2002 (10) TMI 755 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment based on stock variation and defects in maintaining books of accounts.
2. Discrepancy in stock of arrack and rejection of explanation by assessing authority.
3. Burden of proof on assessee regarding unaccounted purchase.
4. Interpretation of previous judgments and application to the current case.
5. Disagreement between Division Bench and Full Bench decisions.
6. Supreme Court's dismissal of appeal without assigning reasons.

Analysis:

1. The assessment for the year 1991-1992 was based on the stock variation and defects in maintaining books of accounts at the business premises of the assessee. The Sales Tax Intelligence Squad found a shortage of arrack (Government sealed) and excess of arrack (unsealed), leading to a proposed rejection of the books of accounts and estimation of turnover by adding six times the detected suppression amounting to Rs.12,19,123.50.

2. The assessee explained that the stock variation was due to filling sealed arrack into unsealed bottles for customer convenience. Despite this explanation, the assessing authority rejected it and completed the assessment as proposed. The first appellate authority reduced the addition to three times the sales value of the excess stock found, considering no actual case of suppression of unaccounted arrack was found.

3. The burden of proof regarding unaccounted purchase was a key issue. The assessee argued that the assessing authority failed to establish any unaccounted purchase of arrack during the relevant period. Previous judgments, including Lovely Thomas's case, emphasized the need for the department to explain unaccounted purchases, but the Full Bench in Mary Antony's case highlighted the assessee's responsibility to prove the source of purchase.

4. The interpretation of previous judgments, especially regarding burden of proof and adverse inference, played a crucial role in the case. The Full Bench disagreed with the Division Bench's view in Lovely Thomas's case and emphasized the importance of establishing the correctness of books of accounts. The Supreme Court's dismissal of the appeal without reasons indicated agreement with the Division Bench's conclusion.

5. The disagreement between the Division Bench and Full Bench decisions highlighted the complexity of drawing adverse inferences and assessing the reliability of accounts. The Full Bench's stance on the burden of proof and maintaining accounts influenced the decision-making process in this case.

6. The Supreme Court's dismissal of the appeal without providing reasons indicated agreement with the Division Bench's decision. As a result, the Tribunal's order was upheld, and the tax revision case was dismissed based on the relief granted by the first appellate authority.