2011 (12) TMI 460 - HC - VAT and Sales Tax

Best judgment assessment sustained by Tribunal to the extent of ₹ 16.50 lakhs - whether the Appellate Tribunal was justified in law in making adhoc addition of 50 per cent of the alleged actual suppression without having due regard to the fact that the inspection of the petitioner s shop by the authorities was at the fag end of the year? Whether the Appellate Tribunal was justified in law in sustaining the maximum penalty calculated on the tax due on the alleged actual suppression as estimated by the assessing authority ignoring the ratio of various decisions of the High Court on the issue of penalty? Held that - The impugned assessment is on estimation. Taking note of the fact that in respect of one other jeweller in the area concerned, as it is reported by the learned Special Government Pleader, the turnover was only ₹ 4 lakhs, we are of the view that in the interest of justice, the turnover of the assessee could be fixed at ₹ 5 lakhs. Inasmuch the impugned order of the Sales Tax Appellate Tribunal stands modified to the extent that the taxable turnover of the assessee could be fixed ₹ 5,00,000, and out of the said sum of ₹ 5,00,000, ₹ 2,00,000 (rupees two lakhs) shall be assessed at one per cent and the remaining ₹ 3,00,000 (rupees three lakhs) shall be assessed at three per cent. Since the assessee has already paid a sum of ₹ 19,763 towards tax and a sum of ₹ 715 towards surcharge, the assessee is entitled for the refund of the excess amount, if any, paid by it. The assessing officer shall calculate accordingly and refund the excess amount, if any, to the assessee to which it is entitled, without any interest. Since the entire assessment is on estimate, there is no question of imposing penalty. In such view of the matter, the penalty portion of the impugned order shall stand set aside.

Summary

Issues:
1. Justification of sustaining best judgment made by assessing authority.
2. Validity of adhoc addition of 50% of alleged actual suppression.
3. Justification of sustaining maximum penalty ignoring penalty ratio decisions.

Analysis:
1. The High Court addressed the issue of the Revenue's appeal against the Sales Tax Appellate Tribunal's order for the assessment year 1993-94. The Tribunal had estimated the turnover at Rs. 16,53,921 and imposed a penalty of Rs. 56,880. The original assessment by the assessing officer was at Rs. 44,11,096 with a penalty of Rs. 2,90,207. The Appellate Assistant Commissioner later reduced the turnover to Rs. 8,21,857 and the penalty to Rs. 32,214. The Deputy Commercial Tax Officer reinstated the original assessment. The High Court, after considering the facts and submissions, estimated the turnover at Rs. 5,00,000 and adjusted the tax liability accordingly. As the assessment was based on estimation, the penalty was set aside, and any excess tax paid was to be refunded to the assessee without interest.

2. The Court examined whether the Tribunal was justified in sustaining the best judgment made by the assessing authority and the adhoc addition of 50% of the alleged actual suppression. It was noted that the assessment was primarily based on an estimation of turnover, and the Court, considering the turnover of another jeweler in the area, fixed the assessee's turnover at Rs. 5,00,000. The Court applied the tax rates accordingly and directed the refund of any excess tax paid by the assessee. The penalty portion of the order was set aside due to the estimation-based nature of the assessment.

3. The Court also analyzed the justification of sustaining the maximum penalty calculated on the alleged actual suppression, disregarding the penalty ratio decisions of the High Court. Given the estimation nature of the assessment and the adjustment of turnover based on similar businesses in the area, the Court found no basis for imposing a penalty. Therefore, the penalty portion of the impugned order was set aside, and the tax liability was adjusted based on the revised turnover estimation.

In conclusion, the High Court modified the Sales Tax Appellate Tribunal's order, adjusted the turnover estimation, set aside the penalty, and directed the refund of any excess tax paid by the assessee. The tax case revision was ordered accordingly, with no costs imposed on either party.