1996 (10) TMI 449 - HC - VAT and Sales Tax

Issues Involved:
1. Reopening of assessment for the year 1985-86 under Section 35 of the Kerala General Sales Tax Act, 1963.
2. Rejection of accounts and estimation of turnover for the year 1986-87.
3. Shortages and damages during transit.
4. Loss of delivery notes and stock register.

Detailed Analysis:

1. Reopening of Assessment for the Year 1985-86:
The case involves the reopening of the assessment for the year 1985-86 under Section 35 of the Kerala General Sales Tax Act, 1963. The Deputy Commissioner, Agricultural Income-tax and Sales Tax, Ernakulam, reopened the assessment on the ground that 1168.70 m.tons of cement stock with Messrs. Venad Agencies had been omitted from the final assessment. This decision was confirmed by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Ernakulam.

2. Rejection of Accounts and Estimation of Turnover for the Year 1986-87:
For the assessment year 1986-87, the assessee filed Form No. 8 declaring a total and taxable turnover of Rs. 9,32,13,732.11. However, the return and accounts were rejected, and the turnover was estimated. The primary item under scrutiny was the Calicut dump of 1175.20 m.tons. The assessee contended that 1165.20 m.tons were misappropriated by Messrs. Venad Agencies and could not be shown in the closing stock for 1985-86 due to misappropriation and lack of physical stock.

3. Shortages and Damages During Transit:
The second item involved 160.35 m.tons of cement, which was claimed as shortage and damage during transit. The assessee submitted that claims for shortages and damages were lodged with the railways. Another item involved 28.94 m.tons of cement in the Cannanore dump, also attributed to transit damage. The assessing authority demanded corroborative evidence for these claims, which the assessee failed to provide.

4. Loss of Delivery Notes and Stock Register:
The assessee reported the loss of delivery notes (Form No. 26) and the connected stock register (Form 19B), which was published in newspapers and reported to the Sales Tax Department. However, the assessing authority rejected this explanation due to the lack of supporting evidence, such as a copy of the advertisement.

Judgment Analysis:

The court observed that the assessing authority's approach, which demanded corroborative evidence for every claim, was unreasonable given the internal checks and balances of a Government Corporation. The court noted that the civil litigation between the assessee and Messrs. Venad Agencies was still pending, and the claims regarding the Calicut dump were disputed.

The court found the rejection of the assessee's explanations regarding the shortages and damages during transit to be unjustified. The assessing authority should have considered the probabilities and the fact that railway claims were lodged.

The first appellate authority, Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, Ernakulam, and the second appellate authority, Kerala Sales Tax Appellate Tribunal, Additional Bench, Ernakulam, were criticized for their cursory and rubber-stamping approach. The Tribunal's observation that the shortages were disclosed from the company's accounts and there were no unaccounted transactions or incriminating records was significant.

The court concluded that the authorities had drawn incorrect inferences and proceeded erroneously with the reopening under Section 35 and the rejection of accounts. The court quashed the orders of the authorities and directed the assessing authority to finalize the assessment based on the Form 8 return filed by the assessee, declaring a total and taxable turnover of Rs. 9,32,13,732.11.

Conclusion:
Both revisions were allowed, and the orders passed by the authorities were quashed and set aside. The assessing authority was directed to proceed with the assessment based on the Form 8 return filed by the assessee. The petitions were allowed.

← Previous Next →