1987 (12) TMI 336 - HC - VAT and Sales Tax

Summary

Issues:
1. Rejection of account books based on survey findings.
2. Validity of grounds for rejection of account books.
3. Disparity in consumption of electricity as a ground for rejection.

Analysis:

Issue 1: Rejection of account books based on survey findings
The applicant, M/s. Shyam Rice Mills, challenged the appellate order by the Sales Tax Tribunal through a revision under Section 11(1) of the U.P. Sales Tax Act. The assessment year in question was 1980-81, during which the applicant was engaged in the business of purchasing paddy, hulling rice, and selling the same. The rejection of the account books was primarily based on a survey conducted on January 4, 1981, which revealed discrepancies in cash balance, unrecorded paddy stock, and disproportionate electricity consumption.

Issue 2: Validity of grounds for rejection of account books
The Court considered the grounds for rejection of the account books, including discrepancies in cash balance, unrecorded paddy stock, and disproportionate electricity consumption. The applicant's counsel argued that the reasons provided by the tax authorities were not substantial enough to warrant the rejection of the account books. The Court analyzed each ground and found that the discrepancies, such as the cash difference and unrecorded stock, were minimal and did not justify the rejection of the accounts. Additionally, the absence of immediate entries in the account books after stock arrival was deemed insufficient to question the regularity of maintaining accounts, citing relevant legal precedents.

Issue 3: Disparity in consumption of electricity as a ground for rejection
Regarding the disparity in electricity consumption, the Court referred to previous decisions that highlighted excess electricity consumption as a factor for suspicion but not sole grounds for rejecting account books. In this case, despite the anomaly in electricity usage compared to rice production, no other discrepancies were found in the accounts. Consequently, the Court held that the disparity in electricity consumption alone was not substantial enough to justify the rejection of the account books.

In conclusion, the Court ruled in favor of the applicant, stating that there was insufficient valid material for the Sales Tax Authorities to reject the account books. As a result, the revision was allowed with costs, and the second question regarding the estimate of rice and rice bran sales was deemed academic and not addressed on merits.