TaxTMI 
TaxTMI 
1977 (5) TMI 28
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.... 694 Kgs 581 Kgs - Maize 4 bags 421 Kgs 21 Kgs - Turmeric 150 Kgs 32 Kgs - 118 Kgs Horsegram 2300 Kgs 1980 Kgs - 320 Kgs Rice 5 bags 12 bags 7 bags - Paddy 25 bags Nil - 25 bags Mohua flower 29 bags 29 bags - - Nigher seeds 3 bags 420 Kgs 195 Kgs - These discrepancies were confronted and as the appellant's explanation was not acceptable, the learned AO estimated the escaped turnover at Rs. 50,000. But as Rs. 5,000 was already enhanced during the original assessment the net estimation of escaped turnover is confined to s. 45,000. On such estimate, he issued additional demand note for Rs. 2204.16 which includes a penalty of Rs. 750. 2. Being aggrieved by this order of assessment, the appellant filed an appeal before the first appellate Court. The learned appellate Court after hearing the appellant was of opinion that the estimate of the ecaped turnover is not correct. He therefore issued a notice of enhancement. After discussion of the discrepancies found at the time of inspection, he thought to apply the principles of the case reported in CST, Madhya Pradesh vs. H.....
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....s and need be set aside. Relying on the above he urged that the proceedings under s. 12(8) be dropped and the extra demand made be annulled. 4. The learned Addl. State Representative on the other hand contended that there was an inspection when the Inspector verified the physical stock with reference to the stock register available than in the business premises. The appellant did not produce that stock register which was found by the Inspector. At the time of inspection he produced a make believe stock register which has been rejected. The excess stocks were found which will go to show that the appellant was carrying on business out of accounts. Further more it has been found that he has suppressed sales and also despatching articles in the name of other persons. In view of that of that the estimate made by the first appellate Court is correct and it should be upheld. 5. In view of the argument the first point for determination is whether there is escapement of the turnover so that the assessment completed under s. 12(4) will be reopened. It is an admitted fact that the assessment under s. 12(4) was completed on 21st Oct., 1970, when the returned GTO was raised from Rs. 79,33....
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.... 21.17 acres of dry land. He has been assessed both in 1969-70 and 1970-71 to agricultural income tax. Further he has been only assessed to 2 per cent, 3 per cent and 5 per cent tax both by the AO and appellate officer. At the relevant year purchase tax on paddy was 7 per cent. In view of all these, while estimating the excess stock found on 17th Feb., 1970, the stock of paddy found which has been valued at Rs. 1,500 must be deleted from consideration. Therefore, the stock found excess will be valued at Rs. 6,175.40 and not Rs. 8,253.00 as estimated by the appellate Court. 7. The other materials discovered are 2 chits. The first chit is written by one P. Purusottam Rao on 17th Jan., 1970 wherein he was mentioned that he is sending 5 bags of till seeds and one bag of mustard an further request that the assessee should send him 3 bags of rice in exchange. It is the explanation of the assessee that as he had no rice than he did not retain the til and mustard. But this explanation has been rejected by the Appellate Officer with the following remark: "Had the transaction not been effected, the chit would not have been in the possession of the appellant, the cart man must have take....
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....rence to the case law so far reported. According to the first appellate Court in Esuff Ali's case it has been decided that once some excess is found out in a particular day it will have to be multiplied by 365 taking all the days of the year to be working days. I am afraid that the principle of the said case has not been properly appreciated by the forums below. In view of that I will refer to some other case law where the principle of best judgment assessment has been indicated. In the case of P. Verghese vs. State of Kerala (1971) 27 STC 459 the question arose as to what will be the principle in estimating the suppressed turnover after certain excess were found out after surprise visit. The Full Bench formulated the following formula for making the estimate and they are as follows: "An inference that there has been a pattern of continuos suppression for any period depend on existence of material or circumstance which offers a reasonable nexus to the inference. This means that there must be material to indicate suppression and material to indicate that there was the pattern of suppression". In that particular case it has been found out that for five continuous days there was....
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.... judgment assessment." Hence the principle of estimate has become clear with reference to these judgments. It shall also refer to the case CST, Madhya Pradesh vs. H.M. Esuf Ali. At page 82 of the report, the Supreme Court indicated the law as follows: "In case of best judgmnte assessment the Courts will have to first see whether the accounts maintained by the assessee are rightly rejected as unreliable. if they come to the conclusion that they were rightly rejected, the next question that arises for consideration is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be a relevant basis even though the Courts may think that it is not the most appropriate basis, the estimate made by the assessing authority cannot be disturbed." From the above observation, it becomes clear that so long as the estimate was not arbitrary and had reasonable nexus with the facts discovered, it could not be questioned by the Court. But in Esuf Ali's case it has been found as a fact that there has been a continuous suppression of sales in a methodical manner for 19 continous days. In view of that findings, the AO estim....