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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs.  4465-4468 OF 2014 (Arising out of SLP (C) Nos.22912-22915 of 2009)

M/s Nathu Ram Ramesh Kumar … Appellant

Versus

Commr. of Delhi Value Added Tax        …  Respondent

J U D G M E N T

Anil R. Dave, J.

1. Leave granted.

2. Being aggrieved by the judgment delivered by the High  

Court of Delhi in STC Nos.1 and 2 of 2008 and CM Nos.2161  

and 2162 of  2008,  these  appeals  have  been filed  by  the  

appellant assessee.   The assessee has been aggrieved by  

the assessment orders as well as the orders of penalty.  As

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both the appeals pertain to the assessee-appellant,  at the  

request of the learned counsel, they were heard together.   

3. The  facts  giving  rise  to  the  present  litigation,  in  a  

nutshell, are as under :

The appellant - assessee has been registered under the  

Delhi  Sales  Tax  Act,  1975  (hereinafter  referred  to  as  the  

‘Act’) as well as under the Delhi Value Added Tax, 2004 and  

is  carrying  on  the  business  of  manufacture  and  sale  of  

sweets,  namkeens and other eatables.  On 9th March, 2000  

and  10th March,  2000,  officers  from  the  office  of  the  

Commissioner of Sales Tax had visited business premises of  

the appellant-firm and had recorded statements of partners  

of the appellant-firm and had also checked total cash inflow  

on  those  days.   On  those  two  days,  sale  proceeds  were  

Rs.2,13,974/-  (Rupees  two  lac  thirteen  thousand  nine  

hundred and seventy four only) and Rs.1,98,009/- (Rupees  

one lac ninety eight thousand and nine only) respectively.

At  the  time  of  assessment  for  the  Assessment  Year  

1999-2000, it  was found by the Assessing Officer that the  

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assessee had not shown its income correctly and therefore,  

the  Assessing  Officer  had  taken  into  account  the  facts  

gathered  on  the  aforesaid  two  days  for  the  purpose  of  

assessing total sales.  On the basis of the gross receipts of  

sale effected on the aforestated two days, average receipts  

per day had been calculated and the Assessing Officer had  

come to a conclusion that the sale proceeds of the assessee  

for  the  relevant  year  was  Rs.7,51,86,350/-  (Rupees  seven  

crore fifty one lacs eighty six thousand three hundred and  

fifty  only).   Before  coming  to  the  said  conclusion,  the  

assessee was given an opportunity to explain its books of  

accounts, as there was substantial discrepancy between the  

receipts  shown  in  the  books  of  accounts  and  the  gross  

receipts which were actually found on the aforestated two  

days.  It was, prima facie, believed by the Assessing Officer  

that the assessee had not given accurate details about the  

gross receipts.   

Similarly  for  the  Assessment  Year  2000-2001,  on  

24.10.2000 also there was a surprise visit  to the place of  

business of the appellant-assessee and even on that day it  

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was found by the officers that there was discrepancy in cash  

on hand and cash as per books of accounts. Moreover, they  

also found that there was discrepancy in stock as the actual  

stock and stock as per books of accounts were not same.  

Thus, once again it  was found that the books of accounts  

maintained by the appellant-assessee were not in order.

In spite of issuance of notice and giving hearing to  the  

appellant-assessee  firm,  sufficient  explanation  was  not  

provided to the Assessing Officer and therefore, assessment  

for  Assessment  Year  1999-2000  was  made  under  Section  

23(3) of the Act.  As the Assessing Officer had come to a  

conclusion  that  correct  books  of  accounts  had  not  been  

maintained, penalty was also imposed upon the assessee by  

assessment order dated 31.12.2001 for the said assessment  

year.  Similarly, for the Assessment-Year 2000-2001 also, the  

books  of  accounts  had not  been maintained properly.   In  

view of the said fact the Assessing Officer had taken into  

account figures of sales arrived at by him for the Assessment  

Year  1999-2000 and had added 10% thereon as that  was  

considered to be a normal growth of the business in normal  

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circumstances,  thereby  arriving  at  gross  sales  for  the  

Assessment Year 2000-2001.

Being aggrieved by the above mentioned assessment  

orders,  the  assessee  had  preferred  appeals  before  the  

Commissioner of Sales Tax, which had been dismissed by an  

order  dated  13.11.2003  and  therefore,  the  assessee  had  

preferred appeals before the Appellate Tribunal of Sales Tax,  

which had also been dismissed by a common order dated  

03.11.2004.

