Case: The Commissioner Of Sales Tax' Madhya Pradesh  Vs. M/S. H.M. Esufali, H.M. Abdulali Indore

estimate was without any basis. In making that estimate there was an element of guesswork which was inevitable in the circumstances of the case. If the Sales Tax Officer was compelled to adopt a rule of thumb which in a sense is an arbitrary rule, assessee was entirely responsible for that situation. 12. In State of Kerala v. C. Velukutty, (1966) 80 ITR 239 (SC) this Court speaking through Subba Rao J. (as he then was) observed (at p. 244 of the Report):"The limits of the power are implicit in the expression "best of his judgment". judgment faculty to decide matters with wisdom truly and legally. Judgment does not depend upon the arbitrary caprice of a Judge, but on settled and invariable principles of justice. Though there is an element of guess work in a best -judgment" assessment, it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case." 13. The question before us is whether there is a reasonable nexus between the basis adopted by the assessing authority and the estimate of escaped turnover made. We have no doubt that there is such a nexus. 14. On behalf of the assessee, reliance was placed on the decision of this Court in Commissioner of Income-tax West Bengali v. Padamchand Ramgopal 76 ITR 719 = (AIR l970 SC 1575) There-in while investigating into the case of the assessee, the Incomes Officer found two insignificant mistakes in the assessees accounts relating to the assessment year 1953-54. No mistakes were found in the accounts relating to the assessment years 1954-55 to 1957-58. Merely because there were some insignificant mistakes in the accounts maintained by the assesses for the assessment year 1953-54 the Income-tax Officer rejected the accounts of the assesses for all the Concerned assessment years and added to the income returned half the amount of gross receipts shown by the assessee under the head "interest" for each of the year as escaped income. The Tribunal upheld the addition but the High Court came to the conclusion that the additions made by the Income-tax Officer were quite arbitrary. This Court agreed with that view. We do not think the said decision lends any support to the assessees contention. 15. For the reasons mentioned above, we are unable to agree with the High Court that the Sales Tax Officer had arbitrarily assessed the assessee. 16.It was next contended that in a re-assessment under Section 19 (1) of the Act. Sales Tax Officer was not competent to make best-judgment assessment as no such power was conferred on him under the said section. This contention had been rejected by the High Court and the assessee had not appealed against that part of the judgment. Be that as it may even though Section 19 does not in specific terms confer on the assessing authority power to make best-judgment assessment that section specifically says that the assessment made under that section is a re-assessment 18 deals with assessment of tax. Section 18 (4) Says :"If a registered dealer- (a) x x x (b) x x x (c) x x x (d) has not maintained any account or has not regularly employed any method of accounting, or if the method employed is such that in the opinion of the Commissioner assessment cannot properly be made on the basis thereof: the Commissioner shall in the prescribed manner assess the dealer to the best of his judgment." 17. What is true of the assessment must also be true of re-assessment because re-assessment is nothing but a fresh assessment. When re-assessment is made under Section 19. the former assessment is completely re-opened and in its place fresh assessment is made. While re-assessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making re-assessment under Section 19, if the assessing authority has no power to make best judgment assessment all that the assessee need do to escape re-assessment is to refuse to file a return or refuse to produce his account-books. If the contention taken on behalf of the assesses is correct, the assessee can escape his liability to be re-assessed by adopting an obstructive attitude. It is difficult to conceive that such could be the Position in law. 18. Before making re-assessment, the assessing authority has to under Rule 33 (1) framed under the Act, call upon the assesses to produce his books of account and other documents which the assessing authority may require and any evidence which the dealer may wish to produce in support of his objection. When such a notice is issued to the dealer, he may appear before the assessing authority on the date fixed in the notice and prefer his objections and produce such evidence as he may think necessary. Sub-rule (2) of Rule 33 provides that if the assesses appear" in response to the notice under Section 33 (1), the assessing authority may make reassessment, if necessary only after considering the objections raised by the dealer and after examination such evidence as may be produced by him. It is important to note that in the notice which the assessing authority is required to issue to the dealer in Form 16, the extent of the escaped turnover as estimated by the assessing authority has to be specified. The procedure laid down in Rule 33 could not have been a mere empty formality. If the assessees contention is right. in order to escape re-assessment all that the assessee need do is to ignore the notice issued under Rule 33 (1) end refuse to co-operate with the assessing authority in the re-assessment proceedings. We are unable to accept that that is the true position in law. 19. In our opinion the decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Ravuri V. Narasimhloo (1965) 16 STC 54 (Andh. Pra.) relied on by the assessee was not correctly decided.