1975 (8) TMI 116 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover based on rejected account books for a dealer in dry fruits, ice, and fireworks for the assessment year 1967-68. Validity of rejecting account books due to the method of recording sales by counting cash in the till. Consideration of the rejection of account books in the previous year. Interpretation of Section 12 of the U.P. Sales Tax Act and Rule 72 of the U.P. Sales Tax Rules regarding maintenance of accounts for verification of turnover accuracy.

Analysis:
The judgment pertains to a reference under section 11(1) of the U.P. Sales Tax Act involving an assessee dealing in dry fruits, ice, and fireworks. The Sales Tax Officer rejected the return disclosing a turnover of Rs. 90,570.29, enhancing it to Rs. 1,40,000. The Assistant Commissioner (Judicial) reduced it to Rs. 1,20,000. The revising authority confirmed the turnover estimate, citing the method of recording sales by counting cash in the till and the rejection of account books in the previous year as reasons. The questions referred to the court revolve around the rejection of account books based on these grounds.

The court emphasized that while cash sales should ideally be vouched by cash memos or contemporaneous entries, for petty dealers, the practice of counting cash daily to determine sales is acceptable. The court cited a previous decision supporting this view. The method, though crude, is recognized, and if no other evidence suggests sales suppression, it must be accepted. The court rejected the revising authority's view that the method alone justifies account book rejection, emphasizing that each assessment year is distinct, and past rejections do not bind future assessments.

Regarding the interpretation of Section 12 and Rule 72, the court noted that there was no finding that the accounts did not show goods' value or were not maintained intelligibly. Absence of evidence that the dealer failed to maintain true and correct accounts of purchases and stock further supported the court's decision. The statutory provisions do not mandate cash sales to be vouched in a specific manner, leaving the choice of accounting method to the assessee as long as it is recognized.

In conclusion, the court answered both questions in the negative, favoring the assessee. The rejection of account books based solely on the method of recording sales and past rejections was deemed unjustified. The assessee was awarded costs, and the reference was answered in their favor.