2018 (12) TMI 300 - HC - VAT and Sales Tax

Assessment under Compounding scheme as per the returns - exemption with respect to the labour contracts - Held that - The assessee had applied under the compounding scheme under Section 8 of the KVAT Act, 2003 and had been granted permission to pay tax at the compounded rates. As has been found by the Tribunal, the assessee cannot turn around and challenge such benefit availed on the assessee s own application especially after the assessment year is over - revision dismissed. Addition made of suppression and omission - failure to produce books of accounts - Held that - The Assessing Officer had granted an opportunity to the assessee to produce books of accounts and the agreements evidencing the turnover, of the contracts awarded to the assessee. The assessee had failed to produce the same. It was in such circumstances that the Assessing Officer had made an addition for probable omission and suppression. The addition made for probable omission and suppression would be akin to the addition made on an actual detection of suppression; especially when it is on account of failure of the assessee to produce the books of accounts - The Tribunal had merely noticed that there was no reason to discredit the compounding permission granted and that alone would not be sufficient ground to delete the addition made by the Assessing Officer on best of judgment - the addition made for probable omission and suppression at the equal amount is restored. Revision is partly allowed restoring the estimation made but however, making it clear that for the conceded turnover, tax would be levied under Section 8 and for the quantum made addition of; tax would be levied at the regular rate but after giving deduction under Rule 10 of the KVAT Rules - decided partly in favor of the State and partly in favor of the assessee.

Summary

Issues:
1. Assessment under the compounding scheme
2. Estimation made by the Assessing Officer
3. Deletion of addition for probable omission and suppression
4. Production of books of accounts
5. Application of Rule 10 of the Kerala Value Added Tax Rules, 2005

Assessment under the Compounding Scheme:
The assessee, a works contractor, had applied for compounding for the year 2008-09 and was permitted to pay tax at compounded rates. The Assessing Officer, in the absence of produced books of accounts, made a best judgment assessment, ignoring the compounding permission. The Tribunal held that the compounding permission was binding on both the assessee and the Assessing Authority. It directed the assessment to be completed under the compounding scheme and deleted the addition of ?30,00,000. The State questioned the Tribunal's decision, arguing that there was no evidence to support the turnover disclosed in the returns. The Court found that the Assessing Officer should have considered the compounding permission and upheld the assessment under the compounding scheme.

Estimation Made by the Assessing Officer:
The Assessing Officer made an equal addition of ?30,00,000 for probable omission and suppression due to the assessee's failure to produce books of accounts. The Tribunal deleted this addition, stating that the compounding permission should be respected. However, the Court disagreed, citing the need for substantiating evidence and the application of Rule 10 of the KVAT Rules for deductions. The Court restored the addition made for probable omission and suppression.

Deletion of Addition for Probable Omission and Suppression:
The addition made by the Assessing Officer for probable omission and suppression was challenged by the assessee. The Tribunal had deleted this addition based on the compounding permission granted to the assessee. However, the Court found that the deletion was not justified as there was no valid reason to discredit the Assessing Officer's judgment. The Court restored the addition for probable omission and suppression.

Production of Books of Accounts:
The assessee failed to produce the books of accounts, leading to the Assessing Officer making a best judgment assessment. The Court emphasized the importance of maintaining proper records and documentation to support the disclosed turnover. Failure to produce books of accounts can result in additions based on suppression and omission.

Application of Rule 10 of the Kerala Value Added Tax Rules, 2005:
The Court highlighted the necessity of applying Rule 10 of the Kerala Value Added Tax Rules, 2005 for deductions in the estimation made by the Assessing Officer. The matter was remanded to the Assessing Authority for proper consideration and application of the relevant rules. The Court partially allowed the revision, restoring the estimation made but specifying the tax rates for the conceded turnover and the additional amount.