2013 (11) TMI 718 - HC - VAT and Sales Tax

Rejection of books of accounts - Whether the account books maintained by an assessee in accordance with the provisions of section 12 (2) of the U.P. Sales Tax Act can be rejected merely on the ground that they were not produced at the time of survey - Rejection of books of accounts in previous assessment assessment years - Held that - non-production of the books of accounts at the time of survey is an important fact, which can be taken into consideration by the Assessing officer while examining the return to find out whether the same is incorrect or incomplete. Non-production of books of accounts at the time of assessment does not take away the effect of non-production at the time of survey. Such non-production is a relevant factor which can be considered by the Assessing Officer while considering whether the books of accounts are to be accepted as to have been maintained in the regular course of business. It is incumbent upon the assessee to offer plausible explanation as to why they were not produced at the time of survey. The burden is on the assessee to show as to why no adverse inference should be drawn - books of account were already rejected in the earlier assessment years and no appeal was filed. So, the said books of accounts are useless for the assessment years under consideration - Decided in favour of Revenue.

Summary

Issues:
Rejection of books of accounts for assessment years 1974-75, 1975-76, and 1976-77 based on non-production during survey.

Analysis:
The judgment pertains to the rejection of books of accounts for an assessee for the assessment years 1974-75, 1975-76, and 1976-77 due to non-production during a survey. The assessee, engaged in manufacturing and selling bricks, had a survey conducted at their business premises on 25.12.1975, during which only one register was available, and the books of accounts were previously rejected by the department. The Assessing Officer (A.O.) made additions on an estimate basis for each year, upheld by the first appellate authority. However, the Tribunal referred a question of law regarding the rejection of account books maintained under the U.P. Sales Tax Act. The case was presented before the High Court for consideration.

The State's counsel relied on a precedent where the Supreme Court observed that an officer has the power to order production of accounts and make best judgment assessments if returns are incorrect or incomplete. Section 12 mandates maintaining true and correct accounts at the place of business, making non-production during a survey a relevant factor for the Assessing Officer to consider. The burden lies on the assessee to explain why the books were not produced during the survey. In this case, as the books were previously rejected, and no appeal was filed, they were deemed useless for the assessment years in question.

The judgment favored the department, allowing the rejection of books of accounts based on non-production during the survey. The matter was directed to be placed before a Single Judge for final adjudication. The decision underscores the importance of complying with record-keeping requirements and the consequences of non-production during official inspections in tax assessments.