2017 (2) TMI 930 - HC - VAT and Sales Tax

Rejection of books of accounts - rejection on the ground that turnover in the books of account is higher than the amount in return is concerned - Shortage of goods - loss in transit - Held that - in a series of judgment of this Court, it is clearly held that Books of Account cannot be rejected merely on the ground that the turnover disclosed in the Books of Account is higher than the turnover disclosed in the return. Wastage/ shortage of transportation at the rate of 4% - Tribunal has allowed only 2% - Held that - There is no basis for the Tribunal to determine or arrived at a conclusion that losses upto 4% could not have occurred. The assessing authority and the Tribunal cannot fix any figure for loss caused during the transportation on surmises. There was nothing on record for the revenue to hold that the figures disclosed by the assessee were abnormally high or that it was otherwise inconceivable. In the absence of any other specific material, the Tribunal was not justified in discarding figures of loss due to transportation at 4% in the facts of the present case. With regard to the loading and unloading figures disclosed by the assessee being lower, I find that except for a solitary instances there was no material before the authority to doubt that assessee had not sold coal at the railway side itself - rejection not justified. With regard to the contention that the assessee has sold goods at a rate lesser than what was the market rate, there is nothing on record to indicate that the assessee has deliberately disclosed a lesser figure in the books of account and that Coal was actually sold at a higher rate. The revenue has, otherwise, not investigated the transaction so as to suggest that the price of coal was, otherwise, higher - rejection not justified. Tribunal was not justified in discarding the revisionist s books of account - appeal allowed - decided in favor of appellant.

Summary

Issues:
Assessment year 2005-2006 - Rejection of Books of Account - Higher tax liability - Four grounds for rejection.

Analysis:
The judgment pertains to a Commercial Tax Revision by the assessee for the assessment year 2005-2006, challenging the rejection of its Books of Account and imposition of a higher tax liability. The authorities cited four grounds for rejection: higher turnover in Books of Account compared to return, disbelief in 4% shortage during coal transportation, discrepancy in loading and unloading charges, and selling products below prevailing market rate.

The counsel for the appellant relied on legal precedents to argue against the rejection of Books of Account based solely on higher turnover. The court cited various judgments emphasizing that turnover disparity alone is insufficient to reject accounts. The court highlighted the principle that authorities cannot discard Books of Account solely due to higher turnover without concrete evidence.

Regarding the transportation shortage issue, the Standing Counsel contended that losses up to 4-5% are acceptable only if coal is delivered to the dealer's premises, not at the railway side. However, the court disagreed, stating that reasonable losses during transportation are inevitable, and the Tribunal's decision to limit losses to 2% lacked factual basis. The court criticized the authorities for arbitrarily disregarding the possibility of 4% losses without substantial evidence.

The court addressed the loading and unloading discrepancy, noting that except for one instance, there was no proof to doubt the sale of coal at the railway side. Without concrete evidence, the Tribunal erred in discarding entries suggesting sales at the railway side. The judgment emphasized the dealer's autonomy in determining sales methods.

Lastly, the court discussed the issue of selling goods below market rate. Citing legal principles, the court highlighted that tax officers cannot dictate business practices or prices to traders. Without evidence of deliberate underreporting or investigation into market prices, the authorities lacked justification to reject Books of Account based on lower selling prices.

In conclusion, the court held that the Tribunal was unjustified in rejecting the revisionist's Books of Account. The court directed a fresh assessment in compliance with the law, emphasizing the importance of concrete evidence and adherence to legal principles in tax assessments.