2016 (7) TMI 879 - HC - VAT and Sales Tax

Estimation of sales turnover - demand of sales tax / VAT - suppressed sales - Held that - though the basis of the estimation of the gross profit is the profit as disclosed in the sale bills, when this proposal was conveyed to the assessee in the show cause notice and thereafter, the assessee had the opportunity to produce his books of accounts, including the sale bills. Despite the availability of such opportunities at no stage of the proceedings, the assesssee produced the documents or the sale bills. Held that - On the other hand, the learned senior Counsel made an attempt to introduce a new case by making reference to a certificate purported to have been issued by the Village Officer to the effect that there was a flood in the area, which resulted in loss of documents. The resultant situation is that the assessee is unable to produce any document showing what exactly was his gross profit. On the other hand, admittedly in the inspection, certain bills were recovered, which disclosed the average gross profit of 80% and its genuineness is not disputed. In such a situation, we are not prepared to find fault with the Revenue in estimating the turnover tax by taking the gross profit as disclosed in the bills that were recovered. Further, the assessee cannot have any grievance, since the gross profit has now been reduced to 50% against the declared gross profit of 41.32%. - Appeal dismissed - Decided against the assessee.

Summary

Issues:
Challenge to orders under Section 45A of the Kerala General Sales Tax Act, 1963 - Levying penalty based on addition of gross profit at 80% - Reduction of gross profit to 50% on purchase price in appeal - Dismissal of further appeal by Tribunal.

Analysis:
The revision was filed challenging orders under Section 45A of the Act, imposing a penalty based on adding 80% gross profit. The assessee, operating a bar attached hotel, had their physical stock inspected, revealing discrepancies in accounts and documents. The Intelligence Officer added 80% to the purchase price due to a lack of proper documentation, estimating sales turnover and imposing a penalty. The appellate authority and Tribunal reduced the gross profit to 50%, which the revision petitioner contested.

The first contention was that the Officer lacked power to fix taxable turnover under Section 45A. However, the Court found the Officer estimated turnover by adding 80% to the purchase price based on recovered bills, not exceeding his authority. Rejecting the contention, the Court noted that accepting it would render Section 45A ineffective.

The second contention questioned the 80% gross profit calculation based on a few recovered bills. The petitioner argued that turnover estimation should not rely solely on recovered bills, citing precedents. However, the Court emphasized that the petitioner had opportunities to produce relevant documents, including sale bills, but failed to do so. The Court found no fault in the Revenue estimating turnover based on recovered bills, especially since the gross profit was reduced to 50%.

In conclusion, the Court dismissed the revision, finding no illegality in the orders. The Court upheld the reduction of gross profit to 50% and determined that the Revenue's estimation based on recovered bills was justified given the circumstances. The failure of the assessee to produce necessary documents contributed to the decision, and the Court found no grounds for interference.