2013 (12) TMI 801 - HC - VAT and Sales Tax

Demand of tax - Rejection of books of accounts - Disparity in electricity consumption - Held that - account books of the assessee revisionist stood rejected on a different ground and disparity in electric consumption was not the sole basis of the said rejection, the authorities were fully justified in taking aid of the electricity consumption of the assessee revisionist in making the assessment of the taxable turnover of the assessee revisionist - A perusal of assessment orders reveal that the assessing authority simply on the ground that the books of account have been rejected had made the best judgment assessment of the turnover in respect of the central sales also even though a finding was returned that the assessee revisionist has not shown any central sales. No other reason or any material in support so as to assess the assessee revisionist under the Central Sales Tax has been pointed out -In the absence of any material to show that the assesee revisionist was indulging any central sales, the authorities were not justified in making best judgment assessment in respect of central sales - Accordingly, the assessment of the taxable turnover under the central sales and consequential tax liability thereon is held to be illegal - Decided Partly in favour of assessee.

Summary

Issues: Assessment based on disbelieved books of accounts, rejection of account books on technicalities, assessment of turnover based on electricity consumption, best judgment assessment, assessment under Central Sales Tax.

Assessment based on disbelieved books of accounts:
The judgment pertains to the assessment year 2001-02 where the assessing authority disbelieved the books of accounts of the assessee revisionist, a company engaged in the business of manufacturing and selling iron products. This best judgment assessment was upheld by the appellate authority and the tribunal. The revisionist challenged this decision under Section 11 of the U.P. Trade Tax Act for both U.P. and Central Sales Tax assessments. The revisionist argued that the authorities erred in disbelieving the books of accounts on technical grounds, specifically regarding the maintenance of two sets of account books. The authorities found a variation in bill sizes, leading to the conclusion that two sets of accounts were maintained. This finding was considered a fact that had not been disturbed by any authority up to the tribunal level, thus justifying the best judgment assessment.

Assessment of turnover based on electricity consumption:
The revisionist contended that the assessment of turnover for U.P. sales based on high electricity consumption was unjustified. Referring to past judgments, the court acknowledged that while electricity consumption could be a relevant factor, it alone might not justify rejecting account books. However, in this case, the rejection of account books was not solely due to electricity consumption disparities but also because the books were never accepted previously. Therefore, the assessing authority was deemed justified in making a best judgment assessment considering electricity consumption as a relevant factor. Past cases, such as M/s Chandu Lal & Sons and M/s Jay Cee Rolling Shutter, supported the consideration of electricity consumption in best judgment assessments.

Assessment under Central Sales Tax:
The revisionist argued that there was no evidence of engaging in central sales, yet the authorities assessed turnover under Central Sales Tax. The assessing authority made a best judgment assessment for central sales despite no indication of such transactions by the revisionist. The appellate authority and tribunal affirmed this assessment without any supporting material. The court held that in the absence of evidence showing central sales activity, the authorities were unjustified in making a best judgment assessment for central sales. Consequently, the assessment of taxable turnover under Central Sales Tax was deemed illegal, and the tax liability imposed for central sales in the assessment year 2001-02 was set aside.

In conclusion, the court dismissed one revision and allowed the other based on the issues discussed regarding the disbelieved books of accounts, assessment of turnover using electricity consumption, and the legality of the assessment under Central Sales Tax.