2021 (11) TMI 729 - HC - VAT and Sales Tax

Rejection of turnover appearing in the books of accounts - turnover shown in the account books is higher than the turnover disclosed in the return - disallowance of claim of damage which is less than 1% - HELD THAT - Seeing the first year of business of the revisionist, the revenue cannot compel the revisionist to manage the affair of its business or to conduct its business according to whims of the assessing authority. The revisionist have all rights to manage its business affairs according to his wisdom. In absence of any material brought on record by the authorities, the revenue cannot compel the dealer to sell its products at a rate fixed by the revenue without bringing on record any exemplars. Therefore, the view taken by the Tribunal as well as the lower authorities that the goods were sold at lesser price is bad. Further the record reveals that only on the basis of surmises and conjucture, the account books of the assessee have been rejected and turnover has been enhanced which cannot be justified. It is already well-settled that in the absence of any definite adverse material accounts kept in regular course of business cannot be disbelieved and must be given credence and due weight - In the case in hand, no adverse material whatsoever was brought on record to disbelieve the account books maintained by the revisionist and therefore rejection of account books and enhancement of turnover is uncalled for. The Tribunal is directed to pass an order under Section 11(8) within a period of two months from the date of receipt of a copy of this order - revision is allowed with cost of ₹ 2000/- (two thousand), which shall be paid to the revisionist within a period of one month from today and compliance report of the same be submitted by the opposite party to the Registrar General of this Court within 45 days from today.

Summary

Issues:
1. Interpretation of law regarding rejection of account books when turnover in account books is higher than disclosed in the return.
2. Justification for disallowing a claim of damage less than 1% when it was allowed in a subsequent assessment year.

Analysis:
Issue 1:
The case involved a revision filed against an order passed by the Commercial Tax Tribunal regarding the rejection of account books for the assessment year 2005-06 under the UP Trade Tax Act. The revisionist, a multinational company engaged in the business of manufacturing and selling vegetable oil, refined oil, and ghee, claimed transit loss of edible oil during stock transfers to its branches. The revisionist argued that the goods were lost in transit due to leakage and damage, common in the nature of trade. The authorities rejected the claim of transit loss and made a best judgment assessment based on alleged under-valuation of sale products. The revisionist contended that the competitive rates were offered in the first year of business to establish market presence and that subsequent years' assessments accepted the transit loss. The Court found that the rejection of account books without concrete evidence was unjustified, citing precedents emphasizing that accounts maintained in the regular course of business should be given credence unless adverse material is presented.

Issue 2:
Regarding the disallowance of a claim of damage less than 1%, the Court noted that the negligible amount of damage shown was reasonable considering the nature of the revisionist's business. The Court held that the revenue cannot dictate how a taxpayer should conduct business affairs and rejected the authorities' justification for disallowing the claim based on suspicion and surmises. Precedents were cited to emphasize that in the absence of adverse material, accounts maintained regularly should not be disbelieved. The Court set aside all orders passed by lower authorities, directing the Tribunal to pass a new order within two months and allowed the revision with costs.

In conclusion, the judgment addressed the issues of rejection of account books and disallowance of a damage claim, emphasizing the importance of concrete evidence and adherence to legal principles in tax assessments.