JUDGMENT
Y.U. Anjaneyulu, J.
1. Learned counsel the assessee, Sri S. Dasaratharama Reddi, has made certain far-reaching propositions in this case and they require to be examined carefully. According to him, an assessee, who declared turnovers in the monthly returns, which were admittedly far less than the turnover recorded in the books of account maintained by him, cannot be penalised under section 14(2) of the Andhra Pradesh General Sales Tax Act (the “Act” for short) for concealing the real turnover in the monthly returns filed by him if eventually the final assessment is made on the turnover as recorded in his books of account.
2. In connection with the financial year 1973-74, the assessee filed monthly returns under rule 13 read with rule 17(2) of the Andhra Pradesh General Sales Tax Rules, 1957 (the “Rules” for short). Rule 17(2) requires a dealer to submit every month a return in form A-II showing the total and net turnover relating to each month. Such return has to be filed before the 25th of the succeeding month to which the return relates. The assessee in this case filed such returns for the months of April and May, 1973. In the return for the month of April, 1973, the turnover declared was Rs. 12,794. In the return for the month of May, 1973, the turnover declared was Rs. 10,000. The returns for may, 1973, was submitted sometime during the month of June, 1973. There was an inspection of the business premises of the assessee on 15th July, 1983, during the course of which certain account books were found. According to these books of account, the turnover for the month of April, 1973, was Rs. 1,68,595 and the turnover for the month of May, 1973, was Rs. 2,19,835. As soon as the above books were detected and the real turnover for the months of April and May, 1973, were noticed by the authorities during the course of the inspection, the assessee promptly filed revised returns for the two months admitting the turnover according to the books of account noticed during the course of the inspection. The Commercial Tax Officer made a provisional assessment on 1st August, 1973, on the turnovers recorded in the books of account for the months of April and May, 1973, and declared by the assessee in the revised monthly returns filed. The Commercial Tax Officer came to the conclusion that in the monthly returns filed, the assessee concealed turnover of Rs. 3,65,636 which is the resultant difference between aggregate of the turnover for the months of April and May, 1973, as per books of account, and the aggregate of the turnover according to the monthly returns originally filed. (Rs. 3,88,430 less Rs. 22,794). The Commercial Tax Officer levied penalty of Rs. 41,236 which was equal to five times of the tax due on the real turnover. The assessee filed an appeal against the penalty levied on the ground that there is no power conferred on the Commercial Tax Officer to levy penalty on the basis of the provisional assessment. It was pointed out that power is conferred on the Commercial Tax Officer to levy penalty under section 14(2) only on the completion of final assessment under section 14(1) of the Act. It was, therefore, urged that the order of the Commercial Tax Officer levying penalty was illegal. The assessee’s contention was upheld in appeal and the order levying penalty was set aside as there was no sanction under law to levy penalty pursuant to a provisional assessment. In course of time, the final assessment was made for the financial year 1973-74 and the turnover for the entire year was determined at Rs. 16,53,195. In determining the turnover as mentioned above, the Commercial Tax Officer adopted the turnover as recorded in the books of account for the months of April and May, 1973, rejecting the turnovers declared in the monthly returns originally filed. The Commercial Tax Officer initiated penalty proceedings under section 14(2) of the Act in the view that the assessee had concealed turnover in the returns for the months of April and May, 1973, originally filed. Obviously, the Commercial Tax Officer ignored the revised returns filed by the assessee admitting the correct turnover for these two months as recorded in the books of account. As far as the assessment is concerned, it became final, there being no appeal. Pursuant to the penalty notice issued, the Commercial Tax Officer levied penalty of Rs. 39,050 which is equivalent to five times the tax due on the suppressed turnover of Rs. 3,65,636 in the returns originally filed for the months of April and May, 1973. The assessee filed an appeal before the Assistant Commissioner of Commercial Taxes challenging the validity of the order passed by the Commercial Tax Officer levying penalty. The Assistant Commissioner upheld the validity of the order levying penalty but reduced the quantum to Rs. 7,180 thereby giving relief of Rs. 31,870. The Assistant Commissioner reduced the penalty “taking lenient and liberal view in the context of their assessee’s financial position”.
