2003 (2) TMI 450 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of turnover based on inspection findings post-assessment year. Justification of addition to turnover based on suppression. Interpretation of compounding fee payment as admission of offense.

The judgment of the Kerala High Court in the tax revision case involved a dispute regarding the assessment of turnover under the Kerala General Sales Tax Act, 1963 for the year 1994-95. The assessee, a revision petitioner, disclosed a total turnover of Rs. 1,87,49,763.38 and a taxable turnover of Rs. 1,16,06,942 in their return. An inspection conducted after the assessment year revealed a suppression of Rs. 4,66,438, leading to the assessing authority estimating the turnover by adding Rs. 13,99,314. The assessee appealed, and the Additional Deputy Commissioner upheld the rejection of accounts but modified the addition to match the actual suppression. Both parties further appealed to the Tribunal, which sustained the addition to 1½ times the suppression, leading to the assessee's appeal being dismissed.

The petitioner argued that the inspection revealing suppression occurred after the assessment year, and thus, it was improper to assume similar suppressed transactions for the preceding period. The Government pleader contended that the compounding fee payment indicated a pattern of suppression, justifying the assessing authority's addition to turnover. The Court noted that the only basis for the addition was the suppression found post-assessment year and the compounding fee paid. Since there was no inspection during the assessment year and no other discrepancies were found, assuming similar transactions for that year was deemed unjustified. The Court emphasized that the assessing authority could only add the suppressed amount of Rs. 4,66,438 to the turnover, as the compounding fee payment was an admission of the offense.

The Court held that the Tribunal erred in upholding the addition to turnover based on the suppression found post-assessment year. Without an inspection during the assessment year and with no other discrepancies, assuming similar unaccounted transactions was deemed speculative. The Court overturned the Tribunal's decision and reinstated the first appellate authority's order, directing the addition of only the actual suppressed amount to the turnover for the assessment year 1994-95. The tax revision case was disposed of accordingly.