Sri V.G. Gujaran,-These two appeals arise out of common orders passed by the Deputy Commissioner of Commercial Taxes (Appeals), Mysore Division, Mysore (hereinafter called the ''first appellate authority'') dated 2nd November, 1988 in KST AP. Nos. 219 and 225/1988-89. Both the cases are clubbed together for common disposal in view of the identical nature of issues involved.
2. Facts of the cases are that:
For the year 1983-84 and 1984-85 (Financial Year) the appellants a partnership firm running a Hotel by the name and style ''HOTEL JYOTHI'' at Chikmagalur were assessed to the best of Judgment by Commercial Tax Officer, I Circle, Chikmagalur (hereinafter called the ''assessing authority") to a total and taxable turnover of Rs. 4,28,000/- for the year 1983-84 and Rs. 4,60,000/- for the year 1984-85 as against the declared total and taxable turnover of Rs. 3,49,890/- and Rs. 3,00,000/- respectively. The appellants approached the first appellate authority on appeal and the first appellate authority in the impugned order redetermined the total and taxable turnover at Rs. 3,64,000/- for the year 1983-84 and Rs. 3,55,000/- for the year 1984-85 respectively. Being not satisfied with the relief obtained, the appellants have approached this Court.
3. It is argued on behalf of the appellants that the affirmation of the addition of Rs. 14,000/- on a turnover under Section 6 of Karnataka Sales Tax Act, 1957 by the first appellate authority is wrong in view of the fact that the first appellate authority has himself stated in page 2 of assessment order that there is no scope for levy of tax under Section 6 of K.S.T. Act, 1957. It is also argued that once the turnover is estimated at 5 times of the establishment expenses, there is no scope for further addition by taking recourse to Section 6 of K.S.T. Act, 1957. In respect of 1984-85 it is argued, that the first appellate authority himself has observed that the appellants were maintaining regular books of accounts and in view thereof, the confirmation of addition of Rs. 55,000/-on account of Sections 6 and 5(4) of K.S.T. Act, 1957 is not called for.
4. It was argued by the State that the purchases were not supported by purchase bills and the estimation of turnover under Section 6 of K.S.T. Act, 1957 at Rs. 14,000/- for 1983-84. It was argued that in respect of 1984-85 the fact of non-maintenance of regular books of accounts has been established at the time of inspection by the Inspection Wing. It is prayed to sustain the orders of the first appellate authority.
5. Heard the rival arguments and verified the records. The turnover declared by the appellants did not include either purchase turnover under Section 5(4) or 6 of K.S.T. Act, 1957. The place of business of the appellant was subjected to inspection both in respect of 1983-84 and 1984-85 as revealed form the report filed in page 24 of assessment records for 1983-84 and page 7 of assessment records for 1984-85. Scrutiny of records, nature of evidence gathered by the authorities below reveal that assessment to the best of judgment was called for. The only dispute raised before us is in respect of confirmation of part of the addition by taking recourse to Section to Section 5(4) and Section 6 of K.S.T. Act, 1957 to the extent of Rs. 14,000/- for 1983-84 and Rs. 55,000/- for 1984-85. The first appellate authority has modified the order estimating the sales turnover of food and drinks to Rs. 3,50,000/- in place of Rs. 4,00,000/- for 1983-84 and Rs. 3,00,000/- in place of Rs. 4,00,000/- for 1984-85. He has modified the turnover under Section 5(4) and under Section 6 of K.S.T. Act, 1957 to 14,000/- in place of Rs. 28,000/- for 1983-84 and Rs. 55,000/- in place of Rs. 60,000/- for 1984-85. There is no dispute regarding the fact that the appellants have purchased the goods without bills and in the circumstances in which he did not pay tax while purchasing the said goods. The only question that has to be decided is as to whether it is permissible for the authorities below to estimate the turnover by adding the turnover under Section 6 of K.S.T. Act, 1957 over and above the sales turnover estimated on the basis of either establishment expenses or purchases consumed in the manufacture of articles of food and drinks. The principle of estimation at 5 times of the establishment expenses is based on the general trend in business as uniform method for the purposes of estimation as an accepted principle/formulae not only in the sales tax adjudication but also in the income tax assessments. Similarly the principle of estimation at 1 1/2 times the purchases relates to the general trend of profit ratio and manufacturing expenses involved in a hotel business as an accepted principle of estimation. These two principles of estimation have been universally accepted, to arrive at the sales turnover whenever the sales reflected in the books of accounts are not reliable. The sales under the Sales Tax Act cannot be confused to mean either total or taxable turnover under the Act. The Advocate for the appellant could not place before us any authority to drive home his argument that "once a sales turnover is estimated, on the basis of cither purchases or working expenses, there cannot be any further addition to arrive at the total turnover." We have appraised ourselves of the principles leading to the estimation of sales on the basis of either purchases or establishment expenses. We are of the opinion that the principle of estimation of sales is different from estimation of turnover as per K.S.T. Act, 1957. A sales turnover and total turnover under K.S.T. Act, 1957 would have been one and the same only in cases where an assessee would not be liable to pay tax under or before the introduction of Section 6 or Section 5(4) of K.S.T. Act, 1957. The concept of turnover under Karnataka Sales Tax as it stands today or at the relevant point of lime is inclusive of turnover under Section 5(4) or Section 6 of K.S.T. Act, 1957. If were to agree to the proposition pro-founded by the learned Advocate, we would be encouraging a hotelier purchasing goods from unregistered dealers or without bills, by treating a dealer who purchases goods from Registered Dealers after payment of tax and a dealer who purchases goods without bills and from unregistered dealers in the same fooling. This would not be correct in the true spirit of law. It is therefore necessary to hold that the authorities below are justified in arriving at a total and taxable turnover, after estimating the sales of articles of food and drinks on the basis of either establishment expenses or purchases of goods used in the manufacturing of articles of food and articles, and adding thereto purchases attracting tax under Section 5(4) or Section 6 of K.S.T. Act, 1957 wherever the taxable goods have been purchased without bills and from unregistered dealers. No doubt, the first appellate authority has granted substantial relief by re-estimation in respect of turnover under Section 6 which was estimated by the assessing authority. We do not wish to disturb this figure in view of the fact that we cannot interfere when there is no cross-appeal from the State. The facts and circumstances of the cases reveal that the turnover under Section 6 of the Act finally adopted by the first appellate authority are reasonable, we pass the following Order:
These two appeals are dismissed.
The original order is retained in file relating to STA No. 1159/1988 and copy retained in file relating to STA No. 1160/1988.
