2001 (8) TMI 1361 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of taxable turnover for two consecutive years based on rejected accounts.

Analysis:
The judgment pertains to two revisions filed against a common order for the assessment years 1988-89 and 1989-90 concerning the taxable turnover of a vegetarian hotel. The assessing authority rejected the accounts, proposing assessments based on various discrepancies and additions to the conceded turnover. The reasons for rejection included discrepancies in turnover, lack of stock register, unaccounted income, unsupported purchases, and inclusion of certain charges in turnover subject to tax.

The petitioner responded to the notice, explaining the peculiarities of the hotel business, challenges in maintaining strict accounts due to perishable nature of goods, and disputing the grounds for rejection provided by the assessing authority. The appellate authority upheld the rejection of accounts, leading to appeals before the Appellate Tribunal.

During the proceedings, the petitioner's counsel highlighted the unique aspects of the hotel business, difficulties in maintaining daily stock registers, and cited relevant case law to support their contentions regarding the treatment of charges, purchases, and usage of water in the business. The Government Pleader argued that the petitioner should explain the discrepancies and differences in accounts to establish the accuracy of the turnover.

The Court observed that there was no contention of suppression by the Department and disagreed with the Revenue's stance on the discrepancies between rice purchase and cooked food turnover amounting to suppression. The Court acknowledged the necessity for a large hotel to maintain stocks and rejected the notion of suppression based solely on turnover variations. Additionally, the Court addressed specific issues such as charges for A/C rooms, purchase of pappadam, and the applicability of section 5A of the Kerala General Sales Tax Act regarding the consumption of goods in the business.

Consequently, the Court held that the assessing authority's rejection of the petitioner's accounts was unwarranted. The orders passed by the authorities were set aside, directing the assessing authority to assess the petitioner based on the return filed. The tax revision cases were disposed of accordingly, with related orders on certain applications dismissed.

In conclusion, the judgment provides a detailed analysis of the issues surrounding the assessment of taxable turnover for the petitioner's hotel business, emphasizing the need for a nuanced understanding of the business dynamics and accounting challenges specific to the hospitality industry.