C.P. Kuppuswamy and Sons vs The State of Tamil Nadu

Sethuraman, J.—The present appeal has been filed against a suo motu revision made by the Board of Revenue of an assessment of sales tax

for the year 1971-72. The assessee is a dealer in cotton seeds and oil cakes . The Deputy Commercial Tax Officer who checked the accounts in

order to verify the correctness of the return filed by the assessee noticed some defects and irregularities in the accounts. He considered that there

was suppression of sales and he added a sum of Rs. 2,54,894.50. This was on the basis that on a shandy day, namely, 6th December, 1971, there

was an inspection of the assessee''s premises in which there were slips, which covered a turnover of Rs. 7,282.70. The view of the assessing

authority was that there must have been similar suppressions on the other 35 days of shandy and that is how the figure arrived at from the slips was

multiplied by 35. The assessee appealed to the Appellate Assistant Commissioner, who after elaborately discussing the facts and the contentions of

the assessee came to the conclusion that an addition of 3 per cent of turnover as per the accounts would meet the ends of justice. The amount so

added came to Rs. 33,675.40. The Board of Revenue considered that the appellate authority was not justified in having granted the reduction in

the turnover and therefore took up suo motu proceedings and restored the order of the assessing authority. A sum of Rs. 830 was also levied as

penalty for wilful and deliberate suppression of turnover. The assessee has filed the present appeal challenging the order of the Board of Revenue.

The learned counsel for the assessee contended that the Board of Revenue has interfered with the order of the Appellate Assistant

Commissioner purporting to exercise its powers of revision in an unjustified and unjustifiable manner. According to the assessee, there were

inspections on 13th May, 1971, and 1st September, 1971, in which there were no suppressions as such of any sales even though there might have

been some excess stock for which the explanation offered by the assessee had not been accepted. He pointed out that the inference that there

must have been a large scale suppression on each of the shandy days merely because of the discovery of certain slips on 6th December, 1971,

could not serve as the foundation for multiplying those slips by 35. He further pointed out that the Appellate Assistant Commissioner has found, as

a fact, that a sum of Rs. 559 being a part of the amount covered by the slips recovered on 6th December, 1971, had actually been accounted for.

If that sum of Rs. 559 is taken into account, then the assessee would be guilty of any suppression, if at all, only to the extent of Rs. 6,723.70. He

contended that the Appellate Assistant Commissioner had gone into all the relevant facts in arriving at the additional turnover to be assessed. For

the respondent the submission was that the Appellate Assistant Commissioner had proceeded on erroneous lines in reducing the turnover. The

point urged by the learned. Additional Government Pleader was that the Appellate Assistant Commissioner had taken the trade in oil cakes to be

seasonal which did not correspond to the facts. His further submission was that by the recovery of the slips on 6th December, 1971, it was

established that the assessee had clandestine transactions which could not be held to be isolated so that it had to be distributed for the entire period

preceding that date. His point, therefore, was that the addition of Rs. 2,54,894.50 as made by the Deputy Commercial Tax Officer was rightly

restored by the Board of Revenue.

We are unable to agree with the submissions urged on behalf of the State. It is rather difficult to comprehend how the Board of Revenue

considered that there was suppression to the extent of what had been estimated by the assessing authority himself, when it was demonstrated by

the Appellate Assistant Commissioner that the assessing authority had not based his estimate on proper figures. When reference to the recovery of

slips on 6th December, 1971, it is not in dispute that the total turnover involved is Rs. 7,282.70. The Appellate Assistant Commissioner has found

that a sum of Rs. 559 has been accounted for. There is no whisper in the order of the Board of Revenue to show that this finding of the Appellate

Assistant Commissioner was in any manner wrong. Thus, the Board of Revenue, if it were to exercise its powers of revision in a case like this,

could not have proceeded on the basis of the Deputy Commercial Tax Officer''s estimate. This estimate could only be, even on the Board of

Revenue''s own reasoning, 35 times the sum of Rs. 6,723.70.

