Kerala High CourtM/S.The Cake House vs State Of Kerala on 14 December, 2007Author:H.L.DattuBench:H.L.Dattu,P.N.RavindranIN THE HIGH COURT OF KERALA AT ERNAKULAM

ST Rev No. 110 of 2005()


1. M/S.THE CAKE HOUSE,
                      ...  Petitioner

                        Vs



1. STATE OF KERALA, REPRESENTED BY
                       ...       Respondent

                For Petitioner  :SRI.E.P.GOVINDAN

                For Respondent  : No Appearance

The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice P.N.RAVINDRAN

 Dated :14/12/2007

 O R D E R
                     H.L.Dattu,C.J. & P.N.Ravindran,J.
                     -----------------------------------------------
                          S.T.Rev.No.110 of 2005
                     -----------------------------------------------
                  Dated, this the 14th day of December, 2007

                                       ORDERH.L.Dattu,C.J.M/s. The Cake House, Kalamassery is the assessee in this

Sales Tax Revision.(2)  The assessee questions the legality or otherwise of the

orders passed by the Sales Tax Appellate Tribunal, Additional Bench-I,

Ernakulam in T.A.No.418 of 2004 dated 15th October, 2004.(3) The assessee has framed the following questions of law for

our consideration and decision. They are as under:(i)     Whether on the facts and in the circumstances of the

      case the Tribunal was justified in sustaining the addition made

      by the lower authorities.(ii)    Whether on the facts and in the circumstances of the

      case the tribunal was justified in holding that a pattern of

      suppression was established in the case of the appellants.(iii)   Whether on the facts and in the circumstances of the

      case the Tribunal was justified in holding that the petitioners

      were maintaining duplicate copy of bills.(iv)    Whether on the facts and in the circumstances of the

      case the Tribunal was justified in passing a remark against the

      petitioners without verifying the report of the inspecting officers.(v)     Whether on the facts and in the circumstances of the

      case the appellate authority was justified in endorsing the

      findings of the lower authorities without making an independent

      analysis of the facts".S.T.Rev.No.110 of 2005                      - 2 -(4) The factual matrix are:(i) The assessee is a dealer, registered under the provisions of theKerala General Sales Tax Act, 1963("Act" for short). He is a dealer in Cake

and Bread. The assessment year in question is 2001-02.(ii) The Inspecting Wing of the Department had inspected the business

premises of the assessee on 20.12.2001 and on such inspection, had detected

unaccounted sales and unaccounted purchases. The total suppression was in

a sum of Rs.4,32,324.75.(iii) The assessee had compounded the offence departmentally, in lieu

of the prosecution proceedings.(iv) The assessee had filed its annual returns, conceding a total and

taxable turnover of Rs.45,78,782.20 and Rs.41,21,598.90 respectively. The

assessing authority had rejected the books of accounts in view of the report

received from the Inspecting wing of the Department. After such rejection of

the return filed by the assessee, the assessing authority had issued

pre-assessment notice to the assessee proposing to make an addition of three

times of the suppressed sales and purchases. After receipt of the

pre-assessment notice, the assessee has filed his objections, inter alia,

bringing to the notice of the assessee that the proposal so made is contrary to

the conceded total and taxable turnover.         The assessing authority, after

considering the explanation so offered by the assessee, has proceeded to

pass an order by way of best judgment assessment and in that has made an

addition of three times the suppression detected to the total and taxable

turnover conceded by the assessee. After such addition, has quantified the tax

liability.(v) The orders passed by the assessing authority is confirmed by theS.T.Rev.No.110 of 2005                       - 3 -first appellate authority as well as by the Tribunal. Aggrieved by these orders,

the assessee is before this Court in this Sales Tax Revision.(5)    Before we refer to the arguments canvassed by

Sri.E.P.Govindan, learned counsel appearing for the assessee, we intend to

remind ourselves to the observations made by the apex Court in the case ofCommissioner of Sales Tax, Madhya Pradesh v. H.M.Esufali H.M.Abdulali[(1973) 32 STC 77]. In the aforesaid decision, the apex Court has stated as

under:"In estimating any escaped turnover, it is inevitable that there is

        some guess-work. 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 anyone else. The High Court could not substitute its "best

        judgment" for that of the assessing authority".(6) This settled legal position is not reversed by any subsequent

decision by the apex Court.(7) Sri.E.P.Govindan, learned counsel appearing for the

assessee, would submit that since the inspection was conducted by the

Inspecting Wing of the Department on 20.12.2001, there is no justification for

the assessing authority to have made an addition of three times the

suppressed purchases and sales. Further it is stated that, the addition made is

excessive and, therefore, this Court should reduce the addition so made by theS.T.Rev.No.110 of 2005                    - 4 -assessing authority.(8)     Per contra, Sri.Mohammed Rafiq, learned Senior

Government Pleader, ably justifies the impugned order.(9)     The facts are not in dispute. The Inspecting Wing of the

Department had inspected the business premises of the petitioner nearly after

six months from the date of commencement of the assessment year. After

such inspection, the Inspecting Wing of the Department had detected a pattern

of suppression of sales and purchases in a sum of Rs.4,32,324.75.               This

inspection, as we have already noticed, was after six months from the date of

commencement of the assessment year.(10) After such inspection, the assessee has volunteered to

compound the offence departmentally by paying the compounding fee, in lieu

of the prosecution.(11)    The assessee had filed his annual return for the

assessment year 2001-02 and in that had conceded a total and taxable

turnover of Rs.45,78,782.20 and Rs.41,21,598.90 respectively. The assessing

authority has rejected the books of accounts in view of the report of the

Inspecting Wing of the Department. The assessing authority has, thereafter,

proceeded to complete the best judgment assessment. While doing so, the

assessing authority has not whimsically made addition to the conceded

turnover of the dealer.    He has taken into consideration the pattern of

suppression by the assessee and has made an addition of three times the

suppression detected to the total and taxable turnover conceded by the

assessee. After such addition, has quantified the tax liability. It is his estimation

and it is his best judgment assessment and that best judgment assessment

should not be replaced by this Court by keeping in view the dicta of the apexS.T.Rev.No.110 of 2005                   - 5 -Court inH.M.Esufali's case.(12) The appellate authority as well as the Tribunal also have

taken the view that the assessing authority is justified in making an addition of

three times the suppressed turnover detected. These are all findings of fact

and those findings of fact cannot be disturbed by this Court in exercise of its

powers underSection 41of the Act.(13) In that view of the matter, we do not find any ground to

interfere with the orders passed by the Tribunal. Therefore, the questions of

law framed by the assessee requires to be answered against the assessee

and in favour of the Revenue.(14) Consequently, I.A.No.596 of 2005 is dismissed.

               Ordered accordingly.H.L.Dattu
                                                          Chief Justice




                                                        P.N.Ravindran
                                                             Judge
vku/-