1999 (9) TMI 918 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of initiating suo motu revisional proceedings by the authority.
2. Legality of passing revisional order by revising the assessment to best judgment.
3. Determination of turnover based on establishment expenses.
4. Correctness and sustainability of turnover as determined by the revisional authority.

Issue 1: Validity of initiating suo motu revisional proceedings by the authority:
The appellant, a hotel, was assessed under best judgment assessment for the assessment year 1990-91. The Additional Commissioner initiated revisional proceedings and revised the turnover based on establishment expenses. The appellant argued against the correctness of initiating suo motu revisional proceedings. The Court emphasized the importance of evidence for best judgment assessment and highlighted the need for a reasonable nexus to the available material and circumstances of each case. The Court directed the assessing authority to gather information on establishment expenses, purchase price, and sale price before framing a fresh assessment based on evidence and principles of natural justice.

Issue 2: Legality of passing revisional order by revising the assessment to best judgment:
The revising authority determined the taxable turnover for the assessment year 1990-91 based on establishment expenses, deviating from the assessing authority's earlier acceptance of the declared turnover. The Court referred to the case law emphasizing that the assessing authority must adopt a method that assists in a just and accurate estimate of turnover. It was noted that the revising authority was justified in pointing out expenses not considered earlier. The Court directed a fresh assessment based on evidence and principles of natural justice, disregarding past figures and formulas.

Issue 3: Determination of turnover based on establishment expenses:
The revising authority determined the taxable turnover for the assessment year 1991-92 based on establishment expenses, deviating from the formula accepted by the assessing authority. The Court discussed the need for a reasonable nexus to available material and highlighted the importance of evidence for best judgment assessment. The Court directed the assessing authority to gather information on establishment expenses and other relevant factors before framing a fresh assessment based on evidence and principles of natural justice.

Issue 4: Correctness and sustainability of turnover as determined by the revisional authority:
The Court considered the correctness and sustainability of the turnover determined by the revising authority based on establishment expenses. It referred to the apex court's observation on best judgment assessment, emphasizing the need for a reasonable nexus to available material. The Court directed a fresh assessment based on evidence gathered after making inquiries, ensuring compliance with principles of natural justice. The Court emphasized that if the assessee fails to cooperate, the authorities can make their best judgment based on the conducted inquiry.

In conclusion, the Court disposed of the appeals with the directive for a fresh assessment based on evidence gathered through inquiries, ensuring compliance with principles of natural justice and emphasizing the importance of a reasonable nexus to available material for best judgment assessment.