Arijit Payayat, C.J.
1. Challenge in this petition under Article 226 of the Constitution of India, 1950, (in short, the constitution) is to the order dated 8.12.1999 passed by the Entertainment Tax Officer (in short, ETO); order dated 23.3. 2000 passed by the Deputy Commissioner entertainment Tax-cum-Appellate Authority (in short the Appellate Authority) and order dated 12th July, 2000 passed by the Lt. Governor Delhi. The orders have been passed under the Delhi Entertainment and Betting Tax Act, 1996, (in short and Act).
2. Background in which the orders came to be passed in essentially as follows:-
Petitioner is an exhibitor of cinemagotraphic films. A premiere show of a movie titled Sangharsh was organized by M/S Abalone Network. Petitioner had been approached by the said organisation for having the show on 2nd September, 1999 at 6.15 pm. Organisers had entered into an arrangement with the petitioner to sell 312 ticket at the rate of Rs. 500/- each, and the rest of the tickets were to be complimentary at normal rates and total tax was to be paid by them to the petition so that the same was deposited with the Department. They also agreed to give normal theatre rent. After receipt of the said offer, petitioner wrote to the ETO requesting him to grant Permission to hold the premier show on the arrangement. referred to above, and a sum of Rs. 70706.42 was deposited towards tax on the basis of the said arrangement referred to above. An undertaking was also given before the ETO as regards the arrangement. Permission was granted by the EEO to hold the show on payment of entertainment tax on regular houseful capacity plus tax on special tickets for the said show. Petitioner's case is that it had only permitted the organisers to sell 312 tickets of Rs. 500/- each and rest was permitted to be on complementary basis and normal tickets were issued. Official of the concerned Department conducted an inspection. Petitioner came to know that the organisers had issued cards to various persons . Petitioner did not permit it and all the cards were destroyed and entry was allowed on the basis or regular cinema tickets, except 312 persons, who were permitted on the tickets of Rs. 500/- each, as permitted by the ETO. There was delay in preparing the DE II/ Form 7 which could be prepared only at about 8.30 p.m. A show cause notice was issued by the Additional ETO on 14.9.1999 alleging that though only 312 tickets of Rs. 500/- each were to be sold and the rest of the tickets ware to be sold at normal rate, the entire tickets pertaining to the show were sold at the rate of Rs. 500/-. Petitioner was required to show cause as to why additional levy of tax was not to be imposed. Petitioner submitted its reply stating that there was no discrepancy, as alleged. The ETO did not accepted the contention, and levied Extra demand of Rs. 1,34,419/- by treating that all the tickets were sold for Rs. 500/- each. Petitioner filed an appeal before the Appellate Authority, who vide order dated 23.3.2000 granted relief for 50 seats. An appeal the Lt. Governor under Section 42 of the Act did but bring any relief to the petitioner.
3. According to the petitioner the entire demand raised is based on surmises and conjectures. It is submitted that there was no material to establish that the petitioner had sold any ticket beyond the authorised rates. That being so, there was no scope for making a best judgment assessment raising extra demand. Further, the orders do not contain reasons or basis for the conclusions. Shri V.K. Shali, on the other Hand stated that inspection was made by in inspector and one person was found holding a ticket for Rs. 500/- which was not one of the 312 tickets authorised to be sold and that being so, considering the scope of manipulations, extra demand was raised and maintained substantially by the first Appellate authority and the Lt. Governor. According to him there is total prohibition against sale of ticket from a place other than the enclosure set apart by the proprietor or the cinema.
4. In order to appreciate rival submissions, relevant provisions need to be noted Chapter III of the Act pertains to Entertainment Tax. Section 6 deals with tax on payment for entertainment. Expression "entertainment" is defined under Section 2(i). Section 15 deals with assessment of tax. The order of Lt. Governor shows that stand of the respondent was to the effect that on actual inspection of the cinema hall it transpired that invitation cards priced at Rs. 500/- each were issued to all in the hall which to full capacity and was not restricted to 312 invitees. Section 16 deals with "provisions against re-sale of tickets". Rule 38 of the Delhi entertainment and Betting Tax Rules, 1997 deals with the manner of sale of tickets. Section 16(2) and Rule 38 read as follows:
Section 16 Provision against resale of tickets
(1) XXX XXX XXXX
(2) No person shall sell, resell or purchase any ticket for admission to a cinematograph exhibition in respect whereof tax is payable under section 6, except from the enclosure set apart by proprietor of the purpose and in such manner as may be prescribed.
