2009 (12) TMI 885 - HC - VAT and Sales Tax

Summary

Issues: Reopening of assessment based on seized documents indicating suppressed sales, determination of evaded turnover, consideration of loose documents for determining turnover, interpretation of dealer's explanation, reliance on judicial pronouncements for similar cases.

The judgment by the Allahabad High Court pertains to the reopening of assessment based on seized documents indicating suppressed sales by a dealer engaged in the business of aerated water and cold drinks. The assessing authority made the original assessment in 1993 but later reopened it upon finding loose documents during a survey suggesting sales suppression. The first appellate authority accepted the dealer's explanation that the seized papers did not reflect actual turnover but were inflated figures for obtaining a higher cash credit limit. Both the Department and the dealer filed cross-appeals before the Tribunal, which upheld the first appellate authority's decision, concluding that the loose documents did not represent actual sales but were inflated for bank purposes.

The Department, dissatisfied with the Tribunal's decision, filed a revision arguing that the seized documents admitted by the dealer should be relied upon for determining turnover. The Department cited Section 8 of the U.P. Trade Tax Act to support its stance. Conversely, the dealer's counsel contended that tax should be levied on actual sales, not on inflated figures for other purposes. The counsel referred to judicial pronouncements where explanations similar to the dealer's were accepted by the court.

The High Court, in its analysis, referred to previous judgments where explanations for inflated turnover figures for obtaining loans or increasing cash credit limits were accepted. The court found no error in the Tribunal's decision, emphasizing that the findings were based on facts and not without a basis. Consequently, the High Court dismissed the revision, stating that it lacked merit. The judgment reaffirmed the principle that tax should be levied on actual sales, not on projected or imaginary figures for other purposes, as long as the explanation provided by the dealer is reasonable and consistent with previous judicial decisions.