Best judgment assessment requires proper inquiry; unverified entries and unexplained appellate reasoning could not sustain tax consequences.
Assessment and appellate interference cannot rest on suspicion or unverified inference. Under Section 29(7) of the Rajasthan Sales Tax Act, a best judgment assessment required notice, hearing and proper inquiry; the assessee's explanation about the sauda register was not independently tested, no verification was made from the named dealers, and the alleged concealment was not established, so the tax, interest and penalty could not be sustained. The Tax Board also failed to deal with the Appellate Authority's reasons and relied on a new reading of "WB" as "without bills" without supporting material, so its order was unsustainable and was set aside, with the Appellate Authority's order restored.
Issues: (i) Whether the assessment and consequential tax, interest and penalty could be sustained when the assessee's reply and defence were not properly verified and the alleged entries in the sauda register were not independently examined. (ii) Whether the Tax Board's order was sustainable when it did not deal with the reasons recorded by the Appellate Authority and proceeded on a new interpretation of the abbreviation "WB".
Issue (i): Whether the assessment and consequential tax, interest and penalty could be sustained when the assessee's reply and defence were not properly verified and the alleged entries in the sauda register were not independently examined.
Analysis: The assessment power under Section 29(7) of the Rajasthan Sales Tax Act, 1994 required notice and hearing before best judgment assessment. The assessee's explanation that the register reflected mere dealings and not completed sales was not effectively tested by inquiry. No verification was made from the named dealers to establish actual transactions, nor was there satisfactory evidence showing concealment or evasion. In such circumstances, the finding founded on suspicion without proper inquiry could not be sustained.
Conclusion: The assessment and the consequential levy could not be upheld on this ground and the finding went in favour of the assessee.
Issue (ii): Whether the Tax Board's order was sustainable when it did not deal with the reasons recorded by the Appellate Authority and proceeded on a new interpretation of the abbreviation "WB".
Analysis: A revisional or appellate authority interfering with a reasoned order is required to meet the reasoning of the lower authority. The Tax Board did not answer the basis of the Appellate Authority's decision and introduced an interpretation of "WB" as meaning "without bills" without supporting material or prior findings by the authorities below. The assumption drawn from the deposit made by the assessee for compounding also could not, by itself, amount to an admission of tax evasion.
Conclusion: The Tax Board's order was unsustainable and liable to be set aside, in favour of the assessee.
Final Conclusion: The revision succeeded, the Tax Board's order was quashed, the Appellate Authority's order was restored, and the limited liability relating to loose paper instead of a bound register remained payable.
Ratio Decidendi: An assessment or appellate order imposing tax consequence cannot rest on suspicion or unverified inference; when a reasoned lower-order is interfered with, the higher authority must deal with the material reasons recorded below.
TaxTMI 
AI Drafter ✕
TaxTMI 