38. Manner of sale of tickets
(1) The tickets for admission to cinematograph exhibition or any other regular programme or entertainment shall be issued by the proprietor only from a booking office provided for a purpose. In case of programme of casual nature, he ticket shall be issued only from the counters which have been permitted by the commissioner under sub-rule (2) of rule 5.
(2) The purchaser of a ticket, who, for any reasons, does not want to see the programme of entertainment shall not resell the ticket to any other person but he may do so through the booking office counter.
In the scheme of the statute there are some other provisions which are of considerable significance. They are Section 15 dealing with the assessment of tax, and Chapter V which deals with penalties and procedure. Section 28 deals with unauthorized sale and purchase of tickets. Section 15 and 28 read as follows:
"15. Assessment of tax
(1) where the assessing authority is satisfied that the proprietor of an entertainment-
(a) has failed to give information or take permission as required under sub-section (1) or ass the case may be under sub-section (2) of section 8; or
(b) has failed to submit true and full returns in the prescribed form; or
(c) has printed distributed, possessed, sold or used duplicate tickets; or
(d) has fraudulently evaded or attempted to evade, the payment of tax due in any manner whatsoever;
it shall, after giving the proprietor a reasonable opportunity of being heard, assess to the best of its judgment, the amount of the tax due from the proprietor, and may also impose a penalty not exceeding two times of the tax due.
(2) The amount of tax assessed by the assessing authority shall, together with any penalty that may be directed to be paid, be paid by the proprietor within a period of fifteen days from the date of service of notice of demand issued by the assessing authority.
(3) Any person aggrieved by an order under sub-section (1) and (2) may, within one month the date of service of such order, prefer an appeal to the Commissioner in such manner as may be prescribed.
(4) An appeal shall lie from a appellate order of the Commissioner passed under sub-section (3) to the appellate authority within one month from the date of service of such order, in such manner as may be prescribed, and the order of the appellate authority shall be final.
28 Penalty for unauthorized sale and purchase of tickets.
(1) Any person who sells any ticket in contravention of the provisions of -
(a) sub-section (1) of Section 16 shall be punishable with a fine not exceeding two hundred rupees.
(b) sub-section (2) of said section shall be punishable with a find not exceeding one thousand rupees.
(2) Any person, who purchase any ticket in contravention of the provisions of section 16, shall be punishable with a fine not exceeding two times of value of the admission ticket."
Section 33 also deals with the offence other than those specifically provided in Section 27. The said provision read as follows:
"Section 32 Penalty for entertainment which is prohibited or when authorization certificate thereof is revoked or suspended. Whoever holds any entertained while it is prohibited under sub-section (3) of section 8 or while the admission fee and tax collection authorization certificate for such entertainment remains suspended or revoked under sub-section (2) of section 18 shall be punishable with fine not exceeding five thousand rupees."
5. As the scheme of the Act would go to show, there is prohibition on the sale of tickets from any place except from the place provided for by the proprietor of the cinema hall. If there is any infraction certainly result to best judgment assessment can be made. Assessment is the process of quantification of tax due from the person who has liability to pay tax. Assessment is a comprehensive word and denoted the entirety of proceedings which are taken with regard to it. Assessment provisions are not charging sections. They relate to quantification of liability for a particular period and are thus machinery proceedings. Best judgment assessment is permissible under Section 15(1) of the Act where any of the situations covered by the four categories enumerated in sub-section (1) exist. A best judgment connotes exercise of care and caution and a decision which would be reasonable in the circumstances of the case. Where the assessment is based on no material or is made by ignoring relevant materials or is based on irrelevant material, it becomes vitiated. Best judgment assessment is made not on the basis of returns and accounts furnished by the assessed in support thereof, but on an estimate made by the assessing authority. Assessment shall not be capricious, whimsical or arbitrary. Though there is scope for some guess work, but the same must be based on some material and there should not be any speculation. Learned counsel for the respondent has submitted that in estimating the escaped turnover it is inevitable that there should be some guess work. There is no quarrel with this position. But in making a best judgment assessment the Assessing Officer does not possess absolutely arbitrary authority to assess at any figure he likes and he is to be guided by fair-play, a sense of justice and equity. it is to be noted that even if the returns are not accepted, there is per force enhancement to be made on estimate, the Assessing Officer is required to make an intelligent and well ground estimate. Such estimate must be based on relevant material. The guess work in a best judgment assessment should be a wild one but should have reasonable nexus to the available material. Estimate should be made on rational basis.