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The assessing authority while making the best-judgment assessment no doubt should arrive at its conclusion without any bias and on rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis. the fact that there is no good proof in support of that estimate is immaterial. Prima facie the assessing authority is the best Judge of the situation. It is his best-judgment and not of any one elses. The High Court could not substitute its best-judgment for that of the assessing authority. In the case of best-judgment assessments the Courts will have to first see whether the accounts maintained by the assesses were 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. In the present case, there is no dispute that the assessees accounts were rightly discarded. We do not agree with the High Court that it is the duty of the assessing authority to adduce proof in support of its estimate. The basis adopted by the Sales Tex Officer was a relevant one whether it was the most appropriate or not. Hence the High Court was not justified in interfering with the same11. Applying the rule laid down in Reghubar Mandal Harihar Mandal case, 8 STC 770   = (AIR 1957 SC 810  ) (supra), to the facts of the present case it is seen that the Sales Tax Officer had material before him to find out how much turnover had escaped assessment during a period of 19 days. On the basis of that materia1 he estimated the escaped turnover for the entire year. Hence it cannot be said that there was no basis for the estimate made by the Sales Tax Officer. It may be that his estimate was an over-estimate or an under-estimate but it cannot be said that the estimate was without any basis. In making that estimate there was an element of guesswork which was inevitable in the circumstances of the case. If the Sales Tax Officer was compelled to adopt a rule of thumb which in a sense is an arbitrary rule, assessee was entirely responsible for that situation15. For the reasons mentioned above, we are unable to agree with the High Court that the Sales Tax Officer had arbitrarily assessed the assessee17. What is true of the assessment must also be true of re-assessment because re-assessment is nothing but a fresh assessment. When re-assessment is made under Section 19. the former assessment is completely re-opened and in its place fresh assessment is made. While re-assessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover. While making re-assessment under Section 19, if the assessing authority has no power to make best judgment assessment all that the assessee need do to escape re-assessment is to refuse to file a return or refuse to produce his account-books. If the contention taken on behalf of the assesses is correct, the assessee can escape his liability to be re-assessed by adopting an obstructive attitude. It is difficult to conceive that such could be the Position in law18. Before making re-assessment, the assessing authority has to under Rule 33 (1) framed under the Act, call upon the assesses to produce his books of account and other documents which the assessing authority may require and any evidence which the dealer may wish to produce in support of his objection. When such a notice is issued to the dealer, he may appear before the assessing authority on the date fixed in the notice and prefer his objections and produce such evidence as he may think necessary. Sub-rule (2) of Rule 33 provides that if the assesses appear" in response to the notice under Section 33 (1), the assessing authority may make reassessment, if necessary only after considering the objections raised by the dealer and after examination such evidence as may be produced by him. It is important to note that in the notice which the assessing authority is required to issue to the dealer in Form 16, the extent of the escaped turnover as estimated by the assessing authority has to be specified. The procedure laid down in Rule 33 could not have been a mere empty formality. If the assessees contention is right. in order to escape re-assessment all that the assessee need do is to ignore the notice issued under Rule 33 (1) end refuse to co-operate with the assessing authority in the re-assessment proceedings. We are unable to accept that that is the true position in lawWe have no doubt that there is such a nexusThis contention had been rejected by the High Court and the assessee had not appealed against that part of the judgment. Be that as it may even though Section 19 does not in specific terms confer on the assessing authority power to maket assessment that section specifically says that the assessment made under that section is areassessment18 deals with assessment of tax.