1993 (1) TMI 267 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of taxable turnover based on running stock value.
2. Reasonableness of the estimate made in a best judgment assessment.

Analysis:
1. The case involved the assessment of taxable turnover for the assessment year 1987-88 under the Kerala General Sales Tax Act, 1963, for a jewellery dealer. The assessing authority initially determined the turnover at Rs. 93,74,230 based on three times the running stock value. The first appellate authority reduced the addition to two times the running stock. Subsequently, the Sales Tax Appellate Tribunal, in a common order, allowed the assessee's appeal in part and dismissed the Revenue's appeal. The Tribunal held that a 100 percent addition to the reported taxable turnover would meet the ends of justice, rejecting the running stock value basis for estimation.

2. The Sales Tax Appellate Tribunal's decision was challenged on the grounds of the reasonableness of the estimate made in a best judgment assessment. The Tribunal justified its decision by considering various factors such as previous assessments, stock difference found during inspection, business location, competition faced, and the negligible stock variation percentage. The Tribunal concluded that making a 100 percent addition to the reported taxable turnover was a more reasonable approach. The Court emphasized that the reasonableness of such estimates should be case-specific and not subject to review unless vitiated in law.

3. The Court highlighted that the Appellate Tribunal's decision was a valid exercise of its fact-finding authority, emphasizing that the method of estimating turnover by running stock value would be unreasonable and unfair in this case. The Tribunal's decision to make an ad hoc addition of 100 percent to the reported turnover was considered rational and fair based on the circumstances presented. The Court reiterated that in best judgment assessments, various methods could be used, and the chosen method should be justifiable and based on relevant facts.

4. Ultimately, the Court found no error of law in the Appellate Tribunal's decision and upheld the common order dated February 22, 1991. The Court dismissed the tax revision cases, concluding that the Tribunal's decision did not warrant interference.