Case: Raghubar Mandal Harihar Mandal Vs. The State Of Bihar

1. The appellant Messrs. Raghubar Mandal Harihar Mandal, hereinafter referred to as the assessee, is a firm of bullion dealers, carrying on its business at Laheriasarai in the district of Darbhanga in the State of Bihar. The assessee was assessed to sales tax for seven quarters ending 31-12-1945, 31-3-1946, 30-6-1946, 30-9-1946, 31-12-1946, 31-3-1947 and 30-6-1947,three of the aforesaid quarters, namely those ending on 31-12-1945, 31-3-1947 and 30-6-1947 the assessee failed to file the necessary returns as required by the provisions of the Bihar Sales Tax Act, 1944 (hereinafter referred to as the Act), which was the Act in force during the material period; therefore, the assessee was assessed for those three quarters under a sub-s. (4) of S. 10 of the Act. For the remaining four quarters the assessee did fileSales Tax Officer rejected those returns as also the books of account filed by the assessee for all the seven quarters and assessed the assessee under cl.(b) of sub-s.(2) of S. 10 of the Act. The Sales Tax Officer passed separate orders assessing the tax for all the seven quarters simultaneously onHe assessed the tax on a taxable turnover of Rs. 2,94,000 for each of the five quarters ending 31-12-1945, 31-3-1946, 30-9-1946, 31-12-1946 and 31-3-1947; for the other two quarters ending on 30-6-1946 and 30-6-1947, he assessed the tax on a taxable turnover of Rs.assessee then moved in appeal the Commissioner of Commercial Taxes, Tirhut Division, but the Commissioner dismissed the appeals by his order dated 23-2-1948. The Board of Revenue was then moved in revision but, by its order dated 31-7-1948, the Board refused to interfere. The Board expressed the view that the finding of the Sales Tax Officer and the Commissioner that the books of account maintained by the assessee were not dependable was a finding of fact which could not be interfered with in revision; therefore the assessing officer was bound to assess to the best of hisBoard was then moved under S. 21 of the Act to refer certain questions of law to the High Court of Patna which the assessee contended arose out of its order. By its order dated 10-12-1948 the Board rejected the applications for making a reference to the High Court on the same ground namely that no question of law was involved and the assessment orders were concluded by a concurrent finding of fact. The assessee then moved the High Court and by its order dated 27-4-1949 passed in miscellaneous judicial cases Nos. 13 to 19 of 1949, the High Court directed the Board of Revenue to state a case on the followingthe Sales Tax Officer is entitled under S. 10 (2) (b) of the Act to make an assessment on any figures of gross turnover without giving any basis to justify the adoption of thatBoard of Revenue then stated a case, and the High Court disposed of the reference by answering the question in the affirmative by its judgment and order datedThe assessee then moved this Court and obtained special leave to appeal from the said judgment and order of the High Court.

Reasoning: In our view, the approach of the High Court to the question referred to it was erroneous and the answer given to the question by it solely on the basis of sub-s. (4) of S. 10 of the Act was vitiated by that wrong approach. It was not sub-s. (4) of S. 10 of the Act which the High Court had to consider; it had to consider the true scope and effect of cl. (b) of sub-s. (2) of S. 10 of the Act.All these we must accept as correct. Having rejected the returns and the books of account, the assessing authorities proceeded to estimate the grossso estimating the gross turnover, they did not refer to any materials at all. On the contrary, they indulged in a pure guess and adopted a figure without reference to any evidence or any material at all. Let us take, for example, the assessment order for the quarter ending 30th Junein this case, the Sales Tax authorities had based their estimate on some material before them, no objection could have been taken; but the question which was referred to the High Court and which arose out of the orders of assessment, was whether it was open to the said authorities to make an assessment on a figure of gross turnover, without referring to any materials to justify the adoption of that figure. In answering that question in the Affirmative, the High Court has given a carte blanche to the sales Tax authorities and has, in our opinion, misdirected itself as to the true scope and effect of cl. (b) of sub-s. (2) of S. 10 of the Act.The last decision to which we have been referred is the decision in Damsaz Khan v. Commissioner of Income-tax, Punjab and NWFP, 1947-15 ITR 446: (A I R 1947 P C 176) (F). That again is a decision of the Privy Council. In that case, the validity of the assessment under S. 23 (3) of the Indian Income-tax Act was not challenged by the assessee and the appeal was directed solely to the amount ofobservations do not help the respondent in any way; nor do they lay down any rule contrary to the rules laid down in 1944-12 I T R 393: (A I R 1944 Lah 353 (2) (E).11. For these reasons we hold that the High Court was in error in answering the question referred to it.