2018 (2) TMI 1801 - HC - VAT and Sales Tax

Suppression of turnover - Estimation to the turnover for probable omission and suppression - Rejection of accounts - no further transactions of suppression having been detected by the Assessing Officer - Held that - We are unable to sustain the view taken by the Tribunal, insofar as relegating the assessee to the Assessing Officer after having sustained the taxable turnover on the suppression detected. There can be no further re-assessment made on the basis of the result of the criminal case. The challenge in the aforesaid revision is of the State against the complete deletion of the estimation made - The deletion was not proper, especially since the actual suppression detected has been sustained by the Tribunal and there is no challenge to that by the assessee. Hence, the question of law is answered in favor of the Revenue and against the assessee - The order of the Tribunal is modified to the extent of setting aside the deletion of estimation as also the direction enabling the assessee to approach the assessing authority on the basis of the outcome of the case pending before the Court of Judicial First Class Magistrate-I, Palakkad. Revision allowed.

Summary

Issues:
Interference with estimation by the Tribunal based on suppression of turnover, validity of estimation for probable omissions and suppression, consideration of public records in estimation, impact of pending criminal case on assessment, finality of turnover addition due to suppression, challenge against deletion of estimation by the State.

Analysis:
The High Court of Kerala addressed the issue of interference by the Tribunal with the estimation carried out by the Assessing Officer for probable omissions and suppression of turnover. The Court highlighted the question of whether the Assessing Officer is entitled to make an estimation for probable omissions and suppression when an offence of turnover suppression has been detected, even without further transactions of suppression being identified. The Court emphasized the importance of the principles of best judgment to enable the Assessing Officer to protect the Revenue's interest and make a reasonable estimation of an assessee's turnover, especially in cases of deliberate suppression. The Court found fault with the Tribunal for deleting the estimation based on public records, despite the detection of suppression, and emphasized that the estimation should have a nexus with the gravity of the offence.

Regarding the impact of a pending criminal case on the assessment process, the Court noted that the Tribunal had directed the assessee to approach the assessing authority based on the outcome of the criminal case. However, the Court disagreed with this approach, stating that the turnover addition due to suppression had already been finalized by the Tribunal and could not be reassessed based on the criminal case's result. The Court clarified that the assessee could not challenge the finality of the turnover addition and ruled in favor of the Revenue, modifying the Tribunal's order to set aside the deletion of the estimation and the direction to approach the assessing authority based on the criminal case's outcome.

The Court also acknowledged the possibility for the assessee to pursue action against individuals found guilty of the offence, leaving that remedy open. Ultimately, the Court allowed the Revision filed by the State, overturning the deletion of the estimation and directing against the assessee's approach to the assessing authority based on the criminal case's outcome. The Court did not award any costs in this matter.