2023 (7) TMI 1233 - HC - VAT and Sales Tax

Validity of Best Judgement Assessment - fixation of rate of Gross Profit - 70% or 80% of cost of goods sold (COGS) - invocation of provisions under Section 41(1) of the Kerala General Sales Tax Act 1963 - HELD THAT - In the instant case the Appellate Tribunal found that the assessee was given the opportunity both at the time of issuance of notice for the production of the books of accounts as well as at the time of issuance of proposal notice to produce the books of accounts. However the assessee did not avail of those opportunities. The Appellate Tribunal noticed that no audited statements in Form 50A and 50B were produced before the first appellate authority and no such audited statements were produced before the Tribunal as well. After considering the rival contentions the Appellate Tribunal by the order dated 03.11.2022 dismissed the appeals filed by the assessee. In the instant case in Annexure-A assessment orders for the year 2017-18 and 2018-19 the assessing authority fixed gross profit at the rate of 80% to complete the assessment for those years on the basis of best judgment assessment . In Annexure-C orders for the year 2017-18 and 2018-19 the first appellate authority modified Annexure-A assessment orders by adopting a gross profit of 70% of the cost of the goods sold for those assessment years considering the fact that the assessee is conducting business at a distance of 8 kilometres from the town. It is an admitted fact that for the years 2015-16 and 2016-17 the assessing authority adopted a gross profit of 65% of the cost of the goods sold while completing the assessment of the assessee for those years on the basis of best judgment assessment in the assessment orders dated 11.03.2020 and 16.03.2020. In best judgment assessment there is always a certain degree of guesswork and it is the assessee himself who is to blame as he did not submit proper accounts. In the facts and circumstances of the case on hand it cannot be said that the estimation of gross profit by the assessing authority at 70% of the cost of the goods sold for those assessment years is not bona fide or without a rational basis. There are no reason to interfere with the orders of the authorities below which are impugned in these S.T. Revisions - Revision dismissed.

Summary

Issues Involved:
1. Assessment of gross profit for the sale of beer, wine, and liquor for the assessment years 2017-18 and 2018-19 through best judgment assessment.

S.T. Rev.No.9 of 2023:
The petitioner, a dealer running a Bar attached hotel, challenged the best judgment assessment by the assessing authority for the year 2018-19. The first appellate authority modified the gross profit to 70% from 80% based on the distance of the business from the town. The Sales Tax Appellate Tribunal dismissed the appeal. The petitioner invoked Section 41(1) of the Kerala General Sales Tax Act, 1963, feeling aggrieved.

S.T. Rev.No.10 of 2023:
Similar to the previous issue, the petitioner challenged the best judgment assessment for the year 2017-18. The first appellate authority modified the gross profit to 70% from 80% considering the business location. The Sales Tax Appellate Tribunal dismissed the appeal. The petitioner invoked Section 41(1) of the Kerala General Sales Tax Act, 1963, feeling aggrieved.

The assessing authority estimated gross profit at 80% for both years due to the petitioner's failure to produce records. The first appellate authority modified this to 70% based on business location. The Tribunal upheld the decisions, leading to the present S.T. Revisions before the High Court.

The petitioner argued against the best judgment assessment, citing previous assessments at 65% gross profit. The respondent defended the legality of the 70% gross profit decision based on best judgment assessment principles and a previous court decision.

The High Court noted the legal principles governing best judgment assessments in tax matters, emphasizing the need for fair and rational estimates by the assessing authority. The court highlighted the importance of honest guesswork in such assessments.

The Appellate Tribunal found the petitioner failed to produce necessary accounts despite opportunities, leading to the dismissal of appeals. The High Court cited precedents where it refrained from substituting its judgment for that of the assessing authority in best judgment assessments.

In conclusion, the High Court found no reason to interfere with the decisions of the lower authorities in the S.T. Revisions, which were subsequently dismissed.