JUDGMENT R.L. Gulati, J.
1. This is a reference under Section 11(1) of the U.P. Sales Tax Act at the instance of the assessee, M/s. Mahabir Prasad Jagdish Prasad, Bishesharganj, Varanasi.
2. The assessee is engaged in the business of manufacture and sale of oil. In respect of the assessment year 1959-60, which is the year in dispute, a, regular assessment was made under Rule 41(5) read with Section 7 of the Act. The assessee's account books were accepted and the returned figures of Rs. 28,937 and Rs. 25,112 were accepted as the turnover for the purposes of the U.P. Sales Tax Act and the Central Sales Tax Act respectively.
3. Subsequently the assessment was reopened under Section 21 because the consumption of the electrical energy by the assessee in the manufacture of oil was found to be disproportionately high on the basis of a report by an expert of the State Government. In due course, the Sales Tax Officer made two supplementary assessments, one under the U. P. Sales Tax Act and the other under the Central Sales Tax Act, determining the escaped turnover at Rs. 1,40,000 and Rs. 20,000 respectively.
4. On appeal the appellate authority upheld the validity of the proceedings under Section 21 of the Act, but reduced the escaped turnover within U.P. to Rs. 19,900 and deleted the entire addition made by the Sales Tax Officer under the Central Sales Tax Act. The assessee and the Commissioner both went up in revision.
5. The assessee's grievance was that the proceedings under Section 21 were not valid inasmuch as the Sales Tax Officer had no material before him on the basis of which he could form an opinion that any turnover had escaped assessment. The assessee also objected to the rejection of its accounts. The Commissioner of Sales Tax, on the other hand, was aggrieved by the reduction allowed by the appellate authority in the quantum of the escaped turnover qf the U.P. sales only.
6. The revising authority has rejected the assessee's revision but has allowed partly that of the Commissioner and has fixed the escaped turnover at Rs. 43,000. The revising authority has now submitted this statement of the case inviting the opinion of this court on the following question of law :
Whether on the facts and in the circumstances of the case the initiation of the proceedings under Section 21 for determination of escaped turnover under the U.P. Sales Tax Act and the rejection of the account books in such proceedings were valid and justified?
7. The question consists of two parts : (i) as to whether the proceedings under Section 21 were valid, and (ii) as to whether there was any material for rejecting the assessee's account books. We shall proceed to answer the two questions separately.
8. The consumption of electricity in the case of the assessee was found to be of the order of 44 units per maund of oil, whereas according to the expert's report, the consumption of electricity varies between 8 to 30 units per maund depending upon the size and quality of the machinery etc. This, in our opinion, constituted good material for initiating proceedings under Section 21.
9. Section 21 only requires that the assessing authority should have reason to believe that some turnover has escaped assessment. He is not required to record a positive finding about the escapement at the time of the initiation of the proceedings. The fact that there was sizeable disparity between the electric consumption shown by the assessee and the report by the expert was enough to induce a belief in the mind of the assessing authority that the assessee might have suppressed some turnover by suppressing its production. We accordingly answer the first part of the question in the affirmative in favour of the department and against the assessee.
10. As regards the second part of the question, one has to bear in mind that the account books of an assessee cannot be rejected on mere suspicion or conjecture unless the accounts are kept in such a way that reliance cannot be placed upon them. For example, if the method of accounting followed by the assessee is so defective that there is a possibility of suppression and leakage, the accounts can be rejected without any further material. But, if the accounts are properly maintained with all the relevant details, it is necessary for the assessing authority to place on record some material to show that the accounts are not reliable.
11. However, in the instant case, the fact that the consumption of electricity shown by the assessee was unduly high certainly can give rise to a strong suspicion that the assessee might have suppressed its production and thereby might have understated its sales. But, suspicion, howsoever strong it may be, cannot take the place of positive material. It is necessary in such a case that the Sales Tax Officer should point out some instance of evasion. Even if the Sales Tax Officer was able to detect one instance where the assessee might have understated its sales, he would have been justified in rejecting the accounts and making an estimate of the escaped turnover, but we find that beyond pointing out the high consumption of electricity, the assessing authority has placed no material on the record which might point towards the escapement of the turnover. As has been observed by the Judge (Revisions) in his order under Section 10(3), the consumption of electricity varies with the size and the type of the expellers, their age and many other factors like voltage etc. It has also been observed by the Judge (Revisions) that the consumption of electricity is more in the case of barrey oil and linseed oil than in the case of mustard oil. In the case of the assessee the total production consists of 10 to 12 per cent. of the mustard oil and the balance was that of linseed and barrey oils. In these circumstances the consumption of electricity alone could not be held to be a material justifying the rejection of the accounts particularly when the assessee's accounts had once been accepted during the regular assessment proceedings. We accordingly answer the second part of the question in the negative in favour of the assessee and against the department.
12. As the assessee and the department both have succeeded in part, there will be no order as to costs.