R. Mookerjee - (1.) THIS reference has been made to this Larger Bench by a learned single Bench in the following circumstances: - The non-applicant is a dealer under the Rajasthan Sales Tax Act. The Commercial Taxes Officer, Survey & Investigation, Ajmer found certain account books in which the dealer having made sales on credit did not show them during his assessment for the year. Consequently after observing the necessary formalities, the assessing authority concluded that a certain net taxable turnover had escaped assessment on which additional tax was levied by recourse to best of judgment assessment. A penalty was also levied for evasion of tax. On appeal to the Deputy Commissioner (Appeals) he held that in matters of escapement of turnover from sales tax a best judgment assessment was not permissible under the law and that in such cases the assessing authority must find out the actual turnover which had escaped assessment. For this he relied upon the case of Messrs Radhey Shyam Bakery Ajmer vs. State reported in 1968 RRD 417. He, therefore, set aside the assessment order and remanded the case to the assessing authority for disposal in accordance with law with the direction to find out the actual turnover which had escaped assessment. The State came up in revision against this order and it was heard ex-parte.
(2.) THE learned single Bench was of the opinion that in the facts and circumstances of the case the best judgement assessment made by the assessing authority was reasonable and proper and that on the material available to him it was not possible for him to find out the actual turnover which had escaped assessment as the necessary material on which the actual turnover could have been calculated was not produced by the dealer. As mentioned by the learned single Member (Shri S. P. Mathur) the only question that requires consideration is whether a best of judgment assessment in a case of escaped turnover is permissible under the law. He has observed that the rule in 1968 RRD 417 undoubtedly supports the view of the learned Deputy Commissioner (Appeals ). In this case the judgment discussed the rulings of the various High Courts on the point at issue available to the Court when it delivered judgment on 4-11-66. THE learned single Member has, however, not expressed any opinion on the correctness or otherwise of the view taken in the said judgment because an Explanation was added to sec. 12, Sales Tax Act 11 of 1969 after delivery of the judgment which in his opinion requires the matter to be reconsidered afresh. He, therefore, referred the following question to this larger Bench: - "what is the effect of the Explanation added to sec. 12 of the Rajasthan Sales Tax Act, 1954 by Act 11 of 1969 ? Would it be permissible under the law for the Assessing Authority to make a best judgment assessment in cases falling u/sec. 12 ? Will such best judgment assessment be permissible even in respect of cases relating to the period prior to Act No. 11 of 1969?" The learned Government Advocate referred to S. 12, Sales Tax Act to which the aforesaid Explanation was added on 2-5-69 by Act No. 11 of 1969. Sub-sec. 1 of sec. 12 with its explanation is reproduced below: - "sec. 12 - Assessment of tax and levy of exemption fee or registration fees incorrectly assessed - (1) If for any reason the whole or any part of the business of a dealer has escaped assessment to tax, or if registration fee or exemption fee has escaped levy or has been assessed at too low a rate in any year, the assessing authority may serve on the dealer liable to pay the tax in respect of such business or such registration fee or exemption fee a notice in the prescribed form and may proceed to assess or reassess the amount of the tax or levy the correct amount of registration fee on exemption from such dealer. Provided that if a Deputy Commissioner (Administration) has reason to believe that the whole or any part of the business of a dealer has escaped assessment to tax or has been under-assessed or has been assessed at too low a rate, he may at any time subject to the time limit specified in sub-sec. (2), either direct the Assessing Authority to assess or reassess the amount of tax or himself proceed to assess or re-assess the tax. Explanation: - Nothing in this section shall be deemed to prevent the assessing authority from making an assessment to the best of his judgment. " The learned Government Advocate pointed out that no substantive law was laid down by adding this explanation but it was only a clarification of the law which was already existing and the point at issue is whether there can be a best judgment assessment for escapement also. He referred to the provisions for best judgment assessment contained in Sec. 10 (1) (b) which reads as follows: - "sec. 10 (1) (b) If no return has been submitted by the dealer under sub-sec. (1) of sec. 7 within the period prescribed in that behalf, or if any return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as he considers necessary assess the tax to the best of his judgment. Provided that before taking action under this sub-section, the dealer shall be given a reasonable opportunity of proving the correctness of any return submitted by him". * He also referred to Sec. 12 (1) which provides for assessment or re-assessment which has been quoted above