2007 (9) TMI 585 - HC - VAT and Sales Tax

Best judgment assessment - enhancement of turnover - rejection of books of accounts - Held that - Admittedly, as per books of account, higher turnover had been shown than the turnover disclosed in the return both gross as well as net turnover.There appears to be no reason to disbelieve the explanation that by the mistake of accountant, lesser turnover had been disclosed in the return. In any view of the matter, above facts does not lead to the inference of suppression of the turnover. The assessing authority had not pointed out any defect in the books of account. In view of the above, do not find any justification for the rejection of books of account and for estimating the suppressed sales at ₹ 35 lacs.In the result, revision is allowed. Order of the Tribunal is set aside so far as the rejection of books of account and the estimate of suppressed sales at ₹ 35 lacs is concerned. The Tribunal is directed to pass appropriate order under section 11(8) of the Act.

Summary

Issues involved:
1. Rejection of books of account by assessing authority.
2. Estimation of suppressed sales at Rs. 35 lacs.
3. Appeal process and Tribunal's decision.

Analysis:
1. The applicant, engaged in the business of iron and steel, maintained books of account but faced rejection by the assessing authority due to discrepancies. The rejection was based on the seizure of goods by the Trade Tax Officer and differences between the return version and book version of turnover. The assessing authority conducted a best judgment assessment, increasing the turnover by estimating suppressed sales at Rs. 35 lacs.

2. The first appeal filed by the applicant was unsuccessful, leading to a second appeal before the Tribunal. The Tribunal upheld the rejection of books of account and the estimation of suppressed sales but remanded other aspects back to the assessing authority. The key issue was the difference in turnover disclosed in the books of account compared to the return version, attributed to a mistake by the accountant.

3. During the hearing, the applicant's counsel argued that the higher turnover in the books of account did not indicate suppression of turnover, as it was due to an accountant's error. The High Court judge, after reviewing the Tribunal's order and arguments, found merit in the applicant's explanation. Citing various legal precedents, the judge emphasized that higher turnover in account books does not justify rejection. Consequently, the High Court allowed the revision, setting aside the Tribunal's decision on book rejection and suppressed sales estimation, directing the Tribunal to take appropriate action under section 11(8) of the U.P. Trade Tax Act, 1948.