2019 (9) TMI 1470 - HC - VAT and Sales Tax

Rejection of books of account - undisclosed turnover of sales - HELD THAT - In the first place, in face of two bills having been discovered from the business premises of the assessee during the survey conducted on 21.01.2006 that were not found accounted for in the regular books of accounts of the assessee, the conclusion of rejection of books of accounts cannot be faulted. That finding of fact arises from material and evidence on record, as has been considered by the authorities - answered in the affirmative, i.e. in favour of the revenue and against the assessee. Estimation of turnover and tax at excessive rate - HELD THAT - This Court does not interfere if such an estimation is found arising from material and evidence on record, however, in the present case, other than the two undisclosed bills recording transactions worth ₹ 5,520/- (in all), there is absolutely no material considered by the assessing officer or the appellate authority for the purposes of making an estimation. It is a settled position in law that the estimation made must arise from and be proportionate to the evidence of undisclosed turnover. In the instant case, as against the undisclosed turnover ₹ 5,520/- discovered, that too, on one date, i.e. 01.01.2006, the estimation as has been sustained, bears no proportion being ₹ 5,25,000/-. The same cannot be sustained. The revision is partly allowed.

Summary

Issues: Revision against Commercial Tax Tribunal order for undisclosed turnover estimation and rejection of books of account.

Undisclosed Turnover Estimation:
The High Court considered the revision filed against the Commercial Tax Tribunal's order, which estimated the undisclosed turnover of sales by the assessee. The Tribunal had dismissed the appeal and upheld the first appeal order, estimating the turnover at ?5,25,000 instead of ?35,00,000 as determined by the assessing officer. The Court analyzed the questions of law raised, focusing on whether the rejection of books of account and the excessive estimation of turnover were legally justified. The Court noted that only two bills worth ?5,520 were considered during estimation, with no other substantial material taken into account. The Court emphasized that the estimation made must be proportionate to the evidence of undisclosed turnover. Given the lack of substantial evidence supporting the estimation of ?5,25,000, the Court found it excessive and unsustainable. In light of the prolonged duration since the assessment year and subsequent changes in tax laws, the Court decided to peg the undisclosed turnover estimation at ?50,000 to bring closure to the dispute.

Rejection of Books of Account:
Regarding the rejection of books of account, the Court upheld the decision based on the discovery of two bills during a survey that were not accounted for in the regular books of accounts. The Court found that this conclusion was supported by material and evidence on record, as considered by the authorities. Therefore, the rejection of books of account was deemed justified in the circumstances. The Court ruled in favor of the revenue on this issue.

Conclusion:
The High Court partially allowed the revision, setting the undisclosed turnover estimation at ?50,000 instead of the previously determined amount. The Court addressed the legality of the rejection of books of account and the excessive estimation of turnover, ultimately providing a resolution to the longstanding dispute while considering the changes in tax laws over the years.