2000 (3) TMI 1049 - HC - VAT and Sales Tax

Summary

Issues:
1. Correctness of conclusions in Lovely Thomas v. State of Kerala [1999] 113 STC 505
2. Burden of proof on the source of unaccounted purchases
3. Adverse inference on unposted books of accounts

Analysis:

1. The judgment questions the conclusions in Lovely Thomas v. State of Kerala [1999] 113 STC 505, where it was stated that the Revenue must explain the source of unaccounted purchases. The Court emphasizes that the burden of proof lies with the assessee to provide evidence on the source of purchase. The judgment cites the Indian Evidence Act and clarifies the distinction between "burden of proof" and "onus of proof." It rejects the conclusions in Lovely Thomas' case, highlighting the continuous process of shifting onus in the evaluation of evidence.

2. Regarding the burden of proof on the source of unaccounted purchases, the Court states that the assessee must prove the source by proper and cogent evidence. The judgment explains that the burden of proof never shifts, but the onus of proof can shift based on the evidence presented. It emphasizes that the assessee is entitled to produce evidence and draw inferences from it. The Court highlights the importance of reliable evidence in establishing ownership and rejects the notion that the Revenue must explain the unaccounted purchases.

3. The judgment addresses the issue of adverse inference when books of accounts are not fully posted during inspection. It states that the correctness of the books and returns filed by the assessee is initially their responsibility. If the explanation for incomplete posting is acceptable, no adverse inference should be drawn. However, if the explanation is unsatisfactory or contradicts the evidence, an adverse inference can be made. The Court emphasizes that each case's fact-situation determines whether an adverse inference is warranted. It concludes that if accounts are not fully posted and the assessee fails to establish otherwise, the inevitable inference is that the accounts are not properly maintained, allowing for best judgment assessment.

In summary, the judgment clarifies the burden of proof on the source of unaccounted purchases, rejects certain conclusions from a previous case, and provides guidance on drawing adverse inferences from unposted books of accounts based on the evidence presented.