1983 (8) TMI 243 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the non-maintenance of a stock book by the assessees justifies an addition to the sales turnover.
2. Whether the assessees can be considered wholesale dealers under the definition provided in rule 3(1) and thus required to maintain a stock account.

Analysis:
1. The primary issue in this case revolves around the non-maintenance of a stock book by the assessees, leading to an addition of 1% of the taxable turnover to the book turnover by the assessing authority. The contention of the assessees is that the absence of a stock register does not automatically warrant an addition towards suppression unless there is a specific finding of omission or suppression in the accounts. The learned counsel argues that failure to maintain a stock account should result in penalties rather than additions to sales turnover. The court referred to various decisions, including Ratna Cafe, Madras-5 v. State of Madras, to support the argument that rejection of accounts is necessary before making such additions. However, the assessing authority rejected the accounts due to the absence of a stock account, justifying a best judgment assessment and an addition towards possible suppression.

2. The second issue pertains to whether the assessees qualify as wholesale dealers under rule 3(1) and are thus obligated to maintain a stock account. The definition of "wholesale dealer" includes dealers who sell to other dealers as well as consumers. The assessees in this case sell to both consumers and other dealers, thereby falling within the definition of wholesale dealers. Rule 26(9) mandates wholesale dealers to maintain separate stock accounts, crucial for verifying the accuracy of other accounts. As the stock account was not maintained, the assessing authority was justified in rejecting the account books and proceeding with a best judgment assessment, including an addition towards possible suppression. The Tribunal reduced the addition from 1% to Rs. 10,000, a decision upheld by the court based on the circumstances of the case.

In conclusion, the court dismissed the tax revision case, finding no grounds to interfere with the Tribunal's decision. The assessees' failure to maintain a stock account as required for wholesale dealers justified the rejection of their accounts and the subsequent best judgment assessment by the assessing authority. The addition towards possible suppression was deemed appropriate under the circumstances, as upheld by the Tribunal and the court.