GIRDHARILAL NANNELAL Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) THIS judgment shall also govern the disposal of Miscellaneous Civil Case. No. 14 of 1968 (Girdharilal Nannelal, Burhanpur v. The Commissioner of Sales Tax, Madhya Pradesh ). These are two references under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958. Some questions have been referred to us by the Board of Revenue in both these cases. The assessee in both these cases is a firm "m/s. Girdharilal Nannelal" of Burhanpur, which deals in cotton and cotton seeds. Two periods are involved in these references. The first period is from Diwali of 1950 to Diwali of 1951 and the second period is from Diwali of 1951 to Diwali of 1952. Since some questions of fact and law are common between the two periods, both these cases were dealt with by the Board of Revenue together and referred by a common order making a common reference. The questions that have been referred to this court are as follows:-

(2.) THE first question, which is in two parts, relates to a sum of Rs. 10,000 which was found credited to the account of the wife of one of the partners Kanji Devsi in the first period mentioned above. The case of the assessee with regard to this amount was that Shri Kanji Devsi had paid a sum of Rs. 10,000 to his wife in the year 1941 in order to induce her to agree to her marriage with him, and this amount remained in her possession and was deposited by her in the business during the first period now in question. This explanation was not accepted by any of the taxing authorities mainly on the ground that there was no proof of such payment except the bare statement of the partner. This partner had a personal account in the books of account and even in that account no withdrawal of such a sum was shown in the year 1941 when it was alleged to have been given to his wife. Having rejected the explanation given by the assessee, the taxing authorities assumed that this amount represented profit arising out of some concealed sales relating to this business. This inference was challenged by the learned counsel appearing for the assessee and his contention was that merely on account of some amount having been shown as credited in the account books, it was not reasonable to infer that it reflected profit arising out of concealed sales. According to him, income could have been derived in many other ways and the principle applied by the income-tax department was not applicable to such an inference being drawn in the case of sales tax. After giving careful thought to the matter, we are unable to agree with the learned counsel. When a sum of money is shown in the accounts of a particular business and no reasonable explanation has been given by the assessee to show how the amount was received, it is reasonable to infer that the amount reflected profit of that business which means necessarily out of sales not shown in the account books. The first part of this question, therefore, must be answered in the affirmative.

(3.) SINCE the average profit shown is on the basis of sales which are reflected in the account books, a profit of about ten per cent. has been calculated. It is, therefore, reasonable further to infer that this profit of Rs. 10,000 arose out of sales which were to the extent of Rs. 1,00,000, and, consequently, that inference drawn by the department that sales to the extent of Rs. 1,00,000 were not reflected in the account books was correct. The result, therefore, is that the second part of the question must also be answered against the assessee.