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CASE NO.: Appeal (civil)  4913 of 2006

PETITIONER: Commissioner, Sales Tax, U.P.

RESPONDENT: M/s Mohan Brickfield, Agra

DATE OF JUDGMENT: 13/11/2006

BENCH: ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T (Arising out of S.L.P. (C) No. 19958 of 2005

ARIJIT PASAYAT, J.

       Leave granted.          The Commissioner of Sales Tax, Uttar Pradesh, calls in  question legality of the order passed by a learned Single Judge  of the Allahabad High Court allowing the revision petition filed  by the respondent under Section 11 of the Uttar Pradesh  Trade Tax Act, 1948 (in short the ’Act’).  The dispute relates to  the assessment year 1984-85.  The High Court set aside the  order passed by the Sales Tax Tribunal, Agra (in short the  ’Tribunal’) in Second Appeal No.129 of 1989. High Court by the impugned order observed that the  rejection of accounts on the ground that books of accounts  were not produced at the time of survey conducted on  29.3.1984 and 30.3.1985 was really of no consequence since  no defect was specifically pointed out in respect of books of  accounts produced at the time of assessment.   The factual position in a nutshell is as follows:- Respondent (hereinafter referred to as ’assessee’) at the  relevant point of time was carrying on business of  manufacturing and sales of bricks. Two surveys were  conducted in the business premises of the respondent on  29.3.1984 and 30.3.1985. But the books of accounts were not  produced on either of the dates. The Assessing Officer was of  the view that non-production of books of accounts at the time  of these surveys established that books of accounts were not  maintained in the regular course of business and, therefore,  were liable to be rejected. It was also noted that apart from the  fact that books of accounts were not produced as noted above,  two other factors existed to discard the books of accounts.   Firstly, the respondent-assessee had indicated the Fukai  period of seventy two days, but had shown lesser production.   The selling rate was found to be lesser than the rate prevailing  during the year in question when compared to sales at kilns in  the same vicinity.  No explanation was offered as to how this  was possible.  It was noted that the assessee did not disclose  the capacity of the kiln. Therefore, taking into account the  productions and rates in similar cases, the Assessing Officer  took the established norm of production to be one lakh bricks  in six days and accordingly fixed the production at 12 lakhs  bricks. Accordingly, assessment was completed to the best of  judgment. An appeal was preferred by the assessee before the

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Assessment Commissioner (Judicial), Range I. The said  authority with reference to the material on record found as  follows: (1)     No allowance for weightage for after  adjusting the opening and closing stock of  bricks outside kiln that 76000 and  2,08,000 respectively. The sale of burn  bricks was determined to be 13,68000  breaking allowance 58000 was given and  the sale was determined at 10,10,000  bricks.

For the year 1983-84 the average sale was determined at  Rs.280/- by the appellate authority.  Taking that into account  the sale rate was fixed at Rs.320/- for the year in question. An appeal was preferred by the assessee against the  Assistant Commissioner’s order before the Tribunal. The  Commissioner of Sales Tax also preferred appeal.  Both the  appeals were taken up together.  The Tribunal found that the  rejection of accounts was justified. Though reliance was  placed on certain decisions of the Allahabad High Court to  contend that when books of accounts were produced at the  time of assessment which were free from defect, it cannot be  held that they were not maintained in the regular course of  business, merely on the ground that at the time of survey they  were not produced. Tribunal found that that was not the only  reason for rejection of the accounts and other factors relating  to rates and low production were reflected. However, the sale  of bricks was fixed at nine lakh bricks. Accordingly the appeal  filed by the assessee was partly allowed and the revenue’s  appeal was dismissed.         The assessee filed revision application before the High  Court. As noted above, by the impugned judgment the learned  Single Judge allowed the same.   In support of the appeal learned counsel for the  appellant submitted that the High Court proceeded on  erroneous premises to hold that the only ground for rejection  of books of accounts was non-production of books of accounts  at the time of survey. As elaborately dealt with by the  Tribunal, that was not the only ground.  Even otherwise the  High Court’s view if accepted will render Sections 12 and 13 of  the Act redundant.  It is also pointed out that Section 11 of  the Act confers limited jurisdiction on the High Court to  interfere only on the question of law.  The High Court should  not have interfered with the findings of fact while exercising  the revisional jurisdiction.   The learned counsel for the assessee on the other hand  supported the order of the High Court. We shall first deal with the power of the High Court in  dealing with the revision petition.  Section 11 of the Act reads  as follows: "11. Revision by High Court in special  cases.\027(1) Any person aggrieved by an order  made under sub-section (4) or sub-section (5)  of Section 10, other than an order under sub- section (2) of that section summarily  disposing of the appeal, or by an order passed  under Section 22 by the Tribunal, may, within  ninety days from the date of service of such  order, apply to the High Court for revision of  such order on the ground that the case  involves any question of law. (2) Any person aggrieved by an order made by  the Revising Authority or an Additional  Revising Authority refusing to state the case