3. The assessee carried the matter in second appeal to the Sales Tax Appellate Tribunal. The Tribunal rejected the assessee’s contention that, in the facts and circumstances of the case, no penalty can be levied at all. The Tribunal held that penal provisions were clearly attracted. The Tribunal further held that the quantum of penalty sustained by the Assistant Commissioner was reasonable and no further interference was called for in the matter of reducing the penalty. Aggrieved by the order of the Tribunal sustaining the penalty of Rs. 7,180 levied, the assessee filed the present tax revision case.
4. Sri S. Dasaratharama Reddi, learned counsel for the assessee, raised a twofold plea against the levy of penalty. First contention is that no power is conferred on the assessing authority to levy penalty under section 14(2) of the Act unless the assessment made is a best judgment assessment under section 14(1) of the Act. It is urged that in the present case the assessment was made by the assessing authority on the turnover as recorded in the assessee’s books of account. According to the learned counsel, an assessment made by the assessing authority on the turnover recorded in the books of account maintained by the assessee cannot be held to be a best judgment assessment under section 14(1) of the Act. Learned counsel heavily relied on the decision of the Supreme Court in State of Madras v. Jayaraj Nadar & Sons . Learned counsel also relied on some decisions of this Court as well as the other High Courts to which we shall make a reference in due course. The second contention urged is that in any event no penalty can be levied in the assessee’s case, because the assessment is made under section 14(1) of the Act on the turnover declared in the monthly returns filed by the assessee and it cannot, therefore, be said that turnover was not disclosed by the assessee correctly in the returns filed. It is pointed out the although in the returns originally filed for the months of April and May, 1973, the assessee disclosed turnover which was far less than what was recorded in the assessee’s books of account, the assessee filed revised monthly returns immediately on the detection of the account books during the course of inspection and in such revised returns the turnover was correctly declared. It was urged that while making the assessment under section 14(1) of the Act, the assessing authority had taken the sum total of the turnover declared in all the monthly returns including the revised returns submitted for the months of April and May, 1973. Learned counsel urged that once a revised returns is filed, the existence of the original return is wiped out and consequently the assessee cannot be held to be guilty of not disclosing the turnover in the returns filed by him. In that view, the provisions of section 14(2) of the Act have no application at all, contended the learned counsel for the assessee.
5. Learned Government Pleader, Sri Venkata Ramana, resisted the pleas urged by the learned counsel for the assessee. In the first place he submitted that the assessment made by the assessing authority in the present case is a best judgment assessment within the terms of section 14(1) of the Act and consequently the assessing authority had power to levy penalty under section 14(2) of the Act. Learned Government Pleader submitted that the revised monthly returns filed by the assessee for the months of April and May, 1973, have no legal sanction whatsoever and the assessing authority in the present case did not act upon the revised returns filed by the assessee. Learned counsel pointed out that the assessee filed revised returns for the months of April and May, 1973, only after detection of the account books in the course of inspection of the assessee’s business premises. According to the learned Government Pleader, the assessing authority did not take cognizance of the revised returns and it must, therefore, be said that in the original returns filed, the assessee was admittedly guilty of not disclosing the turnover correctly for the months of April and May, 1973. It was further submitted that filing the revised returns, apart from absence of statutory sanction, cannot have the effect of wiping out the existence of the original returns as contended by the learned counsel for the assessee. Learned Government Pleader support the levy of penalty on these grounds.
6. We have given our anxious and careful consideration to the pleas urged by both sides. We shall first consider the question whether the assessment made in this case by the assessing authority with reference to which the impugned penalty is levied under section 14(2) of the Act could be considered to be a “best judgment assessment” for the purpose of section 14(1) of the Act. An examination of this aspect, as urged by the learned counsel for the assessee, is necessary because section 14(2) of the Act confers power on the assessing authority to levy penalty only when an assessment is made to the best of his judgment under section 14(1) of the Act. It is relevant to quote below the provisions contained in sub-sections (1) and (2) of section 14 of the Act :
“14. (1) If the assessing authority is satisfied that any return submitted under section 13 is correct and complete, he shall assess the amount of tax payable by the dealer on the basis thereof; but if the return appears to him to be incorrect or incomplete he shall, after giving the dealer a reasonable opportunity of proving the correctness and completeness of the return submitted by him and making such inquiry as he deems necessary, assess to the best of his judgment, the amount of tax due from the dealer. An assessment under this section shall be made only within a period of four years from the expiry of the year to which the assessment relates.
