1986 (1) TMI 375 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover for the year 1972-73 based on the accounts maintained by M/s. Ganesh Jewellers, Lucknow.

Analysis:
The case involved the assessment of turnover for the year 1972-73 for M/s. Ganesh Jewellers, Lucknow. The assessee disclosed a net turnover of Rs. 9,207.54, which was disputed by the assessing officer. The authorities rejected the accounts and fixed the turnover at Rs. 3,00,000. The assessee appealed, but the revisions judge upheld the decision. The High Court was approached under section 11(1) of the Sales Tax Act, contending that the authorities were unjustified in rejecting the accounted version of turnover. The judge (Revisions) highlighted discrepancies in the assessee's accounts, such as lack of purchase vouchers, missing addresses of sellers, and incomplete stock details. The authorities justified their best judgment assessment based on these discrepancies, leading to the rejection of the assessee's accounts.

The High Court analyzed the legal provisions under section 7(3) of the U.P. Sales Tax Act, which allows for best judgment assessment if the return submitted by the dealer is deemed incorrect or incomplete. The court emphasized that the assessing authority cannot resort to best judgment assessment solely due to the inability to verify the accounts. In this case, the authorities did not have grounds to conclude that the return was incorrect or incomplete, as the discrepancies pointed out were not sufficient to justify rejecting the accounts.

Furthermore, the court examined the requirements under Rule 72 of the U.P. Sales Tax Rules, emphasizing the obligation to maintain accurate accounts of purchases, sales, and stocks. The court clarified that the absence of specific documentation like purchase vouchers or detailed stock registers does not automatically render the accounts incorrect. The court cited precedent to emphasize that the primary accounts maintained by the assessee should be reliable for sales and purchases, and the absence of certain ancillary records should not lead to wholesale rejection of accounts.

Ultimately, the High Court found that the reasons given by the sales tax authorities for the best judgment assessment did not align with the legal provisions of the Sales Tax Act. The court held that the rejection of the assessee's accounts was unjustified, and the authorities should have focused on verifying the accuracy of the accounts rather than resorting to best judgment assessment. The revision was allowed, and the original assessment order was quashed, directing the assessing authority to reassess the turnover in accordance with the legal principles outlined in the judgment.