2016 (11) TMI 131 - HC - VAT and Sales Tax

Quantification of escaped assessment - rejection of the books of accounts - excessive electricity consumption and the same did not appear to be commensurate with the declared quantity of production - Held that - it is apparent that the rejection of books of accounts of the assessee on this solitary ground cannot be sustained. More importantly this court notices that a reasonable and plausible explanation had been duly proffered by the assessee to explain the irregular electricity consumption. The Court notices that neither the assessing authority nor the Tribunal disputed or doubted the disclosures made by the assessee in respect of the accident which had taken place in its business premises. The order of the Tribunal as also that of the assessing authority cannot be sustained even on this score - revision allowed - decided in favor of revisionist.

Summary

Issues: Rejection of books of accounts based on excessive electricity consumption and quantification of escaped assessment.

Analysis:
1. The revisionist challenged the order of the Tribunal affirming the rejection of the books of accounts due to excessive electricity consumption, which was deemed inconsistent with the declared production quantity. The Tribunal remitted the matter to the assessing authority for quantification of escaped assessment.

2. The counsel for the revisionist argued that the rejection of the books of accounts was unjustified as it was solely based on the grounds of excessive electricity consumption, which, as per legal precedents, cannot be the sole basis for such rejection. The counsel cited cases like M/s Speed Rollers Pvt. Ltd. and S/s Saini Timber House to support the argument that irregular electricity consumption alone cannot justify the rejection of books of accounts.

3. The legal principle established by the court is that irregular electricity consumption can be a factor but not the sole basis for rejecting books of accounts. The court cited precedents like M/s Mahabir Prasad Jagdish Prasad and M/s Chandu Lal & Sons to emphasize that rejection of accounts solely based on electricity consumption disparity may not be justified.

4. The court highlighted that when books of accounts are rejected on justifiable grounds, the assessing authority can make best judgment assessments considering electricity consumption as a relevant factor. The court also referenced cases like M/s Jay Cee Rolling Shutter and Iron Engineer Works and Melton India to support the assessment based on electricity consumption after the rejection of books of accounts.

5. The court found that the rejection of books of accounts solely on the grounds of irregular electricity consumption was unsustainable. The court noted that the revisionist provided a reasonable explanation for the irregular consumption due to a fatal accident at the business premises, which was not disputed by the assessing authority or the Tribunal.

6. Consequently, the court allowed the revision, setting aside the orders of the assessing authority and the Tribunal, emphasizing that the rejection of books of accounts based solely on excessive electricity consumption was not legally justified.