(2) When making an assessment to the best of judgment under sub-section (1), the assessing authority may also direct the dealer to pay in addition to the tax assessed, a penalty as specified in sub-section (8) on the turnover that was not disclosed by the dealer in his return.”
Where the return filed by the assessee appears to the assessing authority to be incorrect or incomplete, the assessing authority has power to assess to the best of his judgment after giving the assessee a reasonable opportunity of proving the correctness and completeness of the return submitted by him and after making such inquiry as he deems necessary. The expression “best of judgment” is not defined under the Act but there is no difficulty in understanding the scope of best judgment assessment. We may refer to the judgment of the Supreme Court in State of Kerala v. C. Velukutty . Dealing with the scope of the expression “to the best of his judgment”, the Supreme Court pointed out that the above expression was presumably borrowed from the provisions of the Income-tax Act. Scrutinising certain decisions arising under the Income-tax Act dealing with the issue, the Supreme Court observed as under :
“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 guess-work in a ‘best judgment assessment’, it shall not be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case. Though sub-section (2) of section 12 of the Act provides for a summary method because of the default of the assessee, it does not enable the assessing authority to function capriciously without regard for the available material.”
We may point out that the Supreme Court was dealing with the provisions contained in section 12(2)(b) of the Travancore-Cochin General Sales Tax Act, which are in terms analogous to the provisions contained in section 14(1) of the Andhra Pradesh General Sales Tax Act. In State of Madras v. Jayaraj Nadar and Sons , on which learned counsel for the assessee heavily relied, the Supreme Court referred to its earlier judgment in Velukutty’s case and reiterated the same principle. We may usefully extract the relevant observations :
“In other words, when the assessing authority had made the assessment to the best of its judgment, it can levy a penalty. It is well-known that the best judgment assessment has to be on an estimate which the assessing authority has to make not capriciously but on settled and recognised principles of justice. An element of guess-work is bound to be present in best judgment assessment but it must have a reasonable nexus to the available material and the circumstances of each case : [see The State of Kerala v. C. Velukutty ]. Where account books are accepted along with other records there can be no ground for making a best judgment assessment.”
We will consider the impact of the observations of the Supreme Court in the concluding sentence extracts above a little later, but in the first instance we would clear the ground whether in making an assessment to the best of judgment, the assessing authority can take into consideration the assessee’s books of account and other available material and fix the turnover for the purpose of assessment. Learned counsel for the assessee contends that the very concept of “best judgment assessment”, involving as it does some amount of guess-work, should result in the assessing authority fixing the turnover on an estimate using best guess-work and without acting arbitrarily or capriciously. For instance, in the present case the turnover of Rs. 16,53,195 fixed by the assessing authority on completion of the assessment under section 14(1) is with reference to the turnover recorded in the books of account maintained by the assessee. If, instead of fixing the turnover at this figure, the assessing authority estimates the turnover by making an honest guess-work and acting reasonably at say, Rs. 17 lakhs, such an assessment would be a “best judgment assessment” according to the learned counsel for the assessee. Sri Dasaratharama Reddi urges that if the assessing authority does not make an estimate on the basis of the material and merely fixed the turnover as recorded in the books of account of the assessee, he is not indulging in any guess-work and, therefore, the assessment made by the assessing authority in such a case cannot be considered to be a best judgment assessment. We cannot accept the proposition so stated by the learned counsel for the assessee. It is for the assessing authority to determine the turnover to the best of his judgment once he finds that the returns filed by the assessee appear to him to be incorrect or incomplete. In the present case it is admitted that the returns originally filed by the assessee for the months of April and May, 1973, did not disclose the real turnover and in that sense the returns were incorrect or incomplete. The assessing authority is, therefore, driven to the necessity of making an assessment to the best of his judgment. In his endeavour to fix the turnover for the purpose of assessment reasonably and without acting arbitrarily and capriciously, the assessing authority has to take into consideration all available material and circumstances and fix the turnover. In the present case, having found that the returns filed by the assessee for the months of April and May, 1973, were incorrect or incomplete, the assessing authority has acted extremely reasonably in taking into consideration the material available before him, namely, the account books maintained by the assessee himself and the revised returns filed by the assessee for the months of April and May, 1973. Taking into consideration the available evidence, the assessing authority fixed the turnover at Rs. 16,53,195. The turnover so fixed by the assessing authority has a reasonable nexus to the available material and the circumstances of the case. Just because the assessing authority fixed the turnover, which accounts with the turnover recorded by the assessee in his books of account, it cannot be said that the assessment made by the assessing authority ceased to be an assessment to the best of the