Sri Ranganathar Mills vs State of Madras

Ramaprasada Rao, J.—The assessee started business in groundnut and groundnut kernel in the assessment year 1962-63. For the first

assessment year, he returned a turnover of Rs. 78,232.23. There were two surprise inspections made by the departmental officers on 14th

September, 1962, and 27th November, 1962, which disclosed heavy suppressions to the tune of Rs. 27,235.00 and Rs. 15,578.75 on 14th

September, 1962, and Rs. 19,950.00 on 27th November, 1962. Though the dealer produced his accounts, they were rejected by the revenue and

ultimately in second appeal by the Tribunal as well, who maintained the best judgment assessment made by the assessing authority, as also the levy

of penalty for such suppression. Mr. Padmanabhan, learned counsel for the petitioner, reiterates his contentions urged before the Tribunal and says

that the mere fact that suppression was discovered on two occasions of inspection cannot legitimately lead to the inference that a best judgment

assessment could be made and if at all it could be made, an estimate of three times over the returned turnover is, according to him, unsupportable.

The best judgment method of assessment involves a certain amount of legitimate guess though tempered with judicial mercy and such guess is

ordinarily dependent upon the facts and circumstances of the case and particularly the conduct of the assessee in the course of his business.

Though it is essentially subjective in nature, yet it has some objective features as well and it is such objective material which prescribes varied and

variegated standards for the ultimate assessment of the turnover on a hypothetical basis. In the instant case, the assessee started his mill for the first

time during the assessment year, but even then he thought of evasion, suppression and avoidance. It is not on one occasion which could be

ordinarily viewed as a result of an accident. But on two surprise inspections such suppression was discovered. This is, therefore, reflective of the

course of conduct of the new dealer who entered into the field of merchandise and who has not had an honest intention about his trade and

taxation. It was this which no doubt compelled the assessing authorities to resort to best judgment and while resorting to best judgment, they had to

necessarily estimate the turnover. As the Tribunal points out, there was attempted huge suppression of the turnover by the assessee and it was not

satisfactorily explained that such suppressions were properly reflected in the regular accounts kept by the assessee. The assessee wanted to

explain and on the face of it the explanation was spurious. Such suppressions were found in a pocket note-book recovered during inspection and

the assessee gullibly explains away the pocket note-book as one relating to another person and not his. He did not take any steps to substantiate

his statement that the pocket note-book did not belong to him but related to the business of another. Taking the conduct of the assessee as a

whole, the Tribunal thought that there was no occasion for it to interfere with the estimate made by the revenue. There is therefore no question of

law arising from the order of the Tribunal. We are not satisfied that the conclusions resulting in the findings of fact by the Tribunal are without any

basis whatsoever. The tax case is rejected.

Tax Case No. 402 of 1969.

The same assessee is concerned in this tax case, and the year of assessment is 1963-64. In this case also the best judgment assessment was

made by the revenue and the Tribunal considerably reduced the quantum by adopting another yardstick of estimation. This, again, is a case where

the account books of the assessee were rejected because on the date when the mills were inspected, there was a suppression of over one lakh of

rupees on one single day. The revenue rightly, therefore, assessed the assessee in its best judgment. They, however, estimated the turnover and

added 50 per cent, to the book turnover, as returned by the assessee. The Tribunal reduced it and added only 25 per cent, of the same and thus

brought the totality as the assessable turnover. No question of law arises and in addition the finding of fact is justified. The tax case is dismissed.