2008 (8) TMI 840 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, has not the Appellate Tribunal committed error in estimating the taxable turnover by incorporating the value of imported raw nuts for the purpose of arriving at the alleged suppression? Has not the appellate Tribunal failed to deal with the specific contention raised by the petitioner in this regard vide paras 4, 5 and 6 of the grounds of appeal? Is not the addition of two times retained by the Appellate Tribunal excessive and arbitrary in view of the fact that 164 bags of imported raw nuts were taken for quantifying suppression and the period of two inspection covers the whole year? Held that - In the instant case, there is a rational basis for the assessing authority to come to the conclusion that there was shortage of the imported raw cashewnuts. This conclusion is based on the shop inspection report made by the Intelligence Officer of the Department, which offence the assessee has compounded departmentally. This shortage should have been properly explained by the assessee. Merely saying that the said imported raw cashewnuts had been processed, roasted and thereafter sold in the market cannot be accepted either by the assessing authority or by any reasonable person unless the same is supported by documentary evidence. Mere assertion will not help the assessee in any manner whatsoever. However, the first appellate authority as well as the Tribunal, being of the opinion, that the addition made by the assessing authority is on a higher side have come to the aid of the assessee by reducing the addition made by the assessing authority from four times to two times. This is once again on estimation basis. The estimation basis so made by the authorities under the Act can be interfered by this court only if such estimations are either perverse or arbitrary. We do not see any such arbitrariness in the orders passed either by the first appellate authority or by the Tribunal. Sales tax revision rejected - against the assessee.

Summary

Issues:
Assessment of taxable turnover based on imported raw nuts, adequacy of explanation for shortage of imported raw cashewnuts, validity of best judgment assessment, excessive addition to taxable turnover, interference with estimation basis.

Analysis:
The case involves a sales tax revision for the assessment year 1999-2000 under the Kerala General Sales Tax Act. The assessee challenges the order of the Kerala Sales Tax Appellate Tribunal regarding the estimation of taxable turnover incorporating the value of imported raw nuts. The assessee, a registered dealer, primarily imports raw cashewnuts for processing and sales. Shop inspections revealed discrepancies in the books of account on two occasions, leading to a pre-assessment notice due to alleged suppression and omissions.

The assessing authority rejected the returns, issued a pre-assessment notice, and made additions to the turnover, including for imported raw cashewnuts. The assessee's explanation regarding the shortage of 164 bags of cashew nuts valued at Rs. 6,15,328 was deemed unsatisfactory, leading to a best judgment assessment. The first appellate authority reduced the addition, but the Tribunal further reduced it, prompting the sales tax revision.

The High Court emphasized the importance of a rational basis for best judgment assessments. The assessing authority's conclusion of a shortage was based on shop inspection reports, compounded by the assessee. The court noted that mere assertions without supporting evidence are insufficient. Despite reductions by lower authorities, the High Court found no arbitrariness in the estimations made.

Ultimately, the court rejected the sales tax revision, upholding the additions made to the taxable turnover. The questions of law raised by the assessee were answered against the assessee and in favor of the Revenue. The court affirmed the decisions of the lower authorities regarding the estimation basis and the additions made to the turnover.

Therefore, the judgment concludes that the best judgment assessment was valid, the additions made were justified, and there was no basis for interference with the estimation basis. The court upheld the orders passed by the Tribunal and the first appellate authority, ruling in favor of the Revenue.