2014 (4) TMI 496 - SC - VAT and Sales Tax

Evasion of Tax Reduction in sale amount -Absence of bills - Method of recording receipt - No specific method to record receipt - Representative sample - Representative sample of 2 days bills - Business of manufacture and sale of sweets namkeens and other eatables - Held that - It appears from the record that when an individual customer was buying eatables of a nominal value possibly bill was not being issued - There was no specific method whereby each and every receipt from the buyers was recorded by the assessee - On the basis of the receipts of two days collected from inspection considering them as a representative sample AO had come to a conclusion that the sale proceeds or sales of assessee for the year should have been a particular amount and in fact the amount reflected in the books of accounts was much less than the calculations arrived at by AO. Issuance of Notices Maintenance of Books of accounts - Oblique motive Imposition of Penalty - Held that - AO did not jump to a conclusion without any rhyme or reason - There was a reasonable basis for him to arrive at the said conclusion especially when the assessee did not offer any satisfactory explanation in spite of issuance of notice - Assessment orders refer to notices issued to the assessee and they also record the fact that no satisfactory explanation had been offered by assessee to make out a case that there was some special reason for which sale of sweets namkeen etc. on 9th and 10th March 2000 was exceptionally more Once AO had rightly come to the conclusion that the books of accounts were not properly maintained and were not reflecting each and every transaction - Once it is found that with some oblique motive effort was made to show lesser sale proceeds than the actual the orders imposing penalty can not be questioned - Therefore This court is not inclined to interfere even with the quantum of penalty - The impugned judgment delivered by the High Court is just and proper - Appeals are dismissed Decided against assessee.

Summary

Issues:
Assessment orders under Section 23(3) of the Act, validity of penalty imposed, sufficiency of explanation by appellant, correctness of estimated sales, maintenance of books of accounts, basis for penalty imposition, compliance with notice requirements.

Analysis:

Assessment Orders under Section 23(3) of the Act:
The appellant-assessee challenged assessment orders and penalties imposed due to dissatisfaction with the details provided. The Assessing Officer calculated total sales based on specific days' proceeds, considering them representative. The appellant argued against this method, claiming variations in daily sales due to the nature of the business. However, the court found the Assessing Officer's approach reasonable, especially as the appellant failed to offer a satisfactory explanation despite notice.

Validity of Penalty Imposed:
The penalty was imposed due to the belief that the books of accounts were inaccurately maintained. The court upheld the penalty, stating that if there was an attempt to underreport sales, the penalty stands. It was deemed that the penalty imposition was justified based on the findings of improper bookkeeping by the appellant.

Sufficiency of Explanation by Appellant:
The appellant contended that no notice was issued before assessment, and penalties were unjustified. However, the court noted that notices were issued, and the appellant failed to provide a convincing explanation for discrepancies in sales records. The lack of a valid explanation supported the penalty imposition.

Correctness of Estimated Sales:
The Assessing Officer's calculation of estimated sales based on specific days' proceeds was challenged by the appellant. The court found the Officer's method reasonable, considering the lack of proper documentation and the discrepancies found during inspections. The calculated sales figures were deemed appropriate given the circumstances.

Maintenance of Books of Accounts:
The court observed that the appellant's record-keeping lacked precision, with no consistent method for recording transactions. The Assessing Officer's conclusion that the books were inaccurate was upheld, as the appellant failed to demonstrate otherwise, justifying the assessment based on estimated sales.

Basis for Penalty Imposition:
The penalty was imposed due to the Assessing Officer's belief that the appellant intentionally misrepresented sales figures. The court upheld the penalty, stating that if there was an attempt to underreport sales, the penalty stands. The penalty imposition was deemed justified based on the findings of improper bookkeeping by the appellant.

Compliance with Notice Requirements:
The appellant argued that no notice was issued before assessment, challenging the validity of the process. However, the court found that notices were indeed issued, and the appellant's failure to provide a satisfactory explanation supported the assessment and penalty imposition. The court upheld the assessment orders and penalties, deeming them appropriate given the circumstances and the appellant's lack of adequate explanation.