2013 (2) TMI 656 - HC - VAT and Sales Tax

Best judgment assessment - whether assessment could be resorted to only after the rejection of books of accounts that too during the course of assessment proceedings? - Held that - No merit in the present appeal as after framing of the assessment, the information came to the notice of the Assessing Authority that the appellant has not reflected certain sales in the return submitted by it. The Assessing Authority found that not only the appellant has purchased iron and steel from different dealers, which are not reflected in the accounts, but also the sales were also not reflected. Therefore, the Assessing Authority proceeded to frame the best judgment assessment. Once the sales are proved to be outside the said books of accounts, a fact not disputed by the appellant, the rejection of the books of accounts is necessary consequence. The Assessing Authority was able to find out the undisclosed sales in the account books for one month but such could be practice in the other months of the year as well. It cannot be said that the assessee has made purchases and sales outside the books of account only for the one month.

Summary

Issues:
1. Validity of notice issued under section 31 for best judgment assessment.
2. Legality of framing best judgment assessment without specific terms in the notice.
3. Jurisdiction for framing best judgment assessment in absence of specific information.
4. Legality of best judgment assessment in re-assessment proceedings.
5. Requirement of issuing fresh notice in case of turnover disclosure.
6. Applicability of Supreme Court and High Court judgments in favor of appellant.
7. Legality of charging interest in reassessment proceedings.
8. Legality of penalty imposition for suppression.
9. Levying penalty on assumed turnover in best judgment assessment.

Analysis:
The appellant challenged the order passed by the Haryana Tax Tribunal affirming the best judgment assessment for the assessment year 1995-96 under the Haryana Value Added Tax Act, 2003. The appellant raised various substantial questions of law regarding the legality of the notice issued under section 31, the framing of best judgment assessment, jurisdiction for such assessment, and the imposition of penalty and interest.

Initially, the Assessing Authority finalized the assessment under the Haryana General Sales Tax Act, 1973 but later served a show-cause notice to the appellant for escaped turnover related to unaccounted sales of iron and steel. The appellant admitted the sales worth a certain amount were not reflected in the returns due to a bona fide omission. The Assessing Authority found substantial turnover concealed by the appellant and proceeded to frame a best judgment assessment, which was affirmed by higher authorities.

The appellant contended that best judgment assessment can only be done after rejecting the books of accounts during assessment proceedings. However, the court found no merit in the appeal as the Assessing Authority discovered undisclosed sales not reflected in the accounts, justifying the best judgment assessment. The rejection of books of accounts was deemed necessary due to proven undisclosed sales, and it was noted that such practices could extend beyond the identified month.

In conclusion, the court dismissed the appeal, stating that no substantial question of law arose for consideration. The judgment upheld the validity of the best judgment assessment based on the undisclosed sales and rejected the appellant's arguments against the assessment, penalty imposition, and interest charges.