TaxTMI 
TaxTMI 
1980 (4) TMI 286
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.... Act and adopts mercantile method of accounting commencing from 1st April and ending on 31st March, as its accounting year. The returns filed by the petitioner for the above periods were not accepted by the department. The assessee was asked to furnish evidence in support of the returns and the petitioner's officers failing to satisfy the assessing officer, he resorted to best judgment assessment in which the taxable turnover was enhanced and hence the petitions for quashing them. Hereinbelow are given the figures of the respective years: 1973-74 Disclosed turnover Rs. 41,40,298.24 Assessed gross turnover Rs. 81,91,698.24 The taxable turnover Rs. 48,64,920.85 Additional tax demand Rs. 3,10,400.54 1974-75 Disclosed turnover Rs. 54,18,344.31 Assessed gross turnover Rs. 1,05,39,344.31 Assessed taxable turnover Rs. 63,75,365.46 Additional tax demand Rs. 3,98,428.89 1975-76 Disclosed turnover Rs. 51,36,120.49 Assessed gross turnover Rs. 1,04,47,780.69 Assessed taxable turnover Rs. 58,17,149.79 Additional tax demand Rs. 3,87,589.85 The grounds for rejecting the returns are virtually the same and so too the grounds of attack. The figures ....
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....Choudwar, Cuttack, and other banks, with whom the petitioner has accounts, seeking to freeze the balance as may be due and payable by such banks to the petitioner and to pay over such balance to the Government treasury, these O.J.Cs. were filed to quash the assessments and the tax demands. Though the assessments and the tax demands have been challenged on various grounds, as mentioned in the petition, they need not be referred to, by and large repetitions as they are. Substantially they are to the effect that: (i) the proceedings before the assessing authority being a quasi-judicial proceeding, the taxing authority is bound to follow the principles of natural justice and rule of law and violation of the same render the order ab initio void and hence a nullity; (ii) tax demands based on such void orders are non est and there is no obligation to file any appeal against such void orders or demands; and (iii) there has been an erroneous usurpation of jurisdiction and, as such, a writ of certiorari can lie. 5.. In the counter filed on behalf of the opposite parties, the various alleged illegalities in the petition were specifically denied. It was asserted that the pet....
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....s of its sales and nothing more. If that is produced and the assessing authority has no information or evidence that any particular sale has been suppressed or omitted, he is bound to accept it, and if any such evidence is there, then an opportunity has to be given to the assessee to explain it and thereafter assessment made; (iii) the petitioner-company is not bound to keep accounts of its purchase of bamboos, caustic soda and consumption of electrical energy, etc. The taxing officer is also not competent to ask of the petitioner these accounts and even if the petitioner has done so, it is out of fear and not out of any obligation under law and, therefore, should not be considered to the petitioner's prejudice; (iv) the petitioner was not given any opportunity to explain the alleged anomaly in the proposed ultimate assessment; (v) extraneous, incorrect and irrelevant considerations, such as "the dealercompany is a habitual law-breaker for which they are penalised from time to time; repeatedly visited with penalty by the River Board for polluting the water of river Mahanadi; forest department imposing penalty for overfelling and illicit felling of bamboos", have mou....
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....so that if it will be an assessment under section 12(4), it cannot be under section 12(3). In other words, in certain circumstances and to certain extent, i.e., when the returns have been filed beyond the prescribed date and yet the assessing authority takes them into consideration for which there is no express provision under section 12 of the Act, they overlap. The crucial point is if a situation for "best judgment assessment" has arisen or not. In the instant case, with the rejection of the returns consequent upon the rejection of the supporting materials, such a situation did emerge. So, there is nothing to quarrel about the assessment made under section 12(4). Besides, whether it is an assessment under section 12(3) or 12(4), if the assessing authority has power to do so and there is no inherent lack of jurisdiction, under what section he has made the assessment is immaterial. Rightly it has been said that "the mistaken mention of a particular section or the label or the nomenclature used is not determinative of the validity of an assessment" (see Ram Chand & Sons v. Commissioner of Income-tax, U.P.[1967] 63 I.T.R. 252. "In order to substantiate a right to obtain a writ of pro....
