2019 (7) TMI 1124 - HC - VAT and Sales Tax

Best Judgement Assessment - rejection of books of accounts - Whether, in view of the two challans alleged to be unaccounted for which related to the beginning of the assessment year in question only, the entire books of accounts of the assessee could have been rejected and best judgment assessment made? - HELD THAT - Insofar as rejection of books of accounts is concerned, there does not appear any error in the orders passed by the Assessing Authority and the Tribunal, inasmuch as the challans did represent sale of goods made by the assessee. His explanation that those goods were rejected for reason of quality and, therefore, no sale took place, was not supported by any evidence produced by the assessee - The explanation being purely factual and based on no evidence, the finding of the last fact-finding authority, i.e. the Tribunal being based on evidence, does not warrant any interference in exercise of the revisional jurisdiction. Quantification - HELD THAT - The first appeal authority had valued those goods and further determined the tax that may have been payable over them. This finding of fact has not been disturbed by the Tribunal but it has merely made a wild guess work. That exercise does not appear to be founded on any cogent or relevant material. It is also a fact that besides the aforesaid directions pertaining to the two challans, no other challan was detected in the entire year as may reflect that the assessee was engaged in any activity of sale of goods. In such facts, the estimation made by the Tribunal was found to be not based on any material, whereas the estimation made by the first appeal authority was found to be based on material and evidence on record. The order passed by the Tribunal dated 07.01.2008 is set aside to the extent of quantification being found to be not based on any material or relevant consideration - revision allowed.

Summary

Issues:
1. Validity of rejection of books of accounts and best judgment assessment based on two unaccounted challans.
2. Quantification of tax liability based on undisclosed sales.

Analysis:
1. The revision was filed against the Trade Tax Tribunal's order partially allowing the revenue's appeal, resulting in a tax liability of ?3,17,394 for the assessment year 2000-01. The assessee, engaged in footwear manufacturing, disclosed a turnover of ?67,87,628. A survey revealed unaccounted sales against two challans, leading to a best judgment assessment of ?75,23,000. The Joint Commissioner reduced the tax on undisclosed sales to ?1,000, later increased to ?3,17,394 by the Tribunal. The main issue was whether rejection of accounts and best judgment assessment were justified based on the two challans.

2. The assessee argued that the rejected goods were not sold, hence no tax liability should arise. Even if a sale occurred, the quantified liability by the first appeal authority was ?1,000, with no evidence of similar transactions throughout the year. The revenue contended that the rejection was valid as the challans indicated unaccounted transactions, justifying a best judgment assessment. The Court upheld the rejection of accounts, stating the assessee's explanation lacked evidence. However, the quantification was questioned. The first appeal authority's detailed valuation was deemed reasonable, while the Tribunal's estimation lacked substantiation. No evidence of further unaccounted sales was found, supporting the first appeal authority's decision.

In conclusion, the Tribunal's quantification lacked basis, while the first appeal authority's decision was supported by evidence. Therefore, the Tribunal's order was set aside on quantification grounds, affirming the first appeal authority's decision. The revision was allowed in favor of the assessee.