2016 (7) TMI 881 - HC - VAT and Sales Tax

Rejection of books of accounts - demand of sales tax - evasion of tax - Held that - both the assessing authority as well as Tribunal have failed to discharge this statutory obligation which stood placed upon them. All that the two authorities have done is to assess the revisionist on the basis of the rough/provisional balance sheet which was found in the premises during the course of survey. This in the opinion of the Court does not comply with the mandatory obligation placed upon the statutory authorities by and under the provisions of sub section (3) of Section 7 of the 1948 Act. - Matter remanded back.

Summary

Issues:
Challenge to order upholding rejection of books of accounts and tax evasion on sale of jute bags.

Analysis:
The revision challenged an order upholding the rejection of books of accounts by the assessing authority, leading to a finding of tax evasion on the sale of jute bags valued at ?20,00,000. The revisionist, a registered dealer under the U.P. Trade Tax Act, was engaged in manufacturing jute bags. During a survey, a provisional balance sheet for the assessment year 1997-98 was seized, which the assessee claimed to be rough and not the actual maintained books. The assessing authority noted a discrepancy between this balance sheet and audited accounts on which the tax was paid. The first appellate authority annulled the additional tax demand, but the Tribunal upheld the assessing authority's decision.

The assessing authority's order was based solely on the provisional balance sheet seized during the survey, without proper grounds for rejecting the audited accounts. The dealer had filed returns and paid self-assessed tax based on audited accounts. The rejection was solely due to variance with the seized balance sheet, which, in the court's opinion, did not justify rejecting the maintained books. The assessing authority must determine turnover to the best of judgment if returns are deemed incorrect or incomplete, which was not done in this case.

The court found that the assessing authority and Tribunal failed to fulfill their statutory obligation to make a best judgment assessment based on available material. Both authorities assessed the revisionist solely on the seized balance sheet, not complying with the statutory obligation under the U.P. Trade Tax Act. Thus, the Tribunal's order was unsustainable, and the matter was remanded to the assessing authority for fresh proceedings in accordance with the law.

In conclusion, the court allowed the revision, setting aside the Tribunal's order and the assessing authority's decision, remanding the matter for fresh consideration by the assessing authority in compliance with the statutory provisions.