1991 (2) TMI 393 - HC - VAT and Sales Tax

Issues Involved:

1. Rejection of books of account and best judgment assessment.
2. Special discount allowed on sales and its impact on taxable turnover.
3. Non-production of books of account and sale bills.
4. Legality of the Tribunal's reliance on an affidavit.
5. Burden of proof regarding suppressed turnover.
6. Tribunal's determination of turnover and addition of 15% to taxable turnover.

Issue-wise Detailed Analysis:

1. Rejection of Books of Account and Best Judgment Assessment:
The Assistant Commissioner (Assessment), Special Circle I, Ernakulam, rejected the books of account maintained by the assessee for the assessment years 1981-82 and 1982-83 as unreliable and estimated the turnover on a best judgment basis. The Tribunal later confirmed the rejection of the books of account but remanded the matter to the assessing authority to revise the assessments. The Tribunal directed the assessing authority to verify the claim regarding special discount, loss due to breakage, and correctness of the excise duty paid.

2. Special Discount Allowed on Sales and Its Impact on Taxable Turnover:
The main contention raised by the revision petitioner related to the special discount allowed by the assessee on the sale of Indian-made foreign liquor. The assessee had accounted only for the net sale proceeds in the books of account, and the special discount allowed for each year could not be quantified from those account books. The Tribunal directed the assessing authority to consider if the special discount was deductible under rule 9(a) of the Kerala General Sales Tax Rules and to quantify such discounts.

3. Non-production of Books of Account and Sale Bills:
The respondent failed to produce the books of account and sale bills despite several notices issued by the assessing authority. The Tribunal admitted documents produced along with an interlocutory application and an affidavit explaining why the respondent could not produce the books of account and sale bills. The Tribunal accepted the explanation that the respondent was unable to produce the documents due to reasons beyond his control, including involvement in a crime and subsequent raids and searches.

4. Legality of the Tribunal's Reliance on an Affidavit:
The learned Government Pleader contended that the Tribunal should not have relied on the affidavit in view of the specific direction to produce the sale bills. The Tribunal, however, found some force in the explanation provided in the affidavit and accepted it as material evidence. The Tribunal's reliance on the affidavit was supported by the Supreme Court decision in Gouri Prasad Bagaria v. Commissioner of Income-tax, which held that if the Tribunal believes the assessee's statement, there is material on which the finding is based.

5. Burden of Proof Regarding Suppressed Turnover:
The Tribunal observed that the assessing authority had no material to prove that the assessee had suppressed his turnover. The Tribunal noted that the assessing authority could have scrutinized the books of account of the retailers to whom the respondent supplied liquor to ascertain whether any discount was allowed. The Tribunal held that the burden was on the department to establish the allegation of understated sales consideration, which was not properly established.

6. Tribunal's Determination of Turnover and Addition of 15% to Taxable Turnover:
The Tribunal found no material to suspect the veracity of the sale price disclosed in the books of account. It opined that the assessee is at liberty to fix the selling price according to the nature of his business and other relevant circumstances. The Tribunal determined that an addition of 15% to the taxable turnover as per the books of account for both years would be a just, fair, and reasonable estimate. The Tribunal directed the assessing authority to modify the assessment orders accordingly.

Conclusion:
The Tribunal's findings were based on material evidence, including the affidavit, and the explanations provided by the respondent. The Tribunal did not commit an error of law in determining the turnover and adding 15% to the taxable turnover. The tax revision cases were dismissed as they were without merit.

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