judgment of the assessing authority. It must be held that the assessing authority fixed the turnover in the present case to the best of his judgment. Even if no guess-work is involved in fixing the assessment, it has a reasonable nexus to the available material and the assessment so made by the assessing authority must to considered to be a best judgment assessment as explained by the Supreme Court in Velukutty’s case as well as Jayaraj Nadar’s case . The Supreme Court did not say that, if an assessing authority acts reasonably in fixing the turnover after finding the return filed by the assessee, he should not be considered to have made the assessment to the best of his judgment. On the contrary, it is in accordance with the principle enunciated by the Supreme Court that, if the assessing officer had made the assessment on the basis of available material, the assessment made by him is an assessment to the best of his judgment within the meaning of section 14(1) of the Act. The contention that an assessment made, taking into to the account books maintained by the assessee, cannot be considered to be a best judgment assessment is based on a misapprehension that a best judgment assessment must always involve an estimate based on honest guess-work. The decisions of the Supreme Court referred to above unmistakably point out that a best judgment assessment has to be made by the assessing officer on the basis of the available material. The question directly arose before a Division Bench of this Court in Sundermul & Co. v. Commissioner of Income-tax [1967] 66 ITR 227. In that case, in an appeal against the best judgment assessment made by the Income-tax Officer, the Appellate Assistant Commissioner looked into the account books maintained by the assessee for the purpose of determining the income to be assessed on best judgment. This Court held that it is not improper for the Appellate Assistant Commissioner, even in cases of best judgment assessment under section 23(4) of the Indian Income-tax Act, 1922, to look into the books in order to ensure that the judgment of the assessing officer is not capricious or arbitrary. This decision, therefore, supports the principle that, while making a best judgment assessment, the assessing authority can always look into the account books maintained by an assessee and determine the extent of sales. The same principle is set out by the Bombay High Court in Manek Lal Chuni Lal & Sons Ltd. v. Commissioner of Income-tax (1962) 15 Taxation 18 (Ref. No. 25 of 1959 decided on 15/16th September, 1961).
7. We had already pointed out above that the learned counsel for the assessee relied on the Supreme Court judgment in Jayaraj Nadar’s case , an extract of the Supreme Court observations was given in para 6 above. Learned counsel for the assessee drawn our attention to the observations of the Supreme Court that where account books are accepted along with other records there can be no ground for making a best judgment assessment. From these observations, learned counsel seeks to deduce a general principle that whenever account books are accepted and assessment made, such an assessment cannot be considered to be a best judgment assessment. The observations of the Supreme Court cannot be torn out of the context and understood. In Jayaraj Nadar’s case , the assessee did not include in the monthly return three times of turnover. The first was relating to delivery charges paid by the assessee to certain dealers from whom he purchased motor cars, trucks, scooters, etc., the second related to the sales of motor parts and the third related to the sale proceeds of firewood. The assessee explained that the above three items were not liable to be included in the turnover and that was the reason for non-inclusion of the same in the monthly returns. The assessing authority rejected the contention and included the same. The assessing authority also levied a penalty for non-inclusion. On appeal, the Appellate Assistant Commissioner took the view that the failure of the assessee to include the above-mentioned three items in the monthly returns was due to a bona fide impression on the assessee’s part that they were not liable to be taxed. On these facts, the assessee in that case contended that the assessment made by the assessing authority was not a best judgment assessment. The Supreme Court noticed that the assessing authority rejected the claim for non-taxability and subjected the three items, which were recorded in the assessee’s accounts, to tax. Consequently, the assessment made by the assessing authority was held to be not a best judgment assessment. The observations made by the Supreme Court should be understood in the context of these facts. A general principle cannot be deduced from the observations of the Supreme Court that, even in a case like the one before us, where the assessee deliberately filed incorrect or incomplete monthly returns, an assessment made by the assessing authority cannot be considered to be a best judgment assessment if eventually the turnover is fixed with reference to the account books maintained by the assessee. Assessee’s counsel also relied on a decision of this Court in Pursuluri Satyanarayana Murthy v. State of Andhra Pradesh [1978] 42 STC 103. The reliance is misplaced. The assessee in that case did not file the return until an inspection was made and secret account books were found. But, then when a return was filed, he filed a correct return disclosing the turnover recorded in the books of account maintained by him. On these facts, the question arose for consideration is whether the assessment made by the assessing authority accepting the return filed could be considered to be a best judgment assessment. The following observations at page 107 are relevant :
“……. Mr. Dasaratharama Reddi contended, and rightly too, that the expression ‘best judgment assessment’ implies and involves not mere acceptance of the return fled by a dealer but rejecting the turnover as submitted by the dealer and making an assessment to the best of judgment of the assessing authority.”