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under this section, as it stood immediately  before April 27, 1978, hereinafter referred to  as the said date, may, where the limitation for  making an application to the High Court  under sub-section (4), as it stood immediately  before the said date, has not expired, likewise  apply for revision to the High Court within a  period of ninety days from the said date. (3) Where an application under sub-section (1)  or sub-section (3), as they stood immediately  before the said date, was rejected by the  Revising Authority or an Additional Revising  Authority on the sole ground that the period  of one hundred and twenty days for making  the reference, as specified in the said sub- section (1), has expired, such applicant may  apply for revision of the order made under  sub-section (2) of Section 10, to the High  Court within sixty days from the said date on  the ground that the case involves any  question of law. (4) The application for revision under sub- section (1) shall precisely state the question of  law involved in the case, and it shall be  competent for the High Court to formulate the  question of law or to allow any other question  of law to be raised. (5) Every application for making a reference to  the High Court under sub-section (1) or sub- section (3), as they stood immediately before  the said date, pending before the Revising  Authority or an Additional Revising Authority  on the said date, shall stand transferred to  the High Court. Every such application upon  being so transferred and every application  under sub-section (4) as it stood immediately  before the said date, pending before the High  Court on the said date, shall be deemed to be  an application for revision under this section  and disposed of accordingly. (6) Where the High Court has before the said  date, required the Revising Authority or an  Additional Revising Authority to state the case  and refer it to the High Court under sub- section (4), as it stood immediately before the  said date, such authority shall, as soon as  may be, make reference accordingly. Every  reference so made, and every reference made  by such authority before the said date in  compliance with the requirement of the High  Court under sub-section (4), as it stood before  the said date, shall be deemed to be an  application for revision under this section and  disposed of accordingly. (6-A) Where the Revising Authority or an  Additional Revising Authority has, before the  said date, allowed an application under sub- section (1) or sub-section (3), as they stood  immediately before the said date, and such  authority has not made reference before the  said date, it shall, as soon as may be, make  reference, to the High Court. Every such  reference, and every reference already made  by such authority before the said date and  pending before the High Court on the said

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date, shall be deemed to be an application for  revision under this section and dispose of  accordingly. (7) Where an application under this section is  pending, the High Court may, on an  application in that behalf, stay recovery of any  disputed amount of tax, fee or penalty  payable, or refund of any amount due, under  the order sought to be revised : Provided that no order for the stay of  recovery of such disputed amount shall  remain in force for more than thirty days  unless the applicant furnishes adequate  security to the satisfaction of the Assessing  Authority concerned. (8) The High Court shall, after hearing the  parties to the revision, decide the question of  law involved therein, and where as a result of  such decision, the amount of tax, fee or  penalty is required to be determined afresh,  the High Court may send a copy of the  decision to the Tribunal for fresh  determination of the amount, and the  Tribunal shall thereupon pass such orders as  are necessary to dispose of the case in  conformity with the said decision. (8-A) All applications for revision or orders  passed under Section 10 in appeals arising  out of the same cause of action in respect of  the same assessment year shall be heard and  decided together. Provided that where any one or more of  such applications have been heard and  decided earlier, if the High Court, while  hearing the remaining applications, considers  that the earlier decision may be a legal  impediment in giving relief in such remaining  application, it may recall such earlier  decisions and may thereafter proceed to hear  and decide all the applications together. (9) The provisions of Section 5 of the  Limitation Act, 1963, shall, mutatis  mutandis, apply to every application, for  revision under this section. Explanation \026 For the purpose of this section,  the expression "any person" includes the  Commissioner and the State Government."

