2011 (1) TMI 1258 - HC - VAT and Sales Tax

Revision under section 11 of the U.P. Trade Tax Act, 1948 against the order of the Tribunal dated November 25, 2010 for the assessment year 2007-08 Held that - No explanation has been given at the time of survey about the shortage. It has not been told that the stocks were lying in some other room. If it would have been told to the surveying officer that the stock was lying in another shop, the same would have been verified. Therefore, any explanation offered by the applicant that the stock was lying in another room has rightly been rejected by the assessing authority and by the Tribunal. The stock has been valued at ₹ 2 lcas.Therefore, having regard to the value of the stock, which was not found at the time of survey, the estimate of turnover at ₹ 5 lacs of the manufactured tobacco and the purchases of raw materials from the unregistered dealer cannot be said to be excessive or without any basis. However, the Tribunal has erred in levying the tax on the turnover of chemicals @32.5%. Under the Notification No. KA. NI.-2-1084/XI-9 (51)/99................dated 25.2.2003 all kinds of chemicals are liable to tax @4%. Therefore, the order of the Tribunal is modified to this extent. The authorities below are directed to recalculate the turnover levying the tax on the chemicals @4% instead of 32.5%. Revision allowed in part.

Summary

Issues:
Revision under section 11 of the U.P. Trade Tax Act, 1948 against the Tribunal's order for the assessment year 2007-08.

Analysis:
The applicant, engaged in manufacturing and sales of tobacco, faced rejection of books of account based on a survey revealing stock discrepancies. The assessing authority estimated the stock value at Rs. 2 lac and suppressed turnover at Rs. 15 lac within U.P. The first appellate authority deleted the estimated turnover and tax. The Commissioner of Trade Tax appealed to the Tribunal, which partially allowed the appeal, estimating turnovers and levying taxes on various items. The applicant contended no sales were made in U.P., and explanations for stock shortages were given post-survey, accepted by the first appellate authority. The applicant argued against unjustified estimates of turnover from unregistered dealers and incorrect tax rates on chemicals.

The standing counsel supported the Tribunal's order, emphasizing the lack of explanation for stock shortages during the survey. The value of stock discrepancies led to estimated turnovers and taxes. The Tribunal's decision was based on these findings, although the tax rate on chemicals was disputed. The High Court reviewed the Tribunal's order and lower authorities' decisions. The rejection of books of account was upheld due to unexplained stock shortages during the survey. The applicant's explanation of stock location post-survey was deemed unreliable. The estimated turnovers and taxes were considered justified based on the stock value discrepancies. However, the tax rate on chemicals was corrected to 4% from 32.5% in line with the relevant notification.

In conclusion, the High Court partially allowed the revision, modifying the Tribunal's order by adjusting the tax rate on chemicals to 4% instead of 32.5%. The lower authorities were directed to recalculate turnovers accordingly.