Legal evidence on C forms and inter-State sales sustained where official material showed non-genuine transactions and accommodation bills.

Material obtained from sales tax authorities and other official sources concerning cancellation of registrations, non-existent firms, accommodation bills and absence of actual purchases was treated as legal evidence relevant to the genuineness of C forms and the underlying inter-State transactions. The court noted that external enquiry material was not inadmissible merely because it was gathered outside the assessment record. A separate complaint of denial of opportunity and breach of natural justice was outside the scope of the referred question and did not affect the answer. The finding that the C forms and supporting transactions were not genuine was sustained against the assessee.

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Issues: Whether there was legal evidence to hold that the C forms and the transactions supported by them were not genuine.

Analysis: The reference was confined to the existence of legal evidence regarding the genuineness of the C forms and the underlying transactions. The Assessing Authority had obtained material from the sales tax authorities and other official sources at Bombay concerning cancellation of registrations, non-existence of firms, accommodation bills, and absence of actual purchases. That material was relevant to the disputed inter-State sales and was not incapable of being treated as evidence merely because it had been gathered from external enquiries. The separate complaint regarding denial of opportunity and breach of natural justice was not within the scope of the referred question and could not control the answer to the question actually referred.

Conclusion: There was legal evidence on record to support the finding that the C forms and the transactions vouched by them were not genuine, and the answer is against the assessee.

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