and asserted that an explanation which only purports to explain what the main provision means must be regarded as retrospective in scope and cited 1965 S. T. G. XVI 671 in support. He stated that this rule was followed in revision No. 144/69. Messrs Meharddin Sikka vs. State decided on 6 11-71. He then cited the case of Jayanti Lal Thakur Dass vs. State of Gujrat reported in 1969 S. T. C. XXIII 11 to show that according to Sec 14 or 15 of the Bombay Sales Tax Act 1953 the assessing authority is entitled to assess or re-assess the amount of tax due from a dealer. It is open to the assessing authorities to treat the books of account of a dealer as independable and on the material before them to come to their own conclusion regarding the sales which have been suppressed. The authorities however have to base their conclusions on some material before them. If there is no material before them it is not permissible for them to resort to pure guess work. The original assessment proceedings and `reassessement proceedings are to stand on the same footing and in both proceedings the authority concerned has to follow the same procedure. Therefore the power of best judgment which can be exercised in respect of an original assessment can be exercised in reassessment proceedings also. He also referred to the case of Commr. of S. Tax, M. P. Indore vs. Kunte Bros. reported in 1962 S. T. C. XIII 366 in which the same view was taken in relation to sec. 10 of the Madhyabharat Sales Tax Act 1950. Shri R. G. Ghiya appearing as an amicus curiae pointed out that it was clear from the Gujrat High Court case reported in 1969 S. T. G. XXIII 11 that there is no clause in the Andhra Pradesh legislation enabling the power of best judgment exercisable in original assessment to be exercised also in reassessment proceedings and therefore the rule in 1965 S. T. C. XVI 54 has been distinguished and this case in its turn has been dissented from the rule in 1952 S. T. G. Vol XIII 366 also cited on behalf of the State. Learned counsel then referred to the case of P. S. Subramaniam Chettiar & Sons vs. Joint Commercial Tax Officer III Dindigul reported in 1966 S. T. C. XVIII 357 in which the full Bench of the Madras High Court has held that sec. 16 (1) of the Mad. General Sales Tax Act, 1959 does not include the power to assess escaped turnover by best judgment and under that section the power of the assessing authority is confined to the turnover actually proved by evidence to have escaped assessment. The legislative history of the sales tax provisions also supports this view. In a taxing statute like any other statute there is no room for implication of a power which is not there expressly given and that in the taxation laws of the country assessment by best judgment as a distinct category of power has come into practice and wherever the legislature thought fit, it expressly conferred that power upon the assessing authority. This judgment overruled 1964 S. T. C. XV 784 and and relied on 1965 S. T. C. XVI 54. Learned counsel then referred to the case of Udipi Vasanta Vihar vs. The Peputy Commercial Tax Officer, Guntur, 1 reported in 1969 S. T. C. XXIII 6 in which the circumstances were said to be exactly similar to those in the instant case. The law was amended to expressly provide for best judgment assessment in case of escaped turnover and the question was whether it had retrospective application. It was held that the amended provision did not relate merely to procedure but being a provision affecting substantive rights had no retrospective effect so as to affect the assessments made before it was amended. He then referred to the case of State of Raj. vs. M/s. Hazarilal Ghasilal reported in 1971 R. R. D. 223 which held that the explanation to sec. 12, Sales Tax Act became effective from the date the Act was amended and it did not have retrospective effect. The said judgment has not relied upon the rule in 1965 S. T. G. XVI 671 cited in support of the contention that the explanation has a retrospective application. How to construe the scope of an explanation with reference to the main section was decided by the Supreme Court in the State of Bombay vs. United Motors reported in 1953 S. T. C. IV 133. Learned counsel stated that the so-called explanation added to sec. 12, of the Act does not explain what is already in that section but in fact confers a new and additional power. He also referred the Supreme Court judgment in The Bengal Immunity Company vs. State of Bihar and others, reported in 1955 S. T. C. VI 446 to show that an explanation cannot be retrospective if it conferred a new power at a later date. Referring to sec. 10 (l) (b) and 10 (4) of the Act learned counsel argued that the best judgment assessment is possible under only certain specified circumstances which are lacking in sec. 12 and therefore no best judgment assessment can be made for escaped turnover retrospectively. Appearing as amicus curiae Shri B. K. Khetan referred to the three questions which have been raised in the reference. The first was about the effect of the explanation added to sec. 12, of the Act. Dealing with this point he argued that for a sale to take place, there must be a buyer and a seller and specific amount of consideration as sale price but not a speculative decision regarding the extent of the business. Turnover