Holding

Non‑production of books at the time of survey is a material factor that can justify rejection, and the High Court cannot revise the Tribunal’s findings on facts under the limited jurisdiction of Section 11.

Summary

The assessee, Mohan Brickfield, was engaged in brick manufacturing and sales. During two surveys of its premises in 1984-85, it failed to produce its books of accounts, which were later produced at the time of assessment. The Assessing Officer rejected the books, citing the non‑production at the surveys and other discrepancies, and the Tribunal upheld this rejection. The Allahabad High Court, on revision, held that the later production of the books negated the effect of the earlier non‑production and set aside the Tribunal’s order. The Supreme Court held that non‑production of books at the time of survey is a relevant factor that may justify rejection, and that the High Court exceeded its limited revisional jurisdiction under Section 11, which permits interference only on questions of law. Consequently, the High Court’s order was set aside and the appeal was allowed.

Issues considered

The effect of non‑production of books of accounts at the time of survey on the Assessing Officer’s power to reject them.
Whether the High Court can interfere with the Tribunal’s factual findings under Section 11 of the Uttar Pradesh Trade Tax Act.
The interpretation of Sections 11, 12 and 13 of the Uttar Pradesh Trade Tax Act, 1948, regarding the production and maintenance of accounts.

Legislation cited

Code of Criminal Procedure, 1973s. 100, s. 165
Limitation Act, 1963s. 5
Uttar Pradesh Trade Tax Act, 1948s. 11, s. 12, s. 13, s. 2(c)(1), s. 7(3)

Subjects

sales taxtrade taxbooks of accountsnon‑productionrevisionSection 11adverse inferenceassessmenthigh court jurisdictionUttar Pradesh Trade Tax Act

Judgment

A COMMISSIONER, SALES TAX, U.P.
v.
MIS MOHAN BRICK.FIELD, AGRA

NOVEMBER 13. 2006

B [ARIJIT PASAYAT AND LOKESHWAR SINGH PANTA, JJ.] I

Uttar Pradesh Trade Tax Act, 1948:

Sections 11, 12 and 13-Books of accounts-rejection of at the time of
C assessment on the ground of non-production of the same at the time of survey
and other grounds-Tribunal upheld the rejection-In Revision, High Court
held that rejection was not correct as production of the books of accounts
at the time of assessment made non-production of the same at the time of
survey inconsequential-On appeal, held: Interference by the High Court not
D permissible-Rejection of the account was not based alone on the non-
production ofthe same at the time ofsu111ey, but also other factors-Production
of the books of accounts at the time assessment does not take away the effect
<.?f non-production at the time of survey-On such non-production adverse
inference can be drawn against the assessee.

E Section I 1-Revisional Power of High Court-Scope of-Held:
Revisiona/ power of High Court is limited to interference with the order of
Tribunal only on the question of law.

Respondent-assessee was in the business of manufacturing and sale of
bricks. During the surveys of the business premises, the books of accounts
F were not produced. The same was produced at the time of assessment.
Assessing Officer rejected the books of accounts in view of the non-production
of the same at the time of survey opining that they were not maintained in the
regular course of business. The books were rejected also on account of two
other factors. In the appeal of the assessee, before Assessment Commissioner,
G sale rate was fixed after determining the average sale. In appeal by the
assessee as well as the Revenue, Tribunal held that the rejection of the
accounts was justified. In revision application, High Court held that as no
defect was pointed out in respect of the books of accounts at the time
assessment, non-production of the books of accounts at the time of survey

H 1108
COMMISSIONER, SALES TAX, U.P, v. MOHAN BRICKFIELD, AGRA 1109
was of no consequence. Hence the present appeal. A'
Allowing the appeal, the Court

HELD: 1.1. 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. (1112-A] B
1.2. 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.
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 C
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 D
should be drawn. (1119-A-CJ
1.3. Order of High Court is not sustainable even in view of Sections 12
and 13 ofUttar Pradesh Trade Tax Act, 1948. Power to order production of
accounts and powers to entry and inspection are provided in Section 13.
Section 7(3) empowers the Assessing Officer to make an assessment to the E
best of his judgment if no return is submitted or return submitted by the
assessee appears to him to be incorrect or incomplete. 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 F
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)(l). The definition is an inclusive one and
includes any place where a dealer keeps his books of accounts.
(1118-E-H; 1119-AI G
2. 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.
(1114-G-H!
Commissioner ofSales Tax, UP. v. Kumaon Tractors and Motors, (2002) H
1110 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A 9 sec 379, relied on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.4913 of2006.

From the final Judgment and Order dated 1-9-2003 of the High Court of
Judicature at Allahabad in Sales Tax Revision No.928/1992. ""
B Kavin Gulati, Sanjay Bishen and Kamlendra Mishra for the Appellants.

Vikas Singh and Hari Shankar for the Respondent.

The Judgment of the court was delivered by ..,...
c ARIJIT PASA YAT, 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
D 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.129of1989.

