2017 (2) TMI 1398 - HC - VAT and Sales Tax

Discard of books of account - books of account of the assessee have been discarded by the authorities under the Act essentially on the ground that there was excess consumption of electricity in auxiliary works - Held that - The view so taken by the Tribunal is in apparent conflict that the ratio of law laid down by this Court in M/S Shyam Rice Mills 1987 (12) TMI 336 - ALLAHABAD HIGH COURT . This Court had relied upon two previous judgement which have been referred to in the decision to hold that mere excess consumption of electricity can at best given rise to suspicion so as to warrant examination of other materials but that by itself would not be sufficient to discard the books of account. There is nothing on record to show that accounts furnished were otherwise not reliable - the tribunal was not justified in discarding the books of account for the reasons recorded in the order.

Summary

Issues:
- Discrepancy in consumption of electricity leading to the rejection of books of account.

Analysis:
The judgment by the High Court revolves around the rejection of the books of account of the assessee due to alleged excess consumption of electricity in auxiliary works. The authorities discarded the books based on this ground, despite finding no inconsistency between the statements in the books and the records presented. The counsel for the assessee argued that the tribunal's decision was inconsistent, citing the law laid down in a previous case. The judgment referred to two decisions emphasizing that excess electricity consumption may raise suspicion but is not sufficient on its own to reject account books. The tribunal's sole reason for discarding the books was the alleged excess electricity consumption, which the High Court found to be in conflict with established legal precedents.

The High Court concurred with the counsel's argument and held that the mere excess consumption of electricity, without other supporting evidence, is not a valid reason to discard account books. The court emphasized that suspicion arising from high electricity consumption should prompt further scrutiny but cannot be the sole basis for rejecting the books. The judgment highlighted that there was no evidence to suggest the accounts were unreliable, making the tribunal's decision unjustified. Ultimately, the High Court ruled in favor of the assessee, stating that the rejection of the books of account solely on the grounds of excess electricity consumption was not legally sound, aligning with the legal principles established in previous cases.