6. The show cause notice that was issued by the Additional Entertainment tax officer Annexure-E, dated 14.9.1999 contained the following allegations regarding the alleged irregularity/discrepancy.
"Whereas permission to swell 312 Upper stall tickets of denomination of Rs. 500/- was granted by this Department and rest of theatre tickets were to be sold on usual rates but it has been reported that this cinema sold off the entire tickets pertaining to this show to the Organisers of this Premiere.
And whereas all the invitation cards issued by the organisers for this show should have been numbered but this was not done.
And whereas DET 2/Form 7 was not prepared by the cinema management even by 8.30 p.m. inspite of repeated directions by the staff of entertainment tax branch to the cinema officers to this effect.
It was indicated that the aforesaid irregularities/discrepancies were in violation of the provision of the Act. Petitioner was required to indicate as to why action for contravention of the provisions of the Act should not be taken / The petitioner gave reply to the show cause notices. In the assessment/tax levy order, Annexure-G dated 8.12.1999 it was observed that the time of inspection of the cinema as conducted by a team of Entertainment branch, it was noticed that besides selling 312 tickets, other tickets which were to be sold on usual rates were also sold at the same consideration. It was held that reply furnished was not found tenable and therefore, tax was levied for houseful capacity.
7. Two things are to be noted, so far as this assessment is concerned. First is that there was conclusion about the petitioner having sold tickets other than 312 tickets of upper stall tickets, for a consideration of Rs. 500/- each as in the case of 312 upper stall tickets. Second is that no reason was indicated as to why the reply of the petitioner was not found tenable.
8. An appal was filed before the Commissioner of Exercise, entertainment and Luxury Tax under section 15(3) of the Act. The said authority noted that the inspection reported indicated the following lapses on the part of the petitioner.
"(i) The cinema management sold all the tickets to the organisers which, they sold to the public in the shape of invitation cards. They have quoted one instance of S. No. 153 which has bought invitation card for Rs. 500/- from T. Series, one of the sponsors.
(ii) All the entries to the Cinema Hall made through the invitation cards which were un-numbered. This has been admitted by the cinema management also and in their reply admitted by destruction of invitation cards later on.
The cinema management could not furnish the Form-7 (DET.2) By 8.30 P.M. despite several reminders by the inspecting team. Rule 14(2) of the Delhi Entertainment & Betting Tax Rules 1997 Prescribes that "The Form-7 shall be completed with one hour from the commencement of the show or ten minutes before the commencement of interval, which is earlier....."
9. On a consideration of the contention of the petitioner, the Commissioner was the view that the petitioner had violated the provisions of the Rules and also the terms and conditions of the permission given to the petitioner. It did not sell remaining tickets from the counter and rather sold whole lot of tickets to the organisers who in turn sold then to the general public @ Rs. 500/- per ticket and therefore the assessing officer was justified in assessing the entire capacity oat the rate of Rs. 500/- per ticket. However, he granted relief of 50 ceats taking note of the fact that first two raw were for construction of stage. An appeal was filed before the Lt. governor under Section 42 of the Act of the Act. His conclusion as arrived at on the sand of the petitioner and the department, were as follows:-
" I have heard both the parties and have carefully gone through the documents on record. I find reasonable and convincing grounds to conclude that apart from the 312 person granted entry to the show @ Rs. 500/- per Card, the remaining persons in the hall which was packed to full capacity, also gained entry on the basis of cards issued by the organisers @ Rs. 500/- each and that the actual sale of the cinema tickets at the cinema counter did not take place. The management of the cinema therefore owes to the government be balance entertainment tax for the remaining category of persons, computed at the prescribed rates. I, therefore, uphold the impugned order dated 23.3.2000. the appeal dated 14.5.2000 by M/S sangar Theatre (P) Ltd. is hereby rejected".
