2007 (10) TMI 592 - HC - VAT and Sales Tax

Difference between the documents exhibited - cash amount of ₹ 5,000 was found with the manager of the assessee which was accounted in the sundry/petty cash register Held that - As the assessing officer has himself recorded that the purchases of the mentha oil which were made by the assessee were in order. The first appellate authority has accepted the contention of the assessee but the Tribunal has enhanced the entire turnover of the petitioner without taking into consideration the fact that purchases of the raw material was found to be in order. Therefore the computation of enhancement made by the Tribunal stands vitiated. Therefore the Tribunal ought to have taken this fact into consideration while computing the enhancement, if any, for the assessment year in question. In so far as the second ground is concerned the said petty cash could not have led the Tribunal to believe that the assessee had indulged in suppression of sales of this amount in order to evade tax and escape the assessment. Such an assumption could not have been drawn by the Tribunal unless there is any cogent evidence to believe that such petty cash being used to suppress sales. The matter is remanded to the Tribunal for reconsideration.

Summary

Issues:
Assessment of net taxable turnover for the year 1991-92 under the U.P. Trade Tax Act, 1948 based on discrepancies found during a survey at the premises of the assessee, including missing mentha oil and cash amount, and subsequent appeals challenging the assessment.

Analysis:
The case involved a private limited company engaged in the manufacture of mentha oil, challenging an order of the Trade Tax Tribunal related to the assessment year 1991-92 under the U.P. Trade Tax Act, 1948. The assessing authority rejected the account books of the assessee and determined the net taxable turnover significantly higher than what was disclosed by the assessee. The initial appeal by the assessee before the Deputy Commissioner (Appeals) was successful, with the Deputy Commissioner accepting the books of account. However, the Commercial Tax Tribunal (C.T.T.) filed an appeal before the Trade Tax Tribunal, Ghaziabad, raising concerns regarding discrepancies found during a survey at the assessee's premises.

The first ground of appeal by the department was related to the discovery of 75 Kg. of mentha oil missing from the documents of the assessee during a survey. The second ground involved a cash amount of Rs. 5,000 found with the manager of the assessee. The revisionist's counsel acknowledged the non-compliance with section 12(2) of the U.P. Trade Tax Act regarding the maintenance of production entries but argued that the discovery of pre-packed mentha oil did not indicate tax evasion. The revisionist contended that the Tribunal's order enhancing the turnover lacked basis and contradicted the assessing authority's findings regarding the purchases of raw materials.

The High Court observed that the assessing officer had confirmed the validity of the purchases of mentha oil made by the assessee. While the first appellate authority supported the assessee's contentions, the Tribunal unreasonably enhanced the turnover without considering the valid purchases. The Court found the Tribunal's computation of enhancement flawed and remanded the matter for reconsideration within three months, emphasizing the need for a fair assessment without prejudgment. The Court also addressed the second ground concerning the petty cash, stating that it alone could not justify assumptions of tax evasion without substantial evidence.

In conclusion, the High Court allowed the revision, directing the Tribunal to review the case without bias and ordering the deposited amount to remain with the department until a final decision is reached. No costs were awarded in the judgment.