In the present case, the assessment is not made by accepting the returns filed. Indeed, the monthly returns for April and May, 1973, were found incorrect or incomplete inasmuch as the account books maintained by the assessee showed much larger turnover and the assessee had deliberately shown much lesser turnover in the returns filed. Finding the returns filed by the assessee to be incorrect or incomplete, the assessing authority, in the present case, made an assessment to the best of his judgment and in doing so he very fairly and reasonably acted by taking the correct turnover recorded in the assessee’s books of account. The above decision of this Court does not in any way advance the assessee’s case further. For the aforesaid reasons, we reject the first contention urged by the learned counsel for the assessee that the assessment made in this case was not a best judgment assessment under section 14(1) of the Act and consequently penalty could not be levied under section 14(2).
8. The second contention urged by the learned counsel for the assessee is that in any event the assessee disclosed the turnover correctly in the revised returns filed for the months of April and May, 1973, and consequently there could be no question of any penalty. The contention is that once revised returns are filed, the existence of the original returns is wiped out. In the first place, the revised returns filed for the months of April and May, 1973, have no legal sanction. Section 13 of the Act read with rule 17 of the Rules provides for filing only one monthly return. There is no provision for filing a revised return. Revised returns filed for the months of April and May have no relevance. It may be pointed out that unlike in the Andhra Pradesh General Sales Tax Act there is a provision for filing a revised return under the Income-tax Act, 1961 [vide section 139(5)]. In spite of the express provision under the Income-tax Act enabling an assessee to file a revised return, courts have held that the disclosure of correct income in a revised return does not excuse the concealment of income in the return originally filed. Courts have held that, if a revised return is filed by an assessee bona fide prior to the detraction of concealment, then the conduct in filing voluntarily revised return could be considered as a mitigating circumstance to excuse the levy of penalty. It was held that when an assessee verifies and submits a false return, an offence is committed and the fact that subsequently the assessee files a revised return will not condone the offence. It is not necessary to refer to the number of cases under the Income-tax Act as the principle is far too well-settled without any dissent. We may, however, refer to the earliest case on this point in Ganga Sugar v. Emperor 4 ITC 97 (All.) and to the principles flowing from the judgment of this Court in Commissioner of Income-tax, Hyderabad v. Rameswar & Co. [1981] 130 ITR 51. Learned counsel for the assessee relied on a decision of the Madras High Court in State of Madras v. Shahul Hameed [1967] 19 STC 288. We are unable to derive any assistance from the above judgment of the Madras High Court, as the relevant facts are not stated and the judgment is too short and we cannot consider that the Madras High Court had occasion to consider the principle in depth. The Madras High Court was referred to the filing of a provisional return which was incorrect, followed by filing a return which was correct. In the present case, the monthly returns filed by the assessee for April and May, 1973, were in no sense provisional. Learned counsel also relied on the judgment of the Calcutta High Court in Mst. Zulekha Begum v. Commissioner of Income-tax [1981] 129 ITR 560 and the judgment of the Delhi High Court in Qummar-ud-din & Sons v. Commissioner of Income-tax [1981] 129 ITR 703. These decisions are not quite relevant for the purpose of determining the question whether the revised monthly returns filed by the assessee nullify the existence of the original returns. On the contrary, the decision of the Delhi High Court above referred does lend support to the principle that even in the Income-tax Act, the filing of a revised return does not save an assessee from the consequence of penalty unless the revised return is filed bona fide without detection.
