Govindan Nair, J.:— The question in this case is whether the assessment made on the petitioner by the Sales Tax Officer for the year 1961-62 is according to the best of his judgment.

2. The books of account of the assessee were rejected by the Sales Tax Officer, the Appellate Assistant Commissioner in appeal and the Tribunal in further appeal, and we think rightly. Section 12(2)(b) of the General Sales Tax Act, 1125 M.E, the section applicable, was therefore attracted. That section is in these terms:

“12. Procedure to be followed by assessing authority.—

(2) (a)……………………………………………………………………………………………………

(b) If no return is submitted by the dealer under sub-section (1) before the date prescribed or specified in that behalf or if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing authority shall assess the dealer to the best of his judgment:

Provided that before taking action under this clause the dealer shall be given a reasonable opportunity of proving the correctness and completeness of any return submitted by him.”

3. The Act of 1125 has been replaced by the Kerala General Sales Tax Act, 1963. The section in the 1963 Act corresponding to section 12(2)(b) of the General Sales Tax Act, 1125, is section 17(3), which we may extract:

“17. (3) If no return is submitted by the dealer under sub-section (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it, assess the dealer to the best of its judgment:

Provided that before taking action under this sub-section the dealer shall be given a reasonable opportunity of being heard and, where a return has been submitted, to prove the correctness or completeness of such return.”

4. The difference in the wording of the two sections, the section in the later enactment conferring specifically on the assessing authority power for making such enquiry as he may consider necessary and empowering him after taking into account all the relevant materials gathered by him to assess the dealer to the best of his judgment does not in substance add anything to the jurisdiction of the authority to make an assessment to the best of his judgment. The question then is how should a “best judgment assessment” be made.

5. This question has to be answered so far as the assessment on the petitioner for the year 1961-62 is concerned with reference to the following facts. The assessee is a dealer in hill produce and timber. The assessee filed a return for the year 1961-62 showing a gross and net turnover of Rs. 75,353.50 and Rs. 25,195.16 respectively. He claimed exemption on a sum of Rs. 50,158.34. The turnover furnished in the return and the accounts produced in support of the return were found defective and unacceptable by the Sales Tax Officer for the reasons he stated as follows: (1) The turnover furnished in respect of the hill produce was the sales turnover, namely, Rs. 50,158.34 instead of the purchase turnover of Rs. 43,144.46; (2) In respect of sales effected through commission agents only the net amount after deducting commission etc. was accounted instead of the gross amount; (3) The business place of the dealer was inspected by the Intelligence Squad on 25th November, 1962, and a note-book and some slips containing business transactions were recovered from there. Another note-book and a slip containing business transactions at Kalagapara were also recovered on inspection of this place on 25th November, 1962. Some of the slips so detected contain no date of transactions. Slips Nos. 22 to 30 contain details of purchase of pepper, ginger and turmeric for the period from 17th January, 1962, to 21st January, 1962, for Rs. 8,138.91 not brought to account. This is what the Appellate Tribunal remarked with reference to the facts:

“But the irregularities and the malpractices pointed out under the account are suspicious. The conduct of the party is really reflected in these slips. For a short period of one week covered by these slips we found huge turnover of Rs. 8,000 and odd. The slips specifically pointed out are for the period, namely, 17-1-1962 to 21-1-1962, which comes in the year under review though the detection was in the subsequent year…………….”

6. In the light of the above, the addition made on the turnover relating to hill produce to the extent of Rs. 1,44,000 arrived at by assuming that there must have been suppressions more or less similar to the extent indicated for the period from 17th January, 1962, to 21st January, 1962, for the whole of the season of three months was sustained. The question is whether this inference is sustainable on the materials that were available. This question has arisen in one form or other in many decisions. We shall examine some of them.

7. Nothing said in any of the decisions that have been cited before us has improved upon what has been stated by Lord Russell of Killowen in Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas [1937] 5 I.T.R 170 P.C.. No doubt, the statement was made in connection with the assessment to income-tax and With reference to section 23(4) of the Indian Income-tax Act, 1922. But the question that arose therein is the same as the one before us and it will be useful to read a passage from the judgment:

“The officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it may be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary.”

8. This decision of the Judicial Committee of the Privy Council has been noticed with approval in two decisions of the Supreme Court in Raghubar Mandal Harihar Mandal v. The State of Bihar [1957] 8 S.T.C 770 S.C. and in State Of Kerala v. C. Velukutty [1966] 17 S.T.C 465 S.C.. In Raghubar Mandal Harihar Mandal v. The State of Bihar, after referring to the above passage from the judgment in Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas, their Lordships observed as follows:

“No doubt it is true that when the returns and the books of account are rejected, the assessing officer must make an estimate, and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion. To use the words of Lord Russell of Killowen again, ‘he must make what he honestly believes to be a fair estimate of the proper figure of assessment’ and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate.”

9. Reference was also made to an earlier decision of the Supreme Court in which section 23(3) of the Indian Income-tax Act, 1922, was interpreted and the following passage from Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal [1954] 26 I.T.R 775 S.C., was quoted:

“As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 23(3).”