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....e supporting materials of manufacturer and secondly, in discarding the returns on the basis of those irrelevant account books on manufacture. That the assessee is not bound to keep the accounts regarding purchase of bamboos, softwood, consumption of electricity, etc., we are unable to accept. These are raw materials used by the company in the production of paper. If no accounts of those raw materials are maintained and when demanded not produced, the quantum of paper manufactured cannot be judged. It would be puerile to say that a manufacturer like the assessee is only to keep the accounts of its sales and nothing beyond that. If that be so, there would be no scope for checking the same and anything produced by the assessee is bound to be accepted unless the assessing officer has some credible information or material that some sale or sales have been suppressed which is extremely difficult to get. So, we are not impressed with this argument. (C) Point No. (iv).-It was contended that the assessee has not been given an opportunity to give evidence in rebuttal to the finding and, in fact, the petitioner was not at all made known what the assessing officer was going to uti....
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.... The decisions of the Supreme Court in Dhirajlal Girdharilal v. Commissioner of Income-tax[1954] 26 I.T.R. 736 (S.C.). and Omar Salay Mohamed Sait v. Commissioner of Income-tax[1959] 37 I.T.R. 151 (S.C.). do not, however, require that the order of the Tribunal must be examined sentence by sentence, through a microscope as it were, so as to discover a minor lapse here or an incautious opinion there to be used as a peg on which to hang an issue of law. In considering probabilities properly arising from the facts alleged or proved, the Tribunal does not indulge in conjectures, surmises or suspicions." Thus, the sole point for consideration is whether the observations quoted above, viz., that the assessee is a habitual law-breaker, etc., have influenced the assessment. To this question our answer is in the negative as would be clear from the elaborate assessment orders now impugned. In support of our view on this point as well as on other factual aspect of the matter some relevant extracts from the assessment orders on O.S.T. are quoted hereunder: "In response to the notice under section 12(2) of the O.S.T. Act, the Accounts Executive of the company, Shri A.K. Mitra, the Mill Acc....
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....to the bamboo stock register is not faithfully recorded in regular course of business............................................. This is as per the books of account of the dealer-company themselves. But allowing only 20 per cent moisture on bamboo and 30 per cent on wood following the above technical opinion, 45,872 M.T. and 3,170 M.T. of bamboo and wood were put into the manufacturing process during the year under assessment. Applying 2.5:1 production ratio, the total quantity of paper that was produced from the above bamboo and wood consumed comes to 19,616 M.T. whereas the dealer-company has shown the total production at 18,603 M.T." While examining the proportion of power consumed and paper produced from year to year, he detected wide discrepancies and when the representative of the company was confronted with this, he could not offer any reasonable explanation and so the assessing officer observed: "On being asked to prove his statement with reference to the actual production of different variety of paper from time to time, Shri Mitra stated that it was very difficult to do. Therefore, the books of account of the dealer-company are held as unintelligible so far a....
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...., New Orissa Traders v. State of Orissa[1975] 35 S.T.C. 335. But, in following the principles laid down therein, evidently he has overshot the mark and made certain observations which are irrelevant for making an honest assessment of the turnover of the company. The observations that the dealer-company enjoys a semimonopoly position in the market and the dealer-company has taken vast forest contract of bamboo on royalty from which basic raw material, i.e., bamboo, is extracted and utilised in the mill for production of paper, are very much germane; but not that the company is a habitual law-breaker or that it has been repeatedly visited with penalty to the tune of several lakhs by the River Board for polluting the water of river Mahanadi or that the forest department are imposing penalty for overfelling or illicit felling. We may add here that the estimate of production of the company at 20,000 M.T. has already been arrived at by the assessing officer at different stages earlier. So, on a scrutiny of the assessment order as a whole, we are unable to accept the contention that these extraneous and irrelevant matters have in any way influenced the judgment although we agree that it w....