2022 (11) TMI 686 - HC - VAT and Sales Tax

Validity of assessment order - additions were made based on the slips and books recovered from the petitioner - sale suppression of rubber thread - addition of 50% to taxable turnover - HELD THAT - The petitioner has not made out any case for interference of the order of the Tribunal, upholding the order of the Assessing officer, by reversing the order of the Appellate Commissioner, in so far as addition of Rs.1,95,000/- and therefore to that extent we are not inclined to interfere with the order of the learned Tribunal. However, as far as addition of 50% of the Assessing Authority is contrary to the law settled by this Court in the Judgment THE STATE OF TAMILNADU REP. BY THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES VERSUS SRI VINAYAGA AGENCIES 2009 (8) TMI 1072 - MADRAS HIGH COURT where it was held that The Tribunal has rightly applied its mind, verified the contents, compared the details and finally given a finding that the stock verification was arrived at only on the basis of money value of the goods and not on the quantitative basis, which has not at all been taken into consideration either by the Assessing Officer or the first appellate authority in deciding or in coming to the conclusion in so far as the stock variation is concerned - thus in the present case, the deletion of 50% as ordered by the Assessing authority is upheld. The Second Respondent is directed to issue a fresh order calculating the tax liability and a proportionate penalty within a period of three months from the date of receipt of a copy of this order - petition allowed in part.

Issues Involved:

1. Legitimacy of the addition of Rs. 1,95,000/- to the taxable turnover.
2. Correctness of the assessment of turnover based on slips and books recovered.
3. Validity of the equal addition of 50% to the taxable turnover.
4. Legitimacy of the general addition of Rs. 5,000/- for defects in the books of accounts.

Detailed Analysis:

1. Legitimacy of the addition of Rs. 1,95,000/- to the taxable turnover:

The Petitioner challenged the addition of Rs. 1,95,000/- to the taxable turnover, arguing that the amount was advanced to the driver for purchasing a second-hand van for business purposes. The Tribunal found the explanation unconvincing, noting that the Petitioner failed to provide details about the van, such as its make, model, and owner. The Tribunal upheld the assessment, stating, "The availability of the cash balance as per accounts on a particular day could not be a ground to treat the transaction of sale recorded in the recovered records as an advance made for purchase of van." The High Court concurred, stating, "We are of the view that petitioner has not made out any case for interference of the order of the Tribunal, upholding the order of the Assessing officer, by reversing the order of the Appellate Commissioner, in so far as addition of Rs.1,95,000/-."

2. Correctness of the assessment of turnover based on slips and books recovered:

The Tribunal examined the discrepancies in the stock records and found that the original assessment was based on incorrect details of opening stock, purchases, sales, and gross profit. The Tribunal noted, "The department seeks for restoration of assessment without giving any specific reasons or argument to disprove or discredit the findings recorded by the first appellate authority." It upheld the first appellate authority's decision to set aside the assessment based on incorrect details. However, it sustained the assessment on the turnover of Rs. 1,95,000/- and Rs. 11,181/- based on slips no. 2, 5, and 6, as the explanations provided by the Petitioner were found to be insufficient.

3. Validity of the equal addition of 50% to the taxable turnover:

The Petitioner argued that the addition of 50% to the taxable turnover was unwarranted. The Tribunal, referencing the case of State of Tamil Nadu Vs. Sri Vinayaga Agencies, noted that equal addition without proper reasoning is not justified. The High Court agreed, stating, "As far as addition of 50% of the Assessing Authority is contrary to the law settled by this Court in the Judgment stated supra." Consequently, the High Court ordered the deletion of the 50% addition, emphasizing the need for proper reasoning and adherence to principles of natural justice.

4. Legitimacy of the general addition of Rs. 5,000/- for defects in the books of accounts:

The Tribunal upheld the first appellate authority's decision to set aside the general addition of Rs. 5,000/-, reasoning that the assessment on actual suppressions and further estimations rendered such an addition unwarranted. The Tribunal stated, "The reasons adduced by the first appellate authority for setting aside the addition of Rs.5,000/- are found to be proper and the same is upheld." The High Court did not find any reason to interfere with this part of the Tribunal's decision.

Conclusion:

The High Court partly allowed the Writ Petition. It upheld the Tribunal's decision regarding the addition of Rs. 1,95,000/- and the general addition of Rs. 5,000/-, but ordered the deletion of the 50% addition to the taxable turnover. The Court directed the Second Respondent to issue a fresh order calculating the tax liability and a proportionate penalty within three months.

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