1993 (2) TMI 303 - HC - VAT and Sales Tax

Summary

Issues:
Disputed assessment based on disclosed turnover, validity of rejection of account books, legal grounds for rejection of account books, interpretation of relevant provisions of the U.P. Sales Tax Act, burden of proof on the assessee, importance of maintaining accurate accounts, criteria for rejecting account books, impact of average selling rate on turnover assessment.

Analysis:
The case involved a sales tax revision concerning the disputed assessment for the year 1983-84 of an assessee engaged in the brick manufacturing and sales business. The Sales Tax Officer assessed the turnover at Rs. 2,72,000, higher than the declared turnover of Rs. 2,33,363.75. The initial appeal by the assessee was successful, but the Sales Tax Tribunal overturned the decision, leading to a revision in the High Court. The core issue was whether the rejection of the disclosed turnover based on a perceived low average selling rate was legally justified.

The Sales Tax Officer rejected the disclosed turnover primarily due to the assessee's low average selling rate per thousand bricks. However, there was no indication that the account books were unreliable or misrepresented the business's actual state. The Sales Tax Tribunal upheld the rejection, emphasizing the low selling rate as abnormal. The High Court, after considering the arguments, found the Tribunal's decision unsustainable. The law does not mandate maximum profit or specific selling rates, and the low average selling rate alone cannot justify rejecting the turnover based on well-maintained and verifiable account books.

The judgment delved into the relevant provisions of the U.P. Sales Tax Act, particularly Sections 7 and 12, which govern turnover determination, assessment, and maintenance of account books by dealers. It highlighted the burden on the assessee to prove the correctness of their returns through accurate accounts. The court emphasized that account books should not be rejected lightly, and the revenue must provide solid evidence of unreliability or incompleteness before discarding them. In this case, the account books were found to be in order and open for verification, making the rejection unjustified.

The High Court stressed the importance of maintaining accurate accounts for facilitating verification of transactions. It noted that the rejection of account books must be supported by legal and cogent reasons, which were lacking in this instance. The absence of evidence showing incomplete recording of sales or discrepancies in consideration received further weakened the basis for rejecting the disclosed turnover. Ultimately, the Court allowed the revision, emphasizing that the order passed by the Sales Tax Tribunal was unsustainable due to insufficient grounds for rejecting the turnover based on the average selling rate alone.