As rightly contended by the assessee, there were inspections on 13th May, 1971, and 1st September, 1971. There was no discovery of any

suppressed turnover on those dates. Thus, in the absence of any discovery of suppressed transactions on those earlier occasions, there was no

justification for the Board of Revenue to proceed on the basis that there were similar suppressions even prior to 6th December, 1971. It hardly

need emphasis that the Board of Revenue in arriving at the turnover is not to act mechanically but to act in a judicial manner while exercising, as it

does, its powers of revision, which is a judicial power.

As for the criticism that the Appellate Assistant Commissioner had wrongly proceeded on the basis that the sales of oil cakes were only

seasonal, we find that this criticism is not borne out by the record at all. In the order of the Appellate Assistant Commissioner, there is an analysis

of the turnover during two periods. The turnover between 1st April, 1971, and 18th June, 1971, comes to Rs. 12,081.83. The turnover between

19th June, 1971, and 31st March, 1972, comes to Rs. 1,04,850.78. Thus, it is clear that the sales in the second period are much more than the

sales in the first period. This could only be because of the sales being seasonal. The turnover in the first period works out at the rate of less than

Rs. 4,000 per month while the turnover in the second period works out at the rate of about Rs. 15,000 per month. The seasonal character of the

trade, whatever may be the experience of the authorities in any other case, is clearly established in the present case. Further, the authorities are not

supposed to import any a priori conceptions of their own in exercising the judicial power of revision. It is an elementary requirement that they must

have appropriate data to support any estimate that they made. Having regard to the above features, we consider that the Board of Revenue had

absolutely no material to come to the conclusion that the suppressed turnover could be to the tune of Rs. 2,54,894.50.

In exercising the powers of revision, the Board is expected to concentrate its attention on the order which it seeks to revise. The order that is

sought to be revised in the present case was that of the Appellate Assistant Commissioner. If there was any wrong reasoning in the said order, it is,

of course, open to the Board of Revenue to rectify the error in reasoning by taking appropriate action. But in the present case the order of the

Board of Revenue says very little about any wrong reasoning in the order of the Appellate Assistant Commissioner except to mention that the

Appellate Assistant Commissioner had proceeded erroneously on the basis that the turnover in oil cakes was only a seasonal one. We have shown

earlier that on the present facts the Appellate Assistant Commissioner''s conclusion regarding the nature of the activity of the assessee being

seasonal cannot be found fault with. We have also shown that the estimate made by the Deputy Commercial Tax Officer could not have been

proper in view of the fact that a part of the turnover which was taken as suppressed has been accounted for. The function of the Board Revenue is

to find out whether the order of the Appellate Assistant Commissioner is reasonable and not to exercise its power of revision by presuming that

what the assessing authority had done was proper and also that the Appellate Assistant Commissioner had, in giving any reduction, not acted

properly.

The learned Additional Government Pleader brought to our notice a decision of this Court in Marimuthu Nadar & Bros. v. State of Tamil Nadu

[1981] 47 STC 314. In that case there was only one inspection of the premises of the assessee and there was a discovery of some suppression of

turnover during a period of 15 days. It is this discovery which was taken as the basis for arriving at the estimated turnover for the whole year. The

Appellate Assistant Commissioner held that there was no justification for an addition of 16 times, the number 16 representing the number of

fortnights preceding the discovery of the slips. The Board of Revenue took suo motu proceedings and set aside the order of the Appellate

Assistant Commissioner and restored that of the assessing authority. It is this order of the Board of Revenue which was confirmed by this Court.

The decision in that case cannot be said to lay down, as a matter of universal principle, that wherever the Board of Revenue interferes in a case of

estimate, the Board''s reasoning has to be accepted by this Court. The reasonableness of the estimate would depend on the facts of each case. We

therefore see no scope for applying the earlier decision to the present case. It has to be confined to its facts and to similar situations.

Having regard to the features pointed out by us, we consider that the Appellate Assistant Commissioner''s order could not have been properly

interfered with on the facts and we therefore hold that the Board of Revenue had no material to restore the assessment as made by the Deputy

Commercial Tax Officer. The order of the Appellate Assistant Commissioner should have been left as it was. The appeal is allowed with costs.

Counsel''s fee Rs. 250.

Appeal allowed.