The parameters of exercising power under the said  provision were considered by this Court in Commissioner of  Sales Tax, U.P. v. Kumaon Tractors & Motors (2002 (9) SCC  379).  It was inter alia noted as follows: "8.               x     x       x       x       x        It appears that the High Court ignored the  provisions of Section 11 of the Trade Tax Act  which confers limited jurisdiction to interfere  with the order of the Tribunal only on the  question of law, that too the said question of  law is required to be precisely stated and  formulated. Instead of deciding the question  of law, the High Court simpliciter re- appreciated the evidence and ignored the  material documents maintained and produced  by the assessee, that is, books of accounts,  bills and Form ’C’ submitted by it. In this view

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of the matter, the impugned order cannot be  sustained."   

Apart from the fact that the High Court proceeded on  erroneous premises to hold that rejection of accounts was only  on the ground of non-production of accounts at the time of  survey, the conclusions are also not otherwise sustainable.   Sections 12 and 13 of the Act are relevant for the purpose.   They read as follows:   "12. Accounts to be maintained by dealers.\027 (1) Every dealer including a dealer exempted  from tax on payment of fee under any provision  of the Act, shall keep and maintain a true and  correct account showing the value of the goods  sold and bought by him, and in case the  accounts maintained in the ordinary course do  not show the same in an intelligible form, he  shall maintain true and correct account in  such form, as may be prescribed in this behalf Provided that this section shall not apply  to such dealers as are not liable to taxation  under this Act. (2)     A manufacturer liable to pay tax under  this Act shall, in addition to the accounts  referred to in sub-section (1), maintain stock  books in respect of raw materials as well as the  products obtained at every stage of production:  Provided that in the case of any class of  manufacturers, the aggregate of whose  turnover, as referred to in Clauses (a) to (d) of  sub-section (2) of Section 3, in an assessment  year does not exceed five lakh rupees, the  Commissioner, and in any other case the  State Government, may relax the  requirements of this sub-section subject to  such conditions and restrictions as he or it  may deem fit to specify. (3) The accounts and the stock books required  to be maintained under sub-section (1) or sub- section (2) shall be preserved by the dealer or,  as the case may be, by the manufacturer for  such period as may be prescribed."

"Section 13: Power to order production of  accounts and powers of entry and inspection.  - (1) Any officer empowered by the State  Government in this behalf may, for the  purposes of this Act, require any dealer to  produce before him any book, document or  account relating to his business and may  inspect, examine and copy, the same and  make such enquiries from the dealer relating  to his business, as may be necessary: Provided that books, documents and  accounts of a period more than four years  prior to the assessment year shall not be so  required, unless in any special case, for  reasons to be recorded, such officer considers  it necessary. (2) All books, documents and accounts  maintained by any dealer in the ordinary  course of his business, the goods in his  possession, and his place of business or  vehicle shall be open to search and inspection  at all reasonable times by such officers, as

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may be authorised by the State Government in  this behalf. (3) If the officer authorized under sub-section  (2) has reasonable grounds for believing that  any dealer is trying to evade liability for tax or  other dues under this Act and that anything  necessary for the purpose of an investigation  into his liability may be found in any account,  register or documents, he may seize such  account, register or document, as may be  necessary. The officer seizing the account,  register or document shall forthwith grant a  receipt for the same and shall be bound to  return them to the dealer or the person from  whose custody they were seized, within a  period of ninety days from the date of such  seizure, after having such copies or extracts  taken therefrom as may be considered  necessary; provided the dealer or the aforesaid  person gives a receipt in writing for the  account, register or document returned to  him. The officer may, before returning the  account, register or document, affix his  signature and his official seal at one or more  places thereon, and in such case the dealer or  the aforesaid person will be required to  mention in the receipt given by him, -the  number of places where the signature and  seal of such officer have been affixed on each  account, register or document. (3-A) Notwithstanding anything contained in  sub-section (3), the officer seizing any  account, register or other document under  that subsection may for reasons to be  recorded by him in writing and with the prior  approval of the Commissioner, retain such  account, register or document for such period  not extending beyond thirty days from the  date of completion of all the proceedings  under this Act in respect of the years for  which they are relevant, as he deems  necessary.  (4) For the purposes of this section, the officer  authorised thereunder may enter and search  any place of business or vehicle, or any other  building or place where he has reason to  believe that the dealer keeps or is, for the time  being, keeping, any books, registers,  documents, accounts or goods relating to his  business : Provided that no residential  accommodation (not being a place of  business-cum-residence) shall be entered into,  inspected or searched by such officer unless  specially authorised in this behalf by the  Commissioner in writing. (4-A) An officer authorised to act under sub- section (2)\027 (i) shall have the power to seal the place of  business or vehicle, or any box, almirah or  other receptacle found on such place of  business or vehicle in which he has reason to  believe that any account, register or other  documents or goods are kept or contained, if  the owner or the person in occupation or

