1988 (7) TMI 413 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Rejection of account books by the Sales Tax Tribunal.
2. Validity of the grounds for rejection of account books.
3. Discrepancy in the stock of Khand.
4. Assessment on best judgment basis.
5. Legal provisions and precedents relevant to the case.

Issue-wise Detailed Analysis:

1. Rejection of Account Books by the Sales Tax Tribunal:
The primary issue in this case was the rejection of the assessee's account books by the Sales Tax Tribunal. The Tribunal sustained the rejection on two grounds: (i) failure to produce account books during the survey, and (ii) discrepancy in the stock of Khand during physical verification.

2. Validity of the Grounds for Rejection of Account Books:
The Tribunal's decision to reject the account books was contested by the assessee. The assessee argued that the account books could not be produced during the survey because neither he nor his accountant was present, and those present (his brother and father) were not involved in the business. The Tribunal's findings were based on the assumption that the business was being managed by family members who should have produced the books. However, the court noted that the Tribunal's findings were not supported by any legal evidence and that the rejection of account books should not be done lightly or based on suspicion. The court emphasized that account books maintained in the ordinary course of business should be accepted unless there are strong reasons to believe they are unreliable.

3. Discrepancy in the Stock of Khand:
The Tribunal noted a discrepancy in the stock of Khand, where the stock found during the survey was less than what was recorded in the stock register. The assessee explained that the stock noted by the Surveying Officer was based on an estimate without actual counting. The court observed that there was no indication in the orders about the number of bags found during the survey, and the stock registers maintained by the assessee were accepted by the Excise Authorities. The court concluded that the discrepancy noted by the Surveying Officer was not sufficient to reject the account books.

4. Assessment on Best Judgment Basis:
The Tribunal's decision to assess the taxable turnover on a best judgment basis was also challenged. The court found that the rejection of account books and the subsequent best judgment assessment were not justified. The court referred to legal precedents which established that non-cooperation with a Surveying Officer does not automatically render account books unreliable. There must be additional material to justify the rejection of account books.

5. Legal Provisions and Precedents Relevant to the Case:
The court referred to Section 12 of the U. P. Sales Tax Act, 1948, which mandates maintaining true and correct accounts. It also cited several precedents, including Paramount Trading Corporation v. C. S. T., U.P., which held that non-cooperation with a Surveying Officer does not justify rejecting account books without additional material. The court reiterated that rejection of account books should be an exception and not the rule, and should only be done for proper reasons.

Conclusion:
The court found that the rejection of the assessee's account books by the Sales Tax Tribunal was not sustainable. It emphasized that the account books maintained in the ordinary course of business should be accepted unless there are strong reasons to believe they are unreliable. The court allowed the revision, set aside the Tribunal's order, and directed the Tribunal to pass an order in conformity with the judgment.