2019 (1) TMI 308 - HC - VAT and Sales Tax

Rejection of books of accounts - non-production of books - enhancement of turnover - no material or evidence of any concealed turnover of purchase or sale of goods made by the assessee - Held that - While rejection of books of accounts may arise on non-production of books, as is the fact of the present case, however, it cannot be disputed that for the purposes of making the estimation of turnover, the authorities were burdened to justify the estimation on the basis of any material or evidence that may have been existing on record. The fact that the assessee may not have produced it s account books, may only have given rise to rejection of it s books of accounts but not to enhanced estimation of it s turnover. In the present case, the Tribunal had recorded a specific finding that the estimation made by the assessing authority and the first appellate authority did not rest on any valid ground. In face of such finding, the further conclusion drawn by the Tribunal to estimate the enhanced/concealed turnover is, therefore, clearly selfcontradicted and cannot be sustained. Rejection of books of accounts cannot be upheld - revision allowed - decided in favour of the applicant-assessee.

Summary

Issues:
Challenging rejection of books of accounts and estimation of undisclosed turnover.

Analysis:
The revision was filed challenging the order of the Commercial Tax Tribunal regarding the assessment year 2009-10. The main issue raised was the rejection of books of accounts by the assessing authority due to non-production during a survey. The applicant argued that despite this rejection, there was no evidence of concealed turnover of goods. The Tribunal itself acknowledged the lack of credible material supporting the estimation of undisclosed turnover. The applicant contended that the Tribunal's subsequent decision to reduce the estimated turnover was contradictory and unjustified. The Tribunal's finding that no valid grounds existed for the estimation contradicted its own conclusion to estimate concealed turnover, which was deemed unsustainable.

The Standing Counsel defended the Tribunal's decision, citing the non-production of account books and a high number of canceled invoices as reasons for enhancing the turnover estimation. However, the Court emphasized that rejection of account books did not justify an arbitrary increase in estimated turnover. The existence of canceled invoices, while suspicious, was insufficient to infer concealed turnover without substantial evidence. The Court reiterated that suspicion alone could not warrant an increase in turnover estimation; valid material or evidence was necessary to support such a decision. The Tribunal's finding that the assessing authority and the first appellate authority lacked a valid basis for estimation further weakened the justification for enhanced turnover estimation.

The Court held that in the absence of valid grounds for estimating enhanced turnover, the Tribunal should have ruled in favor of the applicant. Consequently, the Court answered the primary question in the negative, favoring the applicant. The revision was allowed, and no costs were imposed.