IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.M.JOSEPH FRIDAY, THE 29TH FEBRUARY 2008 / 10TH PHALGUNA 1929 TRC.No. 580 of 2001 --------------------- TA.207/1996 of AGRL.I.T.ADDL.BENCH,ERNAKULAM .................... PETITIONER: -------------------- N.G. REGHU, M/S. ALANKAR ELECTRICALS AND ELECTRONICS, NJALUPPADY HOUSE, IRINGOLE P.O., ERNAKULAM DISTRICT. BY ADV. SRI.N.SUKUMARAN SRI.S.SHYAM SRI.N.K.KARNIS SRI.BOBBYMATHEW KOOTHATTUKULAM SRI.LATHEESH SEBASTIAN RESPONDENT: ---------------------- STATE OF KERALA, REPRESENTED BY SALES TAX OFFICER, ALUVA. BY SR. GOVERNMENT PLEADER SRI. MUHAMMED RAFIQ. THIS TAX REVISION CASE HAVING BEEN FINALLY HEARD ON 29/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & K.M. JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - T.R.C. No. 580 of 2001 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 29th day of February, 2008. ORDER H.L.DATTU, C.J.: The assessee before us is a registered dealer. He is engaged in the business of electrical and electronic goods. He effects both intra and interstate sales. To facilitate him to effect intra state trade and commerce, he had obtained Declaration Forms (Form C) from the assessing authority. However on a later date the assessee with the permission of the assessing authority has got his registration certificate cancelled and it is the case of the assessee, thereafter he has not conducted any business whatsoever. 2. Since the assessee did not surrender the unused Declaration Forms, the assessing authority for the assessment year 1990-1991 has quantified the tax liability fixing the turnover of Rs.One Lakh for all the unused C Forms. Before the assessing authority, it was the case of the assessee that he would be in a position to produce the C Form Declaration. Thereafter he turns round and then had stated that those C Forms are in the possession of his Accountant. In order to verify the veracity of the statement made the assessing authority has gone to the extent of examining his Accountant, who in turn in his evidence has stated that at no point of time the assessee had handed over the unused Declaration Forms to his custody. Keeping in view all these aspects, the assessing authority has proceeded to complete the best judgment assessment quantifying the tax liability including the suppressed turnover supposed to have been effected by using the unsurrendered Declaration Forms and while doing so TRC. 580/2001. 2 has adopted an uniform turnover. 3. Being aggrieved by the orders passed by the assessing authority, the assessee has filed the first appeal before the First Appellate Authority, who in turn has modified the orders passed by the assessing authority. 4. Disturbed by these two orders, the assessee had carried the matter in appeal before the Sales Tax Appellate Tribunal in T.A. 207 of 1996. The Tribunal has rejected the appeal and while doing so the Tribunal has observed in its order, that the assessee at no point of time had stated before the assessing authority that he has either lost the unused C Forms or not in a position to produce C Forms, but was making the statement that he will be in a position to surrender the C Forms provided he has given sufficient time. Inspite of granting such time, since the assessee did not produce the unused Declaration Forms, the Tribunal is of the opinion that the appellate authority is justified in modifying the orders of assessment passed by the assessing authority. Aggrieved by these findings and conclusions reached by the Tribunal, the assessee is before us in this revision petition. The petitioner has taken up the following legal issues in the Memorandum of Revision Petition filed before us for our consideration and decision. They are as under: “(a) Is it legal in the absence of provisions in the Rules Central and Kerala to estimate turnover on the basis of C Forms not surrendered and add it on to the turnover returned? (b) Is the respondent justified in acting on statement of a person obtained behind the back of the petitioner to make a best judgment assessment. Does it not violate the principles of natural justice? (c) Can arbitrary additions against the facts and circumstances of the case be made to determine turnover and tax? TRC. 580/2001. 3 (d) Is the order of the Tribunal confirming that of the Appellate Assistant Commissioner sustainable?” 5. The orders of assessment passed by the assessing authority is in the nature of best judgment assessment. Even for passing a best judgment assessment, the assessing authority cannot whimsically add a particular turnover to the declared turnover of a dealer. An estimation by best judgment may take into account an element of guess work, but it is nevertheless a 'judgment' and hence must have some basis. 6. In the instant case, it is not in dispute that though the assessee had stated before the assessing authority that he would be in a position to produce the unused Declaration Forms, he did not do so. The assessing authority could have passed the best judgment assessment taking into consideration the average turnover in the Declaration Forms used by the assessee in the year under consideration. Instead of doing so, the assessing authority has taken uniform turnover on all the unused Declaration Forms to quantify the tax liability of the assessee. In the alternative the assessing authority could have, instead of allowing the assessee to get his registration certificate cancelled, could have kept alive the registration certificate and could have directed the assessee that unless the unused Declaration Forms are produced or proved that he lost those Declaration Forms, he would not be allowed to get his Certificate of Registration cancelled. In the alternative, the assessing authority could have verified from those dealers with whom the assessee was regularly carrying on his business transactions to find out whether the assessee had used the unsurrendered Declaration Forms for effecting inter-State purchases. Though these alternatives were available to the assessing authority, without TRC. 580/2001. 4 invoking those alternatives, the assessing authority has proceeded to pass the best judgment assessment, which in our opinion is not sustainable, since it is based on pure assumptions, presumptions and surmises. Therefore, we cannot sustain the orders passed by the Tribunal and the orders passed by the First Appellate Authority confirming the orders passed by the assessing authority for the assessment year 1990-1991. Accordingly, we make the following: Order The orders passed by the assessing authority, the appellate authority and the Tribunal for the assessment year 1990-1991 is set aside. The matter is remanded back to the assessing authority to re-do the matter in accordance with law after affording an opportunity of hearing to the assessee. Ordered accordingly. H.L. DATTU, CHIEF JUSTICE K.M. JOSEPH, JUDGE sb/DK. TRC. 580/2001. 5 H.L. DATTU, CJ. & K.M. JOSEPH, J. - - - - - - - - - - - - - - - - - - - - - - - - T.R.C. No. 580 of 2001 - - - - - - - - - - - - - - - - - - - - - - - - ORDER 29.2.2008.