2008 (11) TMI 639 - HC - VAT and Sales Tax

Suo motu revision initiated by the Joint Commissioner - Held that - The Joint Commissioner has not exercised his power of revision correctly as no reason is given by the Joint Commissioner for setting aside the findings or to show that the procedure is wrong. He merely says that the Appellate Commissioner is not correct and the Appellate Assistant Commissioner ought to have adopted the average of all the three inspection of 356 days at ₹ 18,14,176 in addition to tax under section 7A.. Thus the order of the Joint Commissioner is set aside and the order of the appellate authority is confirmed. This revision is allowed.

Issues Involved:
1. Validity of the suo motu revision by the Joint Commissioner.
2. Assessment of sales turnover and rejection of books of accounts.
3. Estimation of turnover under Section 7A of the Act.
4. Justification for invoking the power of suo motu revision.
5. Consideration of special days' sales in annual turnover estimation.

Issue-wise Analysis:

1. Validity of the suo motu revision by the Joint Commissioner:
The assessee challenged the suo motu revision initiated by the Joint Commissioner, asserting that the power of suo motu revision is circumscribed by the provisions of the Act and cannot be exercised arbitrarily. The Joint Commissioner must provide justification for invoking this power, which was not adequately demonstrated in this case.

2. Assessment of sales turnover and rejection of books of accounts:
The authorities conducted inspections and recorded sales on specific days, which were higher due to special occasions. The assessing officer averaged these sales and determined the annual turnover, rejecting the books of accounts for not maintaining small sales bills. The appellate authority found this rejection improper, noting that the sales on inspection days were exceptionally high due to special circumstances and should not be considered representative of regular sales.

3. Estimation of turnover under Section 7A of the Act:
The assessing authority initially included the purchase turnover of various items but later deleted the purchase turnover of kerosene. The appellate authority sustained the turnover for other items but found no evidence of suppression of sales or purchases. The Joint Commissioner, however, did not provide a clear rationale for setting aside these findings.

4. Justification for invoking the power of suo motu revision:
The learned senior counsel for the assessee argued that the Joint Commissioner failed to justify the use of suo motu revision powers, especially when the appellate authority had already found no suppression of sales or purchases. The cited cases, such as Hotel Vallalar v. Registrar and State of Tamil Nadu v. New Kamaliya Hotel, supported the view that sales on special days should not be used to estimate annual turnover without additional corroborating evidence.

5. Consideration of special days' sales in annual turnover estimation:
The appellate authority had considered the sales recorded on special days and found them to be exceptional. The Joint Commissioner, however, did not adequately address why the appellate authority's findings were incorrect. The court noted that the Joint Commissioner must consider all relevant factors and provide a detailed rationale when exercising revision powers.

Conclusion:
The court found that the Joint Commissioner was not justified in interfering with the appellate authority's order, which had been based on a thorough and reasoned analysis. The appellate authority had correctly identified that the sales on special days were not representative of regular sales and had provided acceptable reasons for its conclusions. The Joint Commissioner's failure to address these findings or provide a substantial rationale for his decision led the court to set aside the Joint Commissioner's order and confirm the appellate authority's decision. The revision was allowed, and the order of the appellate authority was upheld.

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