State of Madras vs C. Karuppan Chettiar

Rajagopalan, J.—The total turnover of the assessee was Rs. 10,2689-14-9, as estimated by the departmental authorities. The assessee''s

accounts showed a turnover of only Rs. 47,239-1-8. It was also in evidence, based primarily on the note-book of the assessee seized, that for a

period of two months purchases to the extent of Rs. 36,209-9-6 had been suppressed, in the sense that they were not brought into the accounts

produced by the assessee.

The explanation of the assessee with reference to the entries in the note-book was, that the note-book did not record completed transactions,

but that only transactions which were expected to materialise in future were noted there to aid the memory of the assessee. The assessee further

pleaded that, when transactions materialised, the entries from the note-book were brought to his regular account books, and the turnover of those

transactions was about Rs. 11,000. The tribunal observed in paragraph 2 of its order that this argument was not without force, and that under the

circumstances there was no necessity for the assessee to keep the transactions out of his accounts. In paragraph 5 of its order the Tribunal

recorded:

It can only be regarded as a case were the appellant did maintain accounts in respect of the suppressed transactions but failed. We are not

prepared to hold ""wilfully"" to produce that account before the assessing authority.

There was no specific finding by the Tribunal that the assessee, who had been a licensee, did not contravene the provisions of Section 13 of the

Madras General Sales Tax Act. It is difficult on the basis of the order of the Appellate Tribunal for us to substitute a categorical finding. We,

therefore, direct the Tribunal to submit a finding on the evidence, which was already considered, on the question, whether there was a

contravention of Section 13of the Madras General Sales Tax Act. Finding to be submitted within one month.

[In pursuance of the above order, the Chairman of the Sales Tax Appellate Tribunal, Madras, has submitted a finding, dated 30th April, 1956.

After discussing the facts and circumstances the conclusion was:

He relied upon his regular accounts for the purpose of giving the figure of Rs. 46,230-13-11 as his turnover for the year and made no reference at

all to the entries in the pocket note-book. He cannot, therefore, rely upon the entries in the pocket note-book as entries duly brought forward into

the regular accounts; they must be put in the category of entries suppressed from the regular accounts. It is no doubt true that the Tribunal has

observed in para. 5 of its prior order that this is ''a case where the appellant did maintain accounts in respect of these suppressed transactions but

failed - we are not prepared to hold ''wilfully'' - to produce that account before the assessing authority . In view of the above discussion, the only

accounts on which the dealer relied upon for giving his turnover for the year were the regular Day Book and Ledger, but in the light of the entries in

the secret account-book above mentioned, it must be held that the regular accounts on which he relied upon were untrue and incorrect and that he

failed to discharge one of the obligations imposed on him under the terms of the licence, viz., the compliance with Section 13of the Act in the

matter of maintenance of true and correct accounts.

It may be true that more than one reason can be suggested as to why he did not bring to the regular accounts the entries in the pocket note-book,

but we do not wish to speculate on this. The issue referred to us for consideration is the brief one about the maintenance of true and correct

accounts as provided in Section 13. We give the finding that during the year of assessment the dealer failed to keep and maintain a true and correct

account showing the goods sold and bought by him and the value thereof.]

The case then came on for final hearing. The Order of the Court was pronounced by:

Rajagopalan, J.

The assessee held a licence during the assessment year in question as a dealer in cotton. The accounts he furnished were not accepted as

correct. A note-book which he stated he had maintained for his personal use contained some entries. The taxing authorities held that part of the

turnover of the assessee had been suppressed from the regular accounts he maintained and produced for the inspection of the departmental

authorities. So, in addition to the turnover he had disclosed, an estimate was made of what he had suppressed, and it was on the total that he was

assessed to sales tax.

When the matter came up before the Appellate Tribunal, it held in paragraph 5 of its order:

In our view this is not a proper case where the appellant should be taxed at 3 pies. At the worst it can only be regarded as a case where the

appellant did maintain accounts in respect of these suppressed transactions but failed, we are not prepared to hold ''wilfully'' - to produce that

account before the assessing authority. We take the view that in respect of the suppressed turnover or the turnover which is estimated as

suppressed the appellant can be called upon to pay tax at one-half of one per cent.

It was this direction of the Appellate Tribunal, that the Government sought to revise by the application preferred to this Court u/s 12-B of the

General Sales Tax Act.

The contention of the learned Government Pleader was, that u/s 6-A of the Act, the assessee, having broken the conditions of the licence that

had been issued to him and held by him during the assessment year in question, forfeited his right to the concessional rate of 1/2 per cent, and that

he was liable to pay the full amount u/s 3 of the Act.

As there was no specific finding recorded by the Tribunal, that the conditions of the licence held by the assessee had been contravened, we

called for such a finding on that issue. That finding has been submitted by the Tribunal and it is against the assessee. The finding was supported by

evidence on record, and we accept that finding, as we must.

If a condition of the licence held by the assessee was contravened, Section 6-Aundoubtedly comes into play.

Section 6-A, however, does not make it obligatory on the assessing authority to deprive the licensee of any statutory concession to which he is

entitled. Section 6-A is only permissive. The use of the expression ''may'' would appear to leave the discretion to the assessing authority, which

discretion, of course, could also be exercised by the Appellate Tribunal. Where circumstances do justify the exercise of the discretion in favour of

the assessee the Appellate Tribunal has jurisdiction to direct that the full tax which the assessee, who had contravened the condition of the licence

held by him, would be liable to pay under the charging sections, for example, Section 3, should be levied. The discretion to be used, of course,

must be used judicially.

Paragraph 5 of the order of the Appellate Tribunal, which we have extracted above, would appear to indicate that the Tribunal, in the exercise

of its discretion, decided that even on the estimated turnover, which was held to have been suppressed it was enough if the assessee was called

upon to pay at the concessional rate to which he would have been entitled had he not broken any condition of the licence held by him. The Tribunal

apparently overlooked the scope of Section 6-A when it gave that direction. The Tribunal no doubt regarded that the suppression had not been

wilful. But the Tribunal did not even go into the question, in the first instance, whether the suppression of the turnover constituted a breach of the

condition of the licence held by the assessee. Since a really relevant factor was not taken into account, we are unable to hold that the discretion

exercised by the Tribunal is entitled to that sanctity, which we must normally accord to an order passed based on a discretion vested in a statutory

Tribunal.

We set aside the order of the Tribunal, and direct that the appeal be remanded for disposal afresh by the Tribunal. No order as to costs.