fall within the taxing provisions. Where separate accounts for locally purchased oil and manufactured oil were not maintained, the assessing authority was entitled to adopt a best judgment method to estimate the taxable turnover. The Tribunal erred in accepting the assessee's bare assertion that separate stock accounts were impracticable and in applying a presumption that the assessee would choose the non-taxable category, especially in view of the later Supreme Court guidance questioning that approach.

Conclusion: The Tribunal was not justified in allowing the turnover as second sales of oil; the order of the lower authorities was restored.

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