must be established by proving the sales which may have escaped. A safe which is subject to assessment has to be proved by the department as is implied by sec. 5 D. Best judgment assessment relates to the entire business. As provided by sec. 19 an assessment is final subject to appeal or revision. Sec. 12 relates to assessment of tax if for any reasons a dealer's business has escaped assessment that is to say those matters which should have been considered but were not considered under sec. 10 could be assessed or reassessed. Therefore for a best judgment assessment the actual sales have to be proved which cannot be accepted on a speculative basis. Learned counsel referred to sec. 10 (1) (b) and sec. 10 (4) (b) which provide for best judgment assessment. He particularly referred to the latter sub-section which states that the assessing authority shall assess the dealer to the best of his judgment and determine the tax payable on the basis of such assessment. He, therefore, argued that determination of tax and turnover are two different things and the explanation to sec. 12 does not mean a determination of turnover but only the assessment of the quantum of tax which has not been already assessed. He referred to the case of Messrs Asha Nand Laxmi Chand vs. State reported in 1972 TR VI 13 which held that sec. 12 (I) authorises the assessing authority to act if for any reason the whole or any part of the dealer's business has escaped assessment to tax. Referring to sec. 5 learned counsel pointed out that the rate of tax is based on taxable turnover defined in sec. 2 (s) as whole or part of the turnover which in turn is defined in sec. 2 (t) as the aggregate amount of the sale prices received or receivable and therefore turnover does not mean only some price which are presumed to have been received. A sale according to sec. 2 (o) must have a buyer and seller and must be for cash or deferred payment. Dealing with the second point in the reference whether the law permits the assessing authority to make a best judgment assessment in cases under sec. 12, learned counsel contended that to make a best judgment assessment under sec. 12 the assessing authority would have to follow the procedure laid down in sec. 10 and sec. 7 (1) and call for returns from the dealer because no procedure has been provided under sec. 12 for making a best judgment assessment. Learned counsel therefore maintained that a best of judgment assessment cannot be made under the Explanation to sec. 12 and he supported the arguments of Shri R. C. Ghiya that even if it is held that a best of judgment assessment is possible prospectively it cannot have any retrospective operation. Shri Padam Kumar Jain also appearing as amicus curiae referred to the case of State vs. Heera Lal reported in 1968 RRD 426 to slow that the explanation added to sec. 12 does not authorise the assessing authority to go beyond that section which it does not enlarge. He then referred to the case of Radhey Shyam Bakery vs. State reported in 1968 RRD 417 to show that a specific finding must be given about any escapement which cannot be established by mere implication. In reply the learned Government Advocate referring to the arguments advanced by the amicus curiae said that they were hypothetical and academic in character. He referred to the Deputy Commissioner's order of 7-12-66 arising out of the assessment order of 20-7-65 and maintained that the revision which was made by the State before the Board was that best of judgement assessment could be made for escapement, of which this reference was made. He referred to the case of State vs. Messrs. Agarwal B. T. & Sons reported in 1972 RRD 234 and said that sec. 12 enables the assessing authority to reassess also when assessment had been made at too low a rate and the power to reassess is not confined to registration or exemption fee. In this the DB followed the rule laid down in 1968 ILR 188. He then referred to the case of Kashi Jewellers vs. Commissioner of Sales Tax UP reported in 1969 STC XXIII 291 in which it was held that a best judgment assessment can be made even in the case of reassessment under sec. 21 (1) of the UP Sales Tax Act 1948. It was pointed out in this connection that in sec. 12 of the Act reassessment has also been provided. The learned Government Advocate contended that the only point for decision is whether the best of judgment assessment alter the addition of the explanation should be prospective or retrospective. .- We shall first consider the question whether the explanation added to sec. 12 by Act No. 11 of 1969 does have any retrospective effect. It was contended on behalf of the State citing 1965 STC XVI 671 that an explanation which only purports to explain what the main provision means must be regarded as retrospective in scope. The said explanation confers on the assessing authority the power to make an assessment to the best of his judgment but it certainly does not purport to explain what the main provisions of that section are. We are also fortified in our opinion by the decision in 1969 STC Vol. XXI11 6 that the corresponding section in the Andhra Pradesh Sales Tax Act is not a provision merely affecting procedure but affecting substantive rights and therefore the amended section cannot be given retrospective effect so as to affect the