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
E
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:-
F
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
G 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
H
COMMISSIONER, SALES TAX, U.P. v. MOHAN BRICKFIELD, AGRA [PASAYA T, J.] 1111

selling rate was found to be lesser than the rate prevailing during the year A
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 B
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 Assessment
Commissioner (Judicial), Range I. The said authority with reference to the
material on record found as follows:
c
(I) 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 bum bricks was determined to be 13,68000
breaking allowance 58000 was given and the sale was determined
at l 0, l 0,000 bricks. D
For the year 1983-84 the average sale was detennined 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 E
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 F
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 othe:r 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 G
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 H
1112 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A 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 I2 and I3 of the Act redundant. It is also pointed out
B that Section I I of the Act confers limited jurisdiction on the High Court to
interfere only on the question of law. The High Court should 11ot 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.
c We shall first deal with the power of the High Court in dealing with the
revision petition. Section I I of the Act reads as follows:

"I I. Revision by High Court in special cases.(1) Any person aggrieved
by an order made under sub-section (4) or sub-section (5) of Section
I 0, other than an order under sub-section (2) of that section summarily
D
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
E
or an Additional Revising Authority refusing to state the case under
this section, as it stood immediately before April 27, I 978, 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 oefore the said date, has not expired, likewise apply for
F revision to the High Court within a period of ninety days from the said
date.

(3) Where an application under sub-section (I) 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
G ground that the period of one hundred and twenty days for making
the reference, as specified in the said sub-section (I), has expired,
such applicant may apply for revision of the order made under sub-
section (2) of Section I 0, to the High Court within sixty days from the
said date on the ground that the case involves any question of law.

H
f
COMMISSIONER, SALES TAX, U.P. v. MOHAN BRICKFIELD, AGRA [PASAYAT, J.J 1113
(4) The application for revision under sub-section (1) shall precisely A
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 B
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. C
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 D
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 c.uthority 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. E
(6-A) Where the Revising Authority or an Additional Revising
Authority has, before the said date, allowed an application under sub-
section {I) 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. F
Every such reference, and every reference already made by such
authority before the said date and pending before the High Court on
the said 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 G
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
H
1114 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A 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 r~sult of
B 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.

c (8-A) All applications for revision or orders passed under Section IO
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
D 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,
E mutatis mutandis, apply to every application, for revision under this
section.

Explanation-For the purpose of this section, the expression "any
person" includes the Commissioner and the State Government."

F The parameters of exercising power under the said provision were
considered by this Court in Commissioner of Sales Tax, UP. v. Kumaon
Tractors & Motors, [2002] 9 SCC 379). It was inter alia noted as follows:

"8. x x xx x

G 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
H

/ '
COMMISSIONER, SALES TAX, U.P. v. MOHAN BRICKFIELD, AGRA [PASAYAT, J.] 1115
documents maintained and produced by the assessee, that is, books A
of accounts, bills and Form 'C' submitted by it. Jn this view 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 B
sustainable. Sections 12 and 13 of the Act are relevant for the purpose. They
read as follows:

"12. Accounts to be maintained by dealers. (I) 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 C
the value of the goods sold and bought by him, and in case the
accounts maintained in the ordina1y course do not show the same in
an intelligible fonn, he shall maintain true a!ld correct account in such
fonn, as may be prescribed in this behalf

Provided that this section shall not apply to such dealers as are D
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 E
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 F
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 G
prescribed."

. "Section 13: Power to order production of accounts and powers of
entry and inspection. - (l) 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 H
1116 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A 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,
B 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
c at all reasonable times by such officers, as 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
D purpose of an investigation into his liability may be found in any
account, register or documents, he may seize such accoun~, register
or document, as may be necessary. The officer seizing the account,
register or do-.::ument shall forthwith grant a receipt for the same and
st1all be bound to return them to the dealer or the person from whose
E 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
F 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.

G (3-A) Notwithstanding anything contained in sub-section (3), the
officer seizing any account, register or other document under that
sub-section may for reasons to be recorded by him in writing and with
the prior approval of the Commissioner, retain sµch 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
H
COMMISSIONER, SALES TAX, U.P. v. MOHAN BRICKFIELD, AGRA [PASA YAT, J.] 1117

of the years for which they are relevant, as he deems necessary. A
(4) For the purposes of th is 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 : B
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)
c
(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 D
the person in occupation or 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 · E
found on the place of business or vehicle is present but leaves the
place or after :m 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.
F
-(4-B) [* * *]

r (4-C) No person shall tamper with any seal put under sub-section (4-
A).

(5) Any officer· empowered under sub-section (I) may require any G
person,

(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, H
1118 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A (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
B 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
c 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
D
inspection or search under the said Code.

Explanation.In 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."
E 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
F 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 ._
I

appears to 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
G 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.
H
COMMISSIONER, SALES TAX, U.P. v. MOHAN BRICKFIELD, AGRA [PASAYA T, J.] 1119

The expression "place of business" is defined in Section 2(c)(l). The A
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 B
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 C
upon the assessee to offor 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 inct'efensible
and is set aside. D
The appeal is allowed. No costs.

K.K.T. Appeal allowed.