2016 (11) TMI 899 - HC - VAT and Sales Tax

Assessment of turnover - best judgement assessment - suppression of facts - Held that - While it is true that the Tribunal is the last fact finding authority, this Court cannot at the same time shut its eye or gloss over findings which have come to be recorded in the total absence of cogent and reliable material nor can findings of fact so recorded by the authorities be affirmed even though they may be wholly perverse - the two loose papers which were found in the business premises were not established to be connected in any manner with the business of assessee. The mere fact that these two loose papers were found in a desk present in the business premises would not on its own form sufficient ground for rejection of the books of accounts. More importantly and as this Court noticed above, the affidavits and the explanation which was submitted in respect of the two loose papers was not accorded any consideration. The Court notes that while the Act places the burden of proof in respect of special facts on the assessee, the burden to prove the occurrence of a taxable event lies solely on the shoulder of the revenue. This burden in the facts of the present case did not stand discharged - revision allowed.

Summary

Issues:
Validity of Tribunal's order rejecting books of accounts and assessing turnover on best judgment basis.

Analysis:
The revisionist, engaged in manufacturing glassware, challenged the Tribunal's order upholding the assessing authority's rejection of books of accounts for the assessment year 2003-04. During a survey, two loose papers were seized, leading to an estimate of evaded sales and additional tax liability. The Tribunal reduced the evaded sales amount but upheld the best judgment assessment. The revisionist contended that the loose papers did not relate to their business and pointed out they were related to another individual. The rejection of books and enhancement of turnover were deemed illegal.

Analysis:
The Tribunal is the final fact-finding authority, but the High Court cannot ignore findings based on unreliable material or perversity. In this case, no adverse inference was drawn from a seized diary, leaving only the two loose papers as evidence. These papers did not show a connection to the revisionist's business and indicated payments through account payee cheques not utilized by the revisionist. Affidavits by the revisionist's proprietor and another individual supporting this explanation were disregarded by the authorities without valid reasons.

Analysis:
The loose papers found at the business premises were not proven to be linked to the revisionist's business. Mere presence in the premises does not justify book rejection. The burden of proving a taxable event lies with the revenue, which was not discharged in this case. Consequently, the orders of the assessing authority, first appellate authority, and Tribunal were deemed unsustainable. The revision was allowed, setting aside the previous orders.