COMMISSIONER OF SALES-TAX, MADHYA PRADESH versus M/S. H.M. ESUFALI, H. M. ABDULALI, SIYAGANJ, INDORE

Citation: [1973] 3 S.C.R. 1005 · Decided: 18-04-1973 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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1005 
COMMISSIONER OF SALES-TAX, MADHYA PRADESH 
v. 
M/S. H.M. ESUFALI, H. M. ABDULALI, SIYAGANJ.-
INDORE 
April 18, 1973 
[K. s. HEGDE AND H. R. KHANNA, JJ.] 
Madhya l'rad~sh SG!ks T~ A.ct a. 19-Reassess~IJt of est:dped 
turnover whether C{JIJ be nlizde on barfs of 'best Judgl'lti1J(-'Best }lldg-
rMnf what is-Estimate of turnover in 'best judgmenf assess~mnt-lnter­
ference by court when justified. 
The asseS8ee was a deater in Iron and Steel in Madhya . Pradesh. 
The Sales Tax Officer m making the original as!lelllDent for the. period 
November I, 1959 to October 20, 1960 accepted the gr018 turnover 
disclosed by the 'IISsesaee's accounts. Later the Flying Squii(J inspeckd 
the :business premises of the 9ssessee and found . a bill 6ook for the 
period September 1, 1960 to September 19, 1960. The bill book sho~d 
that the assessee had dected sales of iron and steel during that period 
ot the value of Rs. 31,171.28 P. Those sales had not been entered 
in the books of a~unt maintained by the essessee. On the basis of 
the lofurmation provided by the said bill book the Sales Tax Officer 
initiated proceedings under s. 19( 1) of the Madhya Pradesh General 
Sales Tax Act 1958 as elso under the Central Sales Tax 
A~ 1956 
against the assessee, After. hearing the assessee he made teassessments 
on best judgment basis and in estimating the asse8See's turnover took 
~ 
consideration the fact that the assessee had dealings outside his 
accounts of the value of Rs. 31.171.28 P. during a ~od of 19 days. 
After the disposal of appeals filed by the assessee under the 
Act a 
refetenoe was made to the High Court. 
lnt~r alia the High Court held 
that the estimate. of taxable turnover under the local Act and the Central 
Act made by the assessing authority for the period from November 1, 
1959' to October 20, 1960 on the basis of Rs. 31,171.28 P as the eactp· 
ed turnover for a _period of 19 days was illegal and unjustified. Accord-
ing to the High Court the only moved escapement was Rs. 31,171.28 
11ie 
penalty 
imposed on the 
assessee in respect of the tumoveJ 
under the State Act was also set aside by the High Court. In appeal 
by the Revenue, 
HElD: (i) The distinction between a 'best judgment' assesiment 
and assessment based on accounts submitted by an assessee must be borne 
in mind. 
Sometime there may be innocent or trivial mistakes in the 
accounts maintained by the assessee. There may be even certain uniBtend-
ed or unimportant omissions in those accounts, but yet the accounts may 
be· accepted as genuine and substantialJy corr.ect. In such cases, the assess-
ments are made on the basis of the accounts maintained even thoqh 
the assessing officer may add back to the account price of items that 
might have been omitted to be included'- in the accounts. In such • 
case, the assessment made ·is not a 'best-judgment' assessment. It is 
pr"unarity ma~e on the basis of the a~unts maintained by the UMIIOe. 
But when the assessing officer comes . to the conclusion that no reliaDce 
CBD be placed on the accounts maintained by the asseaaee, he pfoceede 
to a8aess the assesaee on the basis of his 'beat-judgment'. lo d~ .0, 
.he. may take such asaiatanoe as the assessee's accounts mav atrord, he 
may also rely on other information& gathered by .him u well u on tbe 
surrounding circumstances of the case: 'The assessment made on 
the'· 
1006 
SUPREME COURT REPORTS 
[1973] 3 S.C.R. 
basis of assessee's accounts and those made on 'best-judiiDcnt' buis arc 
totally different types of assessments. [1009 G] 
In the present case it was proved as well as admitted 
that 
the 
asasee'a dealings outside his accounts durini a period of 19 days were 
of the nature of Rs. 31, 171. 28. From this circumst11nce it was open 
to the Sales·tax Officer to infer that the assesseee had large scale deal-
iPS~ outside his accounts. It was obvious that he 
was 
maintainina 
f'lbe accounu to evade payment of sales-tax. In such a situation it 
wu not possible for .the Sates-tax Officer to find out precisely the turn-
owr euppressed. He could only make an est'imate of the suppressed 
tunaover on the b11is of the material before him. So long 
aa 
the 
e1timate made by him wa• not arbitrary •nd has nexus with faets dis-
covered, the same could not be queationed. The Hiah Court was wrona 
in usumini that the assessina authority must have material before it 
to prove the e"'act turnover suppressed. The basis adopted 
by 
the 
Salc1·tax Oftlcer 

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