Compounding estimates do not bind regular sales tax assessment; seized records and billing details must be verified before further tax is added.

Compounding estimates made for fee purposes do not bind regular sales tax assessment, because the assessing officer retains the duty to determine taxable turnover and may reject incomplete or unreliable books; however, if seized records fully cover clandestine transactions and correlate with the returns and books, further addition may be unwarranted. The burden is on the assessee to establish that correlation. On purchase tax, diamonds and precious stones used in studded ornaments may not attract levy under section 5A if they were separately billed and already taxed at the sale point, but that factual position required verification. The Tribunal and first appellate order were set aside and the matter remanded for fresh assessment.

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Issues: (i) Whether findings recorded in compounding proceedings under section 47 bind the assessing officer in regular sales tax assessment and whether the books of account could be accepted without further estimation; (ii) Whether purchase tax under section 5A is leviable on diamonds and precious stones used in studded ornaments.

Issue (i): Whether findings recorded in compounding proceedings under section 47 bind the assessing officer in regular sales tax assessment and whether the books of account could be accepted without further estimation.

Analysis: Compounding proceedings are distinct from regular assessment. The estimate made by the intelligence officer for the purpose of compounding fee does not conclude the actual tax liability. The assessing officer has the exclusive duty to determine taxable turnover and may reject incomplete or unreliable accounts and make a proper estimate on the basis of available materials. At the same time, if the seized records cover the entire clandestine transactions and can be correlated with the returns and books produced, there may be no scope for further addition. The burden lies on the assessee to establish such correlation.

Conclusion: The compounding proceedings do not bind the assessing officer. The Tribunal was not justified in directing unconditional acceptance of the books of account, and the matter was rightly required to be re-examined by the assessing authority.

Issue (ii): Whether purchase tax under section 5A is leviable on diamonds and precious stones used in studded ornaments.

Analysis: Diamonds and precious stones in studded jewellery may already suffer tax at the sale point under section 5(1). If the assessee has separately billed those components in the ornaments sold, there may be no basis for levy under section 5A on the purchased stones. The factual position as to separate billing and the nature of the transactions requires verification in reassessment.

Conclusion: The question of liability under section 5A was left for verification and decision by the assessing authority in reassessment.

Final Conclusion: The orders of the Tribunal and the first appellate authority were set aside, the matter was remanded for fresh assessment, and the assessee was given an option to accept the first appellate authority's order.

Ratio Decidendi: Compounding estimates are confined to the compounding context and do not determine regular assessment; the assessing officer may reject incomplete accounts and estimate turnover, but only after verifying whether the seized records truly cover the whole business activity.

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