2021 (3) TMI 521 - HC - VAT and Sales Tax

Recomputation of appellant s total and taxable turnovers - suppressed turnover as allocated on a pro-rata basis in the ratio of declared taxable turnovers for the respective tax periods - tax periods from April 2005 to October 2006 - correctness to pass a single seizure order in respect of the documents seized from two different premises belonging to two different persons who are not directly connected with each other without mentioning which document is seized from which place - correctness to treat the transactions recorded in the documents seized from a third party as the transactions of the appellant without there being any indication to such effect in such seized documents against such of the entries relating to such transactions. HELD THAT - The Tribunal recorded a finding that the Assessment Authority is not justified in passing the assessment order in respect of the documents seized from two different premises belonging to two different persons who are not directly connected with each other without mentioning which document is seized from which place and further recorded a finding that it is not reasonable and justified on the facts and circumstances of these cases to treat the transactions recorded in the documents seized from a third party (Sri Santosh Jha) as the transactions of the assessee without there being any indication to such effect in such seized documents against such of the entries relating to such transactions and further recorded a finding that though the large number of purchase transactions reflected in the seized documents have been treated as the assessee s suppressed turnover and simultaneously when a large number of sales turnovers reflected in such documents have also been considered as suppressed turnover without treating any part of such suppressed sales turnover to be from out of the suppressed purchase turnovers and held that even a small percentage of the suppressed sales are from out of the suppressed purchases. There is no justifiable reason for the FAA to have considered 40 percent of the transactions relating to Sri Santosh Jha with his other clients as the appellant s transactions based on the documents seized from the premises of Sri Santosh Jha. In the documents seized from Santosh Jha s premises, there were some entries relating to the appellant s transactions also and against such transactions appellant s code name is Mentioned as S/M . Such transactions have been considered separately in the impugned appeal order as the appellant s transactions and dealt with. The Tribunal modified the order passed by the 1st Appellate Authority holding that the appellant/assessee s suppressed turnover for the aforesaid period cumulatively came to be refixed at ₹ 1,20,98,891/- - revision petition dismissed.

Issues Involved:

1. Whether the suppressed turnover detected at the premises of the Assessee exclusively belongs to the Assessee.
2. Whether the Tribunal is justified in giving a legal entity to Sri Santhosh Jha, whose transaction was a benami transaction of the Assessee.
3. Whether the entire turnover detected at the time of inspection was the suppressed turnover of the Assessee.
4. Whether the Tribunal was right in modifying and re-fixing the suppressed turnover without any valid basis.
5. Whether the Tribunal was right in giving a finding that the turnover of other parties was wrongly included in arriving at the suppressed turnover of the Assessee.

Issue-wise Detailed Analysis:

1. Suppressed Turnover Exclusivity:

The Tribunal found that the suppressed turnover detected at the premises did not exclusively belong to the Assessee. It noted that documents were seized from two different premises belonging to two different persons without specifying which document was seized from which place. This lack of specificity led to the conclusion that the suppressed turnover could not be attributed solely to the Assessee.

2. Legal Entity to Sri Santhosh Jha:

The Tribunal held that it was not justified to treat the transactions recorded in the documents seized from a third party, Sri Santhosh Jha, as the transactions of the Assessee without any indication in the seized documents. The Tribunal observed that the documents seized from Jha’s premises included some entries relating to the Assessee’s transactions, marked with the code name 'S/M' or 'Shyam Mica'. However, other entries did not indicate any relationship with the Assessee.

3. Entire Turnover as Suppressed Turnover:

The Tribunal found it unreasonable to treat the entire turnover detected at the time of inspection as the suppressed turnover of the Assessee. It noted that large numbers of purchase and sales transactions were considered as suppressed turnover without treating any part of the suppressed sales as being from the suppressed purchases. The Tribunal concluded that even a small percentage of the suppressed sales should be considered as coming from the suppressed purchases.

4. Modification and Re-fixing of Suppressed Turnover:

The Tribunal modified the order of the First Appellate Authority (FAA), which had treated 40% of the transactions related to Sri Santhosh Jha with his other clients as the Assessee’s transactions. The Tribunal held that this addition to the Assessee’s suppressed turnovers was not legally sustainable. The Tribunal re-fixed the Assessee’s suppressed turnover for the relevant period at ?1,20,98,891/- after excluding transactions unrelated to the Assessee and a small percentage of suppressed sales.

5. Inclusion of Turnover of Other Parties:

The Tribunal found that the turnover of other parties was wrongly included in arriving at the suppressed turnover of the Assessee. It noted that the documents seized from Jha’s premises included transactions with other code names, and there was no reason to treat these as the Assessee’s suppressed transactions. The Tribunal excluded ?2,04,50,237/- attributed to transactions with no indication of any relationship with the Assessee.

Conclusion:

The Tribunal allowed the appeals in part, holding that the Assessee’s suppressed turnover was ?1,20,98,891/-. The High Court upheld the Tribunal’s order, finding no substantial questions of law arising for consideration. The revision petition was dismissed as devoid of merit.

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