assessment completed before the amendment came in to force. Prior to the amendment the powers of the assessing authority under sec. 12 were confined to assessing or reassessing the amount of Tax which had escaped assessment but it did not enable him to make a best judgment assessment and it is only by virtue of the amendment that he has been empowered to do so. That said amendment has not been expressly or even by implication made retrospective. We, therefore, hold that the explanation to sec. 12 cannot have any retrospective effect. The next point for determination is whether by virtue of the explanation added to sec. 12 the assessing authority can make an assessment or re-assessment to the best of his judgment if for any reason the whole or any part of the business of a dealer has escaped assessment to tax etc. It has been contended by Shri B. K. Khetan that as no procedure for making best judgment assessment has been provided in sec 12, the assessing authority will have to follow the procedure laid down in sec. 7 (1) and 10 for doing so and therefore no best judgment assessment can be made under sec. 12. We are unable to agree with this reasoning. The entire Act has to be considered as a whole as one enactment of which the various sections are inseparable and complementary parts and they move together. Provision for best judgment assessment has been made in sec. 10 (l) (b) quoted above as also in Sec. 10 (4) (a) and (b) by which the assessing authority shall assess the dealer to the best of his judgment and determine the tax payable on such assessment. Therefore as power for making best judgment assessment or reassessment of the escaped business etc. liable to tax or levy has been expressly conferred by adding the Explanation to sec 12, such power will have to be exercised in the manner in which it is done according to the procedure laid down therefor elsewhere in the Act. An apprehension has been expressed in this connection by Shri Khetan that such best judgment may be made on a wide speculative basis without any relation to the actual sales or taxable turnover. To set such fears at rest we could do no better than refer extensively to the judgment of the Supreme Court in the case of the State of Kerala vs. C. Velukutty reported in 1966 S. T. C. Vol. XVII 465 by which their Lordships observed that under sec. 12 (2) (b) of the Travanacore Cochin General Sales Tax Act, 1125 M. E , power is conferred on the assessing authority in the circumstances mentioned thereunder to assess the dealer to the best of his judgment. The limits of the power are implicit in the expression "best of his judgment". Judgment is a faculty to decide matters with wisdom, truly and legally. Judgment does not depend upon the arbitrary caprice of a judge, but on settled and invariable principles of justice. Though there is an element of guesswork in a best judgment assessment, it shall not be a wild one, but shall have a reasonably nexus to the available material and the circumstances of each case. Though sub-sec. (2) of sec. 12 of the Travancore Cochin Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously regard without for the available material. It was held therein on facts that from the discovery of secret accounts in the head office it did not necessarily follow that a corresponding set of secret accounts were maintained in the branch office. However, if secret accounts were maintained in the branch office, that might lead only to an inference that the accounts disclosed did not comprehend all the transactions of the branch office, but that did not establish or even probabilise the finding that 135 per cent, or 200 per cent, or 500 per cent of disclosed turnover of the branch office was suppressed. That could have been ascertained only from other materials. The assessments were arbitrarily made applying a ratio between disclosed and concealed turnover in one shop of the respondent. It was only a capricious surmise unsupported by any relevant material and assessments could not be sustained. The significant point which has to be emphasized is that a best of judgment assessment though made because of the default of the assessee cannot be based on wild surmise, caprice or arbitrary presumptions but must be reasonable and positively related to the facts and material available so that the actual turnover which may have escaped assessment, is assessed as accurately as possible. As a result of these discussions, we answer the three questions posed in the reference as follows : - (i) The effect of the explanation added to sec. 12 (1) of the Rajasthan Sales Tax Act 1954 by Act No. 11 of 1969 is that best of judgment assessment or re-assessment can be made if the whole or any part of the business of any dealer has escaped assessment to tax etc. as mentioned in that section. (ii) It therefore follows that the assessing authority can make a best of judgment assessment or re-assessment in cases under sec. 12 (1) but such judgments must be strictly in accordance with the principles enunciated above. (iii) Such best judgment assessments cannot have a retrospective operation i. e. such assessment or re-assessment will not be permissible in respect of cases relating to the period prior to the date when Act No. 11 of 1969 came into force whereby the said explanation was added to sec. 12 (1 ). . ;