2023 (10) TMI 668 - HC - VAT and Sales Tax

Validity of assessment order - correctness of re-computation of the gross profit - levy of penalty on the petitioner being double the amount of tax allegedly evaded by the petitioner - HELD THAT - While it may be a fact that an estimation of gross profit has to be done on a scientific basis, inter alia by taking into account the profit earned through the sale of the various brands of IMFL dealt with by the petitioner, in the instant case, it is found firstly, that the estimation done by the Intelligence Officer in the penalty proceedings was not challenged by the petitioner in further proceedings. The Assessing Authority has merely adopted the same gross profit as was estimated by the Intelligence Officer and it is found difficult to accept an argument against such estimation in the assessment proceedings when there was no such dispute raised by the assessee against the estimation done for the purposes of penalty. Secondly, the estimation of gross profit by the Intelligence Officer/Assessing Authority has not resulted in the adