2022 (10) TMI 55 - HC - VAT and Sales Tax

Enhancement of sale turnover as well as purchase turnover - books of accounts rejected on framing of assessment - adjustment of admissible input tax credit - HELD THAT - It is not in dispute that a survey was conducted on the premises of the assessee firm on 24.04.2014. Six loose papers were found during the survey. Paper No. 1 relates to 660 piece 8 mm tube bag which was purchased by the assessee firm from unregistered dealer and transaction of paper no. 3 which was sale of battery to one Manendra Goswami for Rs.19,000/- was subsequently entered into the books of account which was produced at the time of assessment. From the perusal of the order of the Tribunal, it is clear that it has not recorded any finding as to how it has arrived at only reducing the quantum to such extent when it has recorded that entries in the books of account for two loose papers, paper no. 1 and 3 were made subsequently, and solely on the basis of estimate had refused the quantum without any material on record - The Tribunal is the last fact finding authority and before arriving at any finding in case of either increasing or decreasing the quantum it has to record a specific finding as to how it has arrived at the figure. The tax authorities or the tax Tribunal are not justified in increasing or decreasing the quantum at their whims without any rationale or justification. Increasing or decreasing of the quantum either creates or reduces tax liability which either affects the assessee or the revenue. Thus, the taxing authorities should be very careful and watchful in passing orders holding liability upon any assessee for the payment of tax or reducing the quantum. The exercise should not be at the whims and fancies of the tax authorities and the Tribunal, because such exercises have great fiscal impact both on the assessee and the revenue - The Tribunal which is the last fact finding authority should not pass an order in such a casual manner and before arriving at finding should record specific reason as to how it has arrived at such finding either in extending the benefit or denying the benefit. The order of the Tribunal dated 20.06.2022 is unsustainable in the eyes of law and the same is hereby set aside and the matter is remanded back to the Tribunal to consider the matter afresh on merits and record specific finding to each of the grounds so raised in the revision by the assessee - Revision allowed in part.

Summary

Issues:
Assessment of tax liability based on enhanced turnover, validity of assessment order, consideration of indicators in turnover enhancement, benefit of input tax credit, reasoning behind tax quantum reduction by Tribunal.

Analysis:
The judgment pertains to a Commercial Tax Revision challenging a Tribunal's decision partially allowing an appeal against an assessment order for the assessment year 2013-14 under the U.P. Value Added Tax Act, 2008. The assessee, engaged in trading and repairing of electronic equipment, faced an enhanced turnover assessment due to discrepancies in account books during a survey. The assessing authority increased purchase and sale turnover, leading to a tax demand of Rs. 7,55,000. The first appellate authority upheld the assessment, prompting a second appeal before the Tribunal, which reduced the tax liability by Rs. 5,48,465. The revisionist contended that certain indicators in the turnover enhancement were not adequately considered by the Tribunal, leading to dual taxation and denial of input tax credit benefits.

The revisionist's counsel argued that loose papers seized during the survey were not properly accounted for in the assessment, with some indicators being mere quotations or inquiries without actual transactions. The Tribunal's decision lacked specific findings on certain indicators, resulting in arbitrary reduction of the tax liability without proper justification. The Tribunal's role as the final fact-finding authority necessitates clear reasoning for any adjustments in tax quantum to ensure fairness to both the assessee and the revenue department.

In response, the Standing Counsel defended the assessing authority's actions, citing missing account books during the survey as a basis for the enhanced turnover assessment. However, the Court found that the Tribunal's decision lacked a proper rationale for the tax reduction and failed to adequately address the grounds raised by the revisionist. Emphasizing the importance of reasoned decision-making in tax matters, the Court set aside the Tribunal's order and remanded the case for a fresh consideration, instructing the Tribunal to provide specific findings on each ground raised by the assessee within a stipulated timeframe.

Ultimately, the Court partially allowed the revision, highlighting the need for meticulous and justified tax assessments to prevent arbitrary financial implications on both taxpayers and the revenue department. The judgment underscores the significance of clear and well-founded reasoning in tax dispute resolutions to uphold fairness and legal integrity in commercial tax matters.