10. Their Lordships also referred to a decision of the Lahore High Court in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab, which was approved by the Supreme Court in Dhakeswari Cotton Mills' case and emphasised the rules laid down in the decision which are as follows:

“(1) While proceeding under sub-section (3) of section 23 of the Income-tax Act, the Income-tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false; (2) if he proposes to make an estimate in disregard of the evidence, oral or documentary, led by the assessee, he should in fairness disclose to the assessee, the material on which he is going to found that estimate; (3) he is not, however, debarred from relying on private sources of information, which sources he may not disclose to the assessee at all; and (4) in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it, if possible.”

11. The principles approved and laid down by the Supreme Court after consideration of the decision of the Judicial Committee of the Privy Council in Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas and in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal have been correctly summarised in the head-note to the decision in Raghubar Mandal Harihar Mandal v. The State of Bihar, which may be extracted:

“In making an assessment under section 10(2)(b) the Sales Tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law; but he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. When the returns and the books of account are rejected, the assessing officer must make an estimate and to that extent he must make a guess; but the estimate must be related to some evidence or material and it must be something more than mere suspicion.”

12. The decision of the Judicial Committee of the Privy Council in Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas was again referred to by the Supreme Court in State of Kerala v. Vdukutty and their Lordships in dealing with section 12(2)(b) of the Travancore-Cochin General Sales Tax Act, 1125, (stated the position as follows:

“Under section 12(2)(b) of the Act, power is conferred on the assessing authority in the circumstances mentioned thereunder to assess the dealer to the best of his judgment. 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 subsection (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.”

13. The principles laid down in the above decisions have been applied in a number of cases of varying facts before this court. It is unnecessary to refer to all those decisions as the question that arises specifically in this case is whether on the materials available before the assessing authorities an honest conclusion was possible that the petitioner must have been indulging more or less consistently in the practice of suppressing his turnover, so that the assessment of the suppression for the season of three months proportionately with the detected suppression for a period of five days answers the requirements of “best judgment”. The cases that have dealt with this question decided by this court are those in Chandunny Nair & Son v. State of Kerala, where Ansari, C.J, took the view on the facts of the particular case that there was no justification for inferring from the detection of instances of suppression on particular days that there must have been a continuous practice of suppressing turnover of like amounts on all days justifying the conclusion that the suppression must have been 365 times the suppression detected on a particular day. Only the suppressions actually detected were allowed to be added to the turnover returned. The same view has been taken by one of us in the two decisions in M. Appukutty… v. Sales Tax Officer, Spl. Circle I, Kozhikode…., Kozhikode, and K. Moideenkutty v. Sales Tax Officer, Tirur, Tirur [1967] 19 S.T.C 302. In the Supreme Court decision in State Of Kerala v. C. Velukutty, the Supreme Court held that there was no justification for assuming that there must have been suppressions in the branch office of the assessee when certain suppressions in the head office of the assessee were discovered. The question to be determined must naturally depend on the facts of each case and it is not always easy to decide whether an addition made by the sales tax authorities is justified or not. This difficulty may be illustrated by two decisions of the Andhra Pradesh High Court, one in G. Narasimulu v. The State of Andhra Pradesh and the other in S.M Yousoof Sahib v. The Additional Commercial Tax Officer (Evasions), Vijayawada,. In Narasimulu v. The State of Andhra Pradesh, it was held on the facts that the estimate made by the assessing authority was not based merely on suspicion or guess-work and that there are sufficient materials which could furnish the basis for making the estimate. But in S.M Yousoof Sahib v. The Additional Commercial Tax Officer (Evasions), Vijayawada,, the method adopted of multiplying two transactions which were not entered in the accounts by 82 on the basis that there must have been similar suppressions for 82 days was held to be arbitrary.

14. Certain cases were cited before us in support of the contention that from a single suppressed transaction an inference can be drawn that there must have been concealments throughout the year and to the same extent on each day. Rosette Franks (King Street) Ltd. v. Dick (H.M Inspector of Taxes), Jami Biswanath Prusthy v. Commissioner of Sales Tax, Orissa, and D. Sreenivasappa v. The State of Madras have been relied on. If these decisions lay down anything other than what has been ruled by the Supreme Court, we must respectfully dissent from the view. The Supreme Court has categorically stated “…………. the estimate must be related to some evidence or material and it must be something more than mere suspicion” (vide Raghubar Mandal Harihar Mandal v. The State of Bihar [1957] 8 S.T.C 770 S.C. already referred to) and that “……………. under sub-section (3) of section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all” (vide Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal [1954] 26 I.T.R 775 S.C., also already referred to) and further that “though there is an element of guess-work in a best judgment assessment, it shall not to be a wild one, but shall have a reasonable nexus to the available material and the circumstances of each case.”

15. We understand these decisions to lay down that the answer to the question whether an inference that there has been a pattern of continuous suppression for any period must depend on the existence of material (and/or circumstances) which affords a reasonable nexus to the inference. This means that there must be material to indicate suppression and material to indicate that there was a pattern of suppression.

16. In this case we feel that a pattern has been established; there has been continuous suppression for a period of five days; the amount of suppression was considerable; there have been suppressions at both places of business and a number of unexplained slips indicating large scale suppressions were also recovered. We are unable therefore to come to the conclusion that there was no material before the assessing authorities for drawing the inference that they did, and we are unable to say that the conclusion is not an honest conclusion on the facts of the case.

17. We dismiss this tax revision case.

18. Petition dismissed.