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Issues: (i) Whether, in reassessment under section 12(8) of the Orissa Sales Tax Act, the department must fix the actual amount of escapement; (ii) whether the reassessment under section 12(8) must be confined to the escaped turnover.
Issue (i): Whether, in reassessment under section 12(8) of the Orissa Sales Tax Act, the department must fix the actual amount of escapement.
Analysis: Section 12(8) authorises the assessing authority, upon finding escapement or under-assessment, to call for a return and proceed to assess the tax due in the manner laid down in section 12(5), which permits assessment to the best of judgment. In a case of escapement, the officer is not restricted to the exact figures proved from third-party entries if the original accounts are discarded and the turnover must be re-estimated on rational materials. The requirement is that the estimate be founded on relevant considerations and not on arbitrariness.
Conclusion: The department was not bound to confine itself to the exact amount of escapement; best judgment reassessment was permissible.
Issue (ii): Whether the reassessment under section 12(8) must be confined to the escaped turnover.
Analysis: Although reassessment for escapement may proceed by estimate, the estimate must rest on an acceptable factual foundation. A bare assertion that the amount is honest, without material showing how the figure was reached, is insufficient. Reassessment is not meant to be penal, and the extent of escapement must be indicated by relevant materials before an enhancement beyond the proved suppression can be sustained.
Conclusion: The Tribunal was justified in holding that the assessment could not, on the facts of the case, go beyond the escaped turnover shown by the materials.
Final Conclusion: Reassessment under section 12(8) may be made on best judgment principles, but any estimate must be supported by relevant material and cannot be arbitrary; the reference was answered partly for the revenue and partly for the assessee.
Ratio Decidendi: In a reassessment for escaped turnover, the assessing authority may adopt best judgment, but the estimate must be based on relevant materials and a rational foundation, not on arbitrariness or bare assertion.
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