10. A perusal of the appellate and revisional order shows that reasons as to why the said authorities did not consider the petitioner's stand to be tenable is not indicated. Merely saying that inspection revealed discrepancies/irregularities without considering the stand of the petitioner does not meet the requirements of law. It is to be noted that the allegation were that the organisers sold the tickets @ Rs. 500/- each. There is no material to show that the petitioner had any hand is the said sale. Learned counsel for NCL submitted that it was a well planned operation and role of the petitioner in the said sale cannot be ruled out. According to him, even if there is no concrete material in that regard, a reasonable presumption can be raised about the petitioner being in the background. As noted above, the assessing officer did not. indicate as to what were the provisions which were contravened. It was merely stated that provisions of the Act were contravened. According to the learned counsel for the respondents the allegations against the petition are of the nature covered under Section 16(2) of the Act. If that be so, in terms of Section 28, a person who sells any ticket in contravention of the provision is punishable with fine not exceeding Rs. 1000/-. But as indicated above, stand of the respondents is that the organiser sold the tickets in connection with the petitioner. There is no material to show such connivance. A suspicion however strong cannot take the place of proof. Additionally no reasons have been indicated for rejecting the stand of the petitioner. As was observed by the Apex Court in the State of Kerala vs K.T. Shanduli Yusuff 1977 (39) STC 478, tax authorities entrusted with the power to make assessment of tax discharge quasi judicial function and they are bound to observe the principles of natural justice in reaching their conclusion. Although a taxing officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on materials which may not be accepted as evidence in court of law, that does not absolve him from the obligation to apply the fundamental rules of justice which have come to be known for jurisprudence of administrative law as principles of natural justice. Best judgment assessment of administrative law as principles of natural justice. Best judgment assessment should be based on honest and rational estimated which has rational nexus to the available material and circumstances of each case. Although this Court cannot and should not enquire into sufficiency of material or substitute its judgment in place of the judgment of the taxing officer or the Tribunal, as the case may be, in regard to the question of fact,but if the conclusion drawn by them are so irrational that no reasonable man would have come to such a conclusion either because of a total lack of evidence or because of irrelevant considerations, the High Court would interfere with. Such findings.
11. Giving reasons in support of a decision or action as recorded is hallmark of great administration. In Lord Denning's "giving of reasons is one of the fundamentals of good administration". (See Breen v. Amalgamated Engineering Union, 1971(1) All E.R. 1148) A Party appearing before the Tribunal is entitled to know as, either expressly stated by the Tribunal; or inferentially stated, what it is, to which the Tribunal is addressing its mind.
12. It is settled law that reasons are harbinger between the mind of the maker to the controversy in question and the decision or the conclusion arrived at. Natural justice demands that decision should be passed on some evidence of justice of probative value. The object underlying rules of natural justice is to prevent miscarriage of justice and secure fair play in action. A duty to give reasons entails a duty to rationalize the decision. Reasons therefore, help to structure the exercise of discretion and a necessity of explaining why a decision is reached requires one to address ones's mind to the relevant factors which ought to be taken into account. Secondly, furnishing reasons satisfies an important desire on the part of the affected persons to know why a decision was reached. Basic fairness requires that those in authority over others should tell them why they are subject to some liability or have been refused some benefit. Giving of reasons enables Courts and Tribunals to effectively and meaningfully consideration, for instance, for disclosure of reasons in support of an order or decision is that the same ensures proper application of mind, reduces the possibility of casualness and minimizes qualms and caprice and thereby serves service to provide legal protection to a person against arbitrary action/conduct. A major judicial concerns for requiring reasons is that if virtually impossible for the Court to perform their appellate function or exercise of power of judicial review in agitating the validity of the decision. Whereas the statute or regulation provides a right of appeal from a decision, reasons are necessary to enable the effected person to exercise that right effectively. A right to reason in this situation is inferred by necessary implications from the provisions of appeal.
13. In Bhagat Raja v UOI AIR SC 1606, the Supreme Court held that case for giving case reasons or for making a speaking order becomes much stronger when a decision can be challenged. In the words of the Supreme Court in Organo Chemical Industries vs UOI, AIR 1979 SC 1803, inscrutable face of Sphinx is ordinarily incongruous with a judicial or quasi judicial performance. In re: Poyer and Mills Arbitration 1964(2) QB 467, it was observed that a decision might be perfectly right, but the person against whom it was made, was left with the real grievance that he was not told why the decision had been made.
14. In the aforesaid background of the legal and factual scenario, the inevitable conclusion is that the authorities have not properly applied their mind to the matter in controversy. We therefore set aside the impugned borders passed by the first Appellate Authority and the L.G. and remit the matter back to the Deputy Commissioner Entertainment Tax-cum-appellate Authority for a fresh consideration in accordance with law, keeping in view of our observations made supra. Writ petition is allowed to the extent indicated above.