1981 (2) TMI 246 - HC - VAT and Sales Tax

Summary

Issues:
1. Admissibility of entries in a third party's diary without cross-examination.
2. Department's responsibility in producing witnesses for cross-examination.
3. Rejection of account books based on difference in stock found during survey.

Analysis:

1. The judgment revolves around the admissibility of entries in a third party's diary without providing an opportunity for cross-examination. The revising authority held that the department's failure to produce the third party for cross-examination rendered the entries inadmissible. The Supreme Court precedent in State of Kerala v. K. T. Shaduli and Nalakutti Yusuf was cited, emphasizing the importance of cross-examination. The revising authority's decision was challenged on the grounds of a remand order and the principle established in Commissioner of Sales Tax v. Mukti Nath Misra.

2. The department's responsibility in producing witnesses for cross-examination was a key issue. The assessee had requested to cross-examine the third party, Ram Krishna Dalai, before the assessment took place. Despite the limitation for passing the assessment order, the department's burden to prove the taxable transactions required them to provide an opportunity for cross-examination. The judgment highlighted that the department must establish the authenticity of evidence, especially when relying on account books or diaries of third parties.

3. Another significant issue was the rejection of the assessee's account books based on the difference in stock found during a survey. The revising authority reasoned that the discrepancy in stock did not necessarily indicate suppression of sales, especially in the context of a commission agency business. The argument that the account books should be rejected regardless of the stock difference was countered by emphasizing the normal human dealing aspect and the lack of conclusive evidence of tax evasion.

In conclusion, the revision was dismissed, affirming the revising authority's decision. The judgment underscored the importance of providing opportunities for cross-examination, the department's burden of proof, and the nuanced considerations in rejecting account books based on stock differences.