1997 (2) TMI 508 - HC - VAT and Sales Tax

Summary

Issues:
Assessment based on best judgment, Suppression of turnover, Estimation of taxable turnover, Justification of estimate, Pattern of suppression, Revision of assessment.

Analysis:
The judgment pertains to a revision filed by the assessee, who runs a jewelry business, challenging the best judgment assessment conducted by the assessing authority for the assessment year 1988-89. The assessing authority rejected the accounts and estimated the turnover at 2½ times the average running stock, fixing the taxable turnover at Rs. 30,77,234 based on suppression found during an inspection. The Appellate Assistant Commissioner reduced the estimate to 2 times the average running stock, setting the taxable turnover at Rs. 26,21,786, a decision affirmed by the Tribunal in the second appeal.

The primary contention raised by the appellant-assessee was that the Tribunal's rationale for sustaining the estimate at 2 times the average running stock lacked a valid basis. The appellant argued that only the actual suppression should be added to the turnover, as there was no subsequent inspection to establish a pattern of suppression. Conversely, the Government Pleader supported the Tribunal's decision, emphasizing the substantial nature of the suppression found during the inspection, which occurred 50 days into the assessment year.

The Court disagreed with the Government Pleader's assertion that the suppression amounting to Rs. 73,652 was for a single day, highlighting that the inspection took place well into the assessment year. Additionally, the Court rejected the assessee's argument that only actual suppression should be considered for addition to the turnover. The Court reviewed the inspection results, including stock variations and unaccounted transactions, and acknowledged the admitted suppression compounded by the assessee.

Ultimately, the Court determined that a 1½ times estimate of the average running stock would serve the interests of justice, considering the timing of the inspection, the quantum of suppression, and the overall circumstances of the case. Consequently, the Court modified the Tribunal's order, reducing the estimated turnover from 2 times to 1½ times the running stock value. The revision was partly allowed, with a related application dismissed, resulting in a partial success for the petitioner in the matter.