2020 (5) TMI 364 - HC - VAT and Sales Tax

Best Judgement Assessment - addition towards suppressed turnover - rejection of VAT-100 Form - validity of proceedings initiated by the revisional authority under Section 64(1) of KVAT Act - HELD THAT - Where the accounts are acceptable as genuine and substantially correct, the assessment could be made on the basis of the accounts maintained. Indisputably, the assessee has compounded the offence by accepting the suppression at the time of inspection and discharged the tax liability of ₹ 75,180/- towards suppressed turnover of ₹ 5,56,982/-. It is obvious that the pattern of maintaining the account books was not in order. On rejecting the accounts and the VAT-100 Form submitted by the assessee, the prescribed authority has made best judgment assessment by adding the turnover equal to the suppressed turnover over and above detection made. It is imperative that no suppression would have come to light in the absence of inspection - There being rationale behind estimation of the turnover, same cannot be held to be untenable. The appellate authority has merely proceeded to set-aside the addition of turnover without examining the applicability of the judgments referred to supra in the right perspective. At any stretch of imagination, it cannot be held that the 3rd respondent had no jurisdiction to invoke the revisional power under Section 64(1) of the Act. The twin conditions i.e., the appellate order being erroneous and prejudicial to the interest of the revenue being satisfied, the 3rd respondent was justified in setting aside the order of the appellate authority and restoring the order of the prescribed authority - the questions of law are answered against the assessee and in favour of the Revenue. Appeal dismissed.

Summary

Issues:
Challenge to re-assessment order under Karnataka Value Added Tax Act, 2003.

Analysis:
The appellant, a partnership firm engaged in the sale of timber, challenged a re-assessment order passed by the prescribed authority under Section 39(1) of the Act. The prescribed authority rejected the VAT-100 Form filed for the tax period, leading to a best judgment assessment adding a suppressed turnover based on an intelligence report. The appeal before the Joint Commissioner partly allowed relief, setting aside the addition made by the prescribed authority equal to the stock shortage and interest aspects.

The substantial questions of law raised by the assessee questioned the jurisdiction of the authorities in imposing additional turnover for tax liability and the correctness of the appellate order. The appellant contended that the prescribed authority erred in making the addition despite penalty imposition for discrepancies, arguing for assessment based on accepted accounts rather than best judgment. The appellant relied on specific judgments to support their arguments.

The Addl. Advocate General supported the impugned order, emphasizing the physical stock shortage noticed during inspection and the subsequent best judgment assessment based on the intelligence report. The revisional authority found the appellate order prejudicial to revenue and correctly exercised power under Section 64(1) of the Act. Specific legal precedents were cited to justify the position taken by the Addl. Advocate General.

The Court considered the submissions and material on record, noting the inspection findings of suppressed sales leading to tax liability discharge by the assessee. Legal precedents were referenced to establish the validity of best judgment assessments in cases of suppression, emphasizing the need for deterrence through penalty imposition. The Court upheld the revisional authority's decision, finding the appellate order erroneous and prejudicial to revenue, justifying the restoration of the prescribed authority's order. Consequently, the sales tax appeal was dismissed.