2019 (8) TMI 6 - HC - VAT and Sales Tax

Validity of assessment - rejection of Books of Accounts - enhancement to the undisclosed turnover - HELD THAT - In the absence of any credible explanation being submitted with respect to the three non-serialled used invoice, books seized from the assessee which record transactions of about ₹ 25,00,000/-, it has to be accepted that the Tribunal had not made any error in affirming the finding of rejection of the books of account as clearly the assessee was found maintaining parallel books. Insofar as the estimation of turnover is concerned, by way of first principle, it remains undisputed that certain amount of guess work is necessarily involved in such cases. Purchase of raw material - assessee would submit that the assessing officer had recorded categorical finding that no physical verification of stock was made at the time of survey and therefore, no adverse inference may be drawn thereon - HELD THAT - It appears that that finding can never be read in isolation in face of Exhibit Nos.4, 5 and 6, as discussed above. Once the assessee was found to have manufactured and sold goods outside its books, the estimation of undisclosed purchase of raw material was a natural consequence of that finding. The fact that the central excise and state excise authorities may not have found or considered that material to be adverse, may only be relevant for proceedings under those Acts and not for the present proceeding where the assessee has been found to have dealt with goods outside its books. Revision dismissed.

Summary

Issues involved:
Challenging order of Trade Tax Tribunal on Second Appeal for A.Y. 2004-05 (UP and Central) - Partial relief granted - Rejection of books of accounts upheld - Estimation of undisclosed turnover - Parallel books of account maintained - Estimation of suppressed purchases and sales - Credible explanation for non-serialled used invoices - Assessment of undisclosed turnover and purchase of raw material.

Analysis:

1. Rejection of Books of Accounts:
The Tribunal upheld the rejection of the books of accounts of the assessee due to the discovery of non-serialled used invoices, indicating the maintenance of parallel books. The rejection was based on concrete evidence found during the survey, leading to the conclusion that the assessee had not disclosed all transactions accurately.

2. Estimation of Undisclosed Turnover:
The Tribunal estimated the undisclosed turnover based on evidence of undisclosed sales discovered during the survey. The estimation was considered reasonable, as it was slightly more than double the material available with revenue authorities. This estimation was not deemed excessive or arbitrary, as it was supported by material discovered during the investigation.

3. Estimation of Suppressed Purchases and Sales:
The assessing officer and appellate authorities had initially made significant additions to the undisclosed turnover and purchase of raw materials. However, the Tribunal granted substantial relief by reducing these figures, considering the evidence and circumstances of the case. The final estimations were made based on a balanced assessment of the available material.

4. Assessment of Undisclosed Purchase of Raw Material:
The estimation of undisclosed purchase of raw material was deemed a natural consequence of the finding that the assessee had engaged in manufacturing and selling goods outside its books. The proportion between raw material consumed and manufactured goods was a crucial factor in determining the undisclosed purchases, which was supported by the evidence presented.

5. Judicial Findings and Dismissal of Revision:
The Court, after considering arguments from both parties, concluded that the revision lacked merit and dismissed it. The decision was based on the fact that the estimation of turnover and purchase of raw material was supported by relevant material and considerations. The Court found no grounds for interference with the factual findings made by the Tribunal.

In conclusion, the judgment addressed the issues of rejection of books of accounts, estimation of undisclosed turnover, suppressed purchases and sales, and assessment of undisclosed purchase of raw material. The Court upheld the Tribunal's decision, emphasizing the importance of credible evidence and proportionality in making estimations related to tax assessments.