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incharge of such place of business or vehicle  or box, almirah or other receptacle leaves the  place or is not available or fails or refuses to  open it when called upon to do so; (ii) where the owner or other person in  occupation or incharge of the place of  business or vehicle or of the box, almirah or  other receptacle found on the place of  business or vehicle is present but leaves the  place or after an opportunity having been  given to him to do so, fails to open, as the case  may be, such place of business or vehicle or  box, almirah or other receptacle, may break  open the same and prepare a list of the goods  and documents found therein. (4-B) [* * *] (4-C) No person shall tamper with any seal  put under sub-section (4-A). (5) Any officer empowered under sub-section  (1) may require any person,\027 (a) who transports or holds in custody, for  delivery to or on behalf of any dealer, any  goods, to give any information likely to be in  his possession in respect of such goods or to  permit inspection thereof, as the case may be, (b) who maintains or has in his possession  any account, book or document relating to the  business of a dealer, to produce such account,  book or document for inspection. (6) Every person transporting goods by any  public service motor vehicle or by any vessel  and every forwarding agent shall submit to  assessing authority of the area from which the  goods are despatched, such returns, as may  be prescribed, of all goods transported or  forwarded him. The Assessing Authority  concerned shall have the power to for and  examine the books of account or other  documents in the possession of such  transporter or agent with a view to verify the  correctness the returns submitted, and that  transporter or agent shall be bound furnish  the books of account or other documents,  when so called. (7) The provisions of Sections 100 and 165 of  the Code of Criminal Procedure, 1973 shall,  ’as far as may be’, apply in relation to any  entry, search or inspection under this section,  as they apply in relation any inspection or  search under the said Code. Explanation.\027In calculating the period  specified in sub-section the period during,  which proceedings under this Act remain  stayed under the orders of any Court or  authority shall be excluded."

Power to order production of accounts and powers to  entry and inspection are provided in Section 13.  An officer  empowered by the State Government for the purpose of the  Act may require any dealer to produce before him any book,  document of the business and may inspect and make such  enquiries from the dealer relating to his business as  necessary. Section 7(3) empowers the Assessing Officer to  make an assessment to the best of his judgment if no return  is submitted or return submitted by the assessee appears to

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him to be incorrect or incomplete. As noted above, Section 12 mandates a dealer to keep  and maintain true and correct accounts.  Obviously, the  books of accounts are to be kept at the place of business.  If  they are not kept at the place of the business, the power of  inspection in terms of Section 13 becomes redundant.  Sub- section (4) of Section 13 empowers the officer of the authority  to enter and search any place or any other building or place  where he has reason to believe that the dealer keeps or for the  time being keeps any documents and accounts relating to his  business. The expression "place of business" is defined in Section  2(c)(1). The definition is an inclusive one and includes any  place where a dealer keeps his books of accounts. That being so, non-production of the books of accounts  at the time of survey is a factor which can be taken into  consideration by the Assessing officer while examining the  return to find out whether the same is incorrect or incomplete.   Non-production of books of accounts at the time of  assessment does not take away the effect of non-production at  the time of survey.  Such non-production is a relevant factor  which can be considered by the Assessing Officer while  considering whether the books of accounts are to be accepted  as to have been maintained in the regular course of business.   It is incumbent upon the assessee to offer plausible  explanation as to why they were not produced at the time of  survey.  The burden is on him to show as to why no adverse  inference should be drawn.     Looked at from any angle, the order of the High Court is  indefensible and is set aside.        The appeal is allowed.  No costs.