9. We are not referred to any principle of law which can support the extra-ordinary contention raised by the learned counsel for the assessee that once an assessee files a revised return correctly, no notice can be taken of the assessee’s fraudulent acts prior to the filing of the revised returns. If this principle was to be accepted, an assessee can play hide and seek game with the Revenue. An assessee can dishonestly file returns showing turnover far less than what was actually recorded in the account books and challenge the assessing authorities to find for themselves the correct turnover. When eventually the assessing authorities find his correct account books the assessee can rush forward and file revised returns and plead that his dishonest and fraudulent behaviour in filing incorrect and incomplete returns earlier cannot be taken note of because he has filed a correct return after the Revenue officials detected his account books and the correct information. If the provisions of law are clear enough to give protection to such a dishonest assessee, the courts have no say in the matte. If, however, the assessee invites us to interpret the provisions of law in such a way that his dishonest is rewarded, we would refuse to interpret the provisions to let the dishonest go scot-free. The law should not be seen to sit by limply while those who defy it to go free. If the courts were to accept interpretation of law to leave the guilty unpunished, the confidence of the public in the efficacy of law would be shaken. The assessee in this case acknowledges that he had dishonestly and fraudulently filed the monthly returns for the months of April and May, 1973, declaring turnover which was far less than what was recorded in the books of account, perhaps in the hope and expectation that his account books would not come to the notice of the tax officials. When the tax officials found the account books showing much large turnover, the assessee quickly filed revised returns and did not even offer a word of explanation as to why he filed incorrect or incomplete returns initially. On the contrary, he challenges the Revenue that he cannot be punished by levy of penalty claiming that an interpretation of law must leave him free and reward his guilt. We find no remorse or realisation on the part of the assessee that he committed an offence. On the contrary, he claims protection of law for the offence that he had admittedly committed.
10. We are satisfied that the interpretation of what is a best judgment assessment for purposes of section 14(1) of the Act canvassed by the learned counsel for the assessee is not tenable and is not supported by the decision of the Supreme Court in State of Madras v. Jayaraj Nadar & Sons and the decision of this Court in Pusuluri Satyanarayana Murthy v. State of Andhra Pradesh [1978] 42 STC 103. In our opinion, the provisions of section 14(1) and 14(2) of the Act fully empower the assessing authority to levy penalty in the assessee’s case.
11. A word about the contention of the learned counsel for the assessee that the Tribunal filed to deal with the quantum of penalty. Assessee’s contention is that penalty, if leviable, could be confined only to the difference of Rs. 5,203, that is to say, difference between the assessed turnover of Rs. 16,53,195 and Rs. 16,47,992 being the sum total of turnover declared in the monthly returns including the revised returns for the months of April and May, 1973. We have already rejected this contention and held that the sum to be subjected to penalty is Rs. 3,65,636 which is the difference between correct turnover of Rs. 3,88,430 for the months of April and May, 1973 and the turnover of Rs. 22,794 declared in the original monthly returns. The authorities below were quite justified in levying the penalty with reference to the concealed turnover of Rs. 3,65,636. We have mentioned in the beginning that the Assistant Commissioner reduced the penalty to Rs. 7,180 from Rs. 31,870 levied taking lenient and liberal view in the context of the assessee’s financial position. The relief given by the Assistant Commissioner is unwarranted in a case like this. Assessee’s financial position has no bearing on the question regarding the quantum of penalty leviable. It is the serious nature of offence that is relevant. No offence could be more serious than the assessee himself admitting without even a word of explanation that he filed incorrect returns and challenged the tax officials to find out correct turnover. If the assessee was in bad financial position, that may be a case for writing off the amount. The Assistant Commissioner has been unduly generous in reducing the penalty and surprisingly the Revenue did not file an appeal to the Tribunal against the relief given by the Assistant Commissioner. The assessee should consider himself to be lucky in getting away with the penalty of Rs. 7,180.
12. For the aforesaid reasons, we do not find any merit in this tax revision case. It is dismissed. The assessee shall pay the Revenue’s costs. Advocate’s fee Rs. 500.