1991 (7) TMI 308 - HC - VAT and Sales Tax

Summary

Issues:
1. Best of judgment assessment based on failure to maintain stock register and gross profit discrepancy.
2. Interpretation of section 12(2) of the Tamil Nadu General Sales Tax Act, 1959 for best judgment assessment.

Issue 1: Best of Judgment Assessment
The case involved the assessees, dealers in glass sheets and mirrors, challenging the best of judgment assessment by the assessing authority. The assessing authority determined the taxable turnover by adding 30% towards gross profit in respect of inter-State purchase value of glasswares due to the assessees not maintaining separate accounts for local and inter-State purchases. The Appellate Assistant Commissioner partially allowed the appeal, reducing the taxable turnover by a sum of Rs. 69,000. The Sales Tax Appellate Tribunal upheld the best of judgment assessment, considering the lack of separate accounts for local and outside purchases. The Tribunal reduced the taxable turnover further by Rs. 60,000, fixing it at Rs. 10,55,080. The assessees contended that the assessing authority's approach was arbitrary and whimsical, lacking justification for the best of judgment assessment.

Issue 2: Interpretation of Section 12(2) of the Act
The judgment analyzed the provisions of section 12(2) of the Tamil Nadu General Sales Tax Act, 1959, governing best judgment assessment. The section allows for best judgment assessment if the return submitted by the dealer is incomplete or incorrect. The assessing authority must conduct necessary inquiries before resorting to best judgment assessment and provide the dealer with an opportunity to prove the correctness of the return. The judgment emphasized that best judgment assessment should not be random or uncontrolled, requiring relevant circumstances and material consideration. It highlighted that failure to maintain stock register alone is not sufficient grounds for rejecting the return. Additionally, the judgment noted that declaring low gross profit or trade loss does not automatically imply suppression, especially without evidence of inflated purchase or suppressed sales. The assessing authority's reliance on guesswork and failure to reject accounts before resorting to best judgment assessment were deemed unjustified. The Tribunal's failure to consider the assessees' explanations and pleas rendered the orders unsustainable.

In conclusion, the revision petition was allowed, setting aside the orders and remanding the case to the assessing authority for a fresh assessment in accordance with the law, granting the assessees an opportunity to address the alleged defects. No costs were awarded in the matter.