1987 (1) TMI 473 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Compliance with Rule 26(14) of the Tamil Nadu General Sales Tax Rules, 1959.
2. Validity of the "best judgment assessment" by the assessing authority.
3. Rejection of accounts based on low gross profit.
4. Opportunity for assessment under Section 7 of the Tamil Nadu General Sales Tax Act, 1959.
5. Jurisdiction and powers of the appellate authority.

Issue-wise Detailed Analysis:

Compliance with Rule 26(14) of the Tamil Nadu General Sales Tax Rules, 1959:
The revision petitioner did not maintain a production-cum-stock account in Form XXX as mandated by Rule 26(14). The Tribunal endorsed the opinion of the assessing authorities and the lower appellate authority that the petitioner failed to comply with this rule. The petitioner contended that the total turnover was less than Rs. 50,000, thus not necessitating the maintenance of the required accounts. However, this argument was rejected by the Tribunal, which noted discrepancies in the account books, including unexplained pencil entries.

Validity of the "best judgment assessment":
The Tribunal and the assessing authorities concluded that the "best judgment assessment" was warranted due to the failure to maintain proper accounts and the low gross profit reported. The Tribunal found that the gross profit of Rs. 386.32 for the entire year was significantly low, leading to the rejection of the accounts. The Tribunal observed that the addition of 20% for probable omissions and gross profit was normal in this line of business. The court, however, noted that there was no finding that the purchases were inflated or the sales were suppressed, and thus, the "best judgment assessment" was not justified.

Rejection of accounts based on low gross profit:
The Tribunal rejected the accounts maintained by the petitioner primarily due to the low gross profit of 1%. The petitioner argued that the Tribunal erred in relying on pencil entries and that low gross profit alone should not warrant rejection of accounts. The court referred to various precedents, including R.M.P. Perianna Pillai & Co. v. Commissioner of Income-tax and Veeriah Reddiar v. Commissioner of Income-tax, which held that low gross profit alone is not a sufficient ground for rejecting accounts. The court concluded that the assessing authorities did not provide adequate reasons for rejecting the accounts.

Opportunity for assessment under Section 7 of the Tamil Nadu General Sales Tax Act, 1959:
The petitioner contended that the Tribunal failed to consider the option for assessment under Section 7. The Tribunal held that the petitioner did not make a specific offer to be assessed under Section 7 before the assessing officer or the Tribunal. The court referred to the decision in Ramayana Printing Works v. State of Tamil Nadu, which stated that Section 7 does not impose a time limit for exercising the option for assessment at a compounded rate. The court did not find it necessary to discuss this point further due to the decision on the primary issue.

Jurisdiction and powers of the appellate authority:
The petitioner argued that the appellate authority had the jurisdiction to consider the grounds of appeal and provide relief. The court referred to the decision in State of Tamil Nadu v. Arulmurugan and Co., which held that the appellate authority has the power to confirm, reduce, enhance, or annul the assessment and to pass any other order deemed fit. The court emphasized that the appellate authority's powers are of the widest amplitude and are not less than those of the assessing authority.

Conclusion:
The court allowed the tax revision case, setting aside the order of the assessing officer as confirmed by the Appellate Assistant Commissioner and the Tribunal. The court found no real basis for the rejection of the accounts maintained by the petitioner and no ground warranting a "best judgment assessment." The petition was allowed, and no costs were imposed.