Thereafter, the appellant-assessee had approached the  

High Court  by filing STC Nos.1 and 2 of  2008.   The High  

Court was also pleased to dismiss the said Reference Cases  

after giving hearing to the concerned parties by a common  

judgment dated 19th May, 2009 as no question of law was  

involved in  the  said  cases.   The said  judgment  has  been  

challenged in the present appeals.

4. The  learned  counsel  appearing  for  the  appellant-

assessee had mainly submitted that the assessment orders  

were  passed  under  Section  23(3)  of  the  Act  as  the  

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authorities were not satisfied with the details furnished by  

the appellant-assessee.  In the aforestated circumstances, it  

was obligatory on the part of the assessing authority to issue  

notice and give hearing to the assessee so that appropriate  

explanation  could  be  given  to  the  authorities  by  the  

assessee.  As no notice was given to the assessee before the  

assessment, the impugned assessment orders as well as the  

orders passed in appeal are bad in law.  Thereafter, it had  

been submitted that merely on the basis of two visits to the  

business  place  of  the  appellant-assessee,  the  Assessing  

Officer could not have jumped to a conclusion that the sale  

proceeds  received  on  those  two  days  were  standard  or  

normal and therefore, on the basis of those sale proceeds,  

assessments could not have been made.  It had been further  

submitted  that  in  the  business  of  the  assessee,  being  a  

dealer in eatables, normally there would be huge variation in  

sale on different days.  On a particular day, sale proceeds  

could be more than rest of the days and therefore, on the  

basis of some selected days, i.e., 9th and 10th March, 2000  

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and 24th October, 2000, the Assessing Officer could not have  

made the assessments.

5. It had been further submitted that the penalty imposed  

upon the appellant-assessee was based on guess work or  

conjectures.  There was no basis for the Assessing Officer to  

believe  that  the  books  of  accounts  maintained  by  the  

assessee  were  not  correct  and  the  facts  found  on  those  

selected days when there were surprise visits by the officers  

of the Department were normal, i.e., the assessee was every  

day getting the same amount by way of sale of eatables.  

Moreover,  adjustments  regarding  the  amount  of  tax  

recovered  had  not  been  made  while  calculating  the  

estimated sales.

6. For  the  aforestated  submissions,  the  learned counsel  

appearing for the appellant-assessee had submitted that the  

judgment  of  the  High  Court,  confirming  the  assessment  

orders, should be quashed and set aside and even the orders  

imposing penalty should be quashed.

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7. On the other hand, the learned counsel appearing for  

the Revenue had submitted that it  was apparent that the  

appellant-assessee  was  not  correctly  showing  all  

transactions in his books of accounts.  The said fact could be  

very well seen when the representatives of the Department  

had visited the place of business of the assessee on 9 th and  

10th March,  2000  and  on  24th October,  2000.   The  sale  

proceeds, which had been meticulously recorded on those  

two days in accounting year 1999-2000 were Rs.2,13,974/-  

and Rs.1,98,009/-  respectively  whereas total  sales  for  the  

said year was much less. In the aforestated circumstances,  

average sale of the aforestated two days was calculated and  

multiplying  the  same  by  365  (days  of  the  year),  the  

Department had arrived at a figure of estimated sales for the  

year  1999-2000  and  similarly  after  making  a  reasonable  

addition of 10%, sale for the  Assessment Year 2000-2001  

had been arrived at.

8. In spite of the notice issued to the assessee for giving  

explanation  with  regard  to  the  discrepancy,  the  assessee  

could not  give any satisfactory explanation and therefore,  

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the Assessing Officer was constrained to presume that the  

books  of  accounts  were  not  maintained  properly  by  the  

appellant- assessee.   

9. As the Assessing Officer  had come to  the conclusion  

that the books of accounts had not been properly maintained  

with an oblique motive, penalty was rightly imposed upon  

the assessee and the quantum of penalty imposed was also  

just and proper.   

10. For  the  aforestated  reasons,  the  learned  counsel  

appearing  for  the  Revenue  had  submitted  that  the  

assessment  orders,  which  had  been  affirmed  by  all  the  

authorities below and the High Court are just and proper and  

they need not be interfered with.

11. We had heard the learned counsel for the parties and  

had  also  considered  the  relevant  orders  as  well  as  legal  

submissions made by the counsel.

12. We do not find any substance in the submissions made  

on behalf  of  the appellant-assessee and therefore, we are  

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not  inclined  to  allow  the  appeals  for  the  reasons  stated  

hereinbelow :

(i) The  appellant-assessee  is  making  and  selling  

sweets, namkeens and other eatables.  It appears from  

the  record  that  when  an  individual  customer  was  

buying eatables of a nominal  value,  possibly bill  was  

not  being  issued.   There  was  no  specific  method  

whereby each and every receipt from the buyers was  

recorded  by  the  assessee.   In  the  aforestated  

circumstances,  possibly  due  to  some  doubt,  which  

might have arisen, a special search or inspection was  

made  on  9th and  10th March,  2000  and  total  sale  

proceeds  had  been  meticulously  recorded  and  

calculated, which have been stated hereinabove.  On  

the basis of the receipts of those two days, considering  

them as a representative sample, the Assessing Officer  

had come to  a  conclusion  that  the  sale  proceeds  or  

sales  of  the  appellant-assessee  for  the  year  should  

have been a particular amount and, in fact, the amount  

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reflected in the books of accounts was much less than  

the calculations arrived at by the Assessing Officer.

(ii) It is pertinent to note that the Assessing Officer did  

not jump to a conclusion without any rhyme or reason.  

The Assessing Officer had called upon the assessee to  

explain the difference but the assessee could not or did  

not give sufficient explanation as to how the total sale  

on the basis of the average daily sale arrived at by the  

Assessing Officer was not correct.  One can very well  

presume that in case of a dealer dealing in eatables,  

and specially sweets and namkeens, on a particular day  

like a holiday or on account of some festivity, total sale  

can be more than other days.  For example, sale would  

normally  be  more  on  Saturdays,  Sundays  and  other  

holidays because more people would be visiting such  

eateries.  In the instant case, had those two days, when  

business premises of the assessee was inspected and  

the sale  proceeds were  recorded,  been some special  

days,  the  assessee  could  have  placed  those  special  

facts before the Assessing Officer, but nothing of that  

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sort was done.  In the circumstances, in our opinion, the  

Assessing  Officer  had  rightly  come to  the  conclusion  

that the books of accounts maintained by the assessee  

were  not  showing  correct  sales  and  therefore,  the  

conclusion  arrived  at  by  him  cannot  be  said  to  be  

incorrect.   There  was  a  reasonable  basis  for  him  to  

arrive  at  the  said  conclusion,  especially  when  the  

assessee did not offer any satisfactory explanation in  

spite of issuance of notice.

(iii) The  submission  made  by  the  learned  counsel  

appearing for the appellant-assessee that no notice was  

issued, as required under the Act, before framing the  

assessment is also not correct.  The assessment orders  

refer to notices issued to the assessee and they also  

record  the  fact  that  no  satisfactory  explanation  had  

been offered by the appellant-assessee to make out a  

case that there was some special reason for which sale  

of sweets,  namkeen etc.  on 9th and 10th March, 2000  

was exceptionally more.

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(iv) Once the Assessing Officer had rightly come to the  

conclusion that the books of accounts were not properly  

maintained  and  were  not  reflecting  each  and  every  

transaction,  in  our  opinion,  the Assessing Officer  had  

rightly come to a conclusion that total possible sale was  

much  higher  and  the  conclusion  so  arrived  at  was  

based on sound reasons.  We also do not agree with the  

learned  counsel  for  the  assessee  that  proper  

adjustments regarding sales tax had not been made by  

the Assessing Officer in the process of the assessment.

(v) Once it  is  found that with some oblique motive,  

effort was made to show lesser sale proceeds than the  

actual,  the  orders  imposing  penalty  can  not  be  

questioned.  We are, therefore, not inclined to interfere  

even with the quantum of penalty.

13. For  the  aforestated  reasons,  in  our  opinion,  the  

impugned judgment delivered by the High Court is just and  

proper,  which  does  not  require  any  interference  and  

therefore,  the  appeals  are  dismissed  with  no  order  as  to  

costs.

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                                        …………………………….,J.

                        (Anil R. Dave)

                                       …………………………….,J.         (Dipak Misra)

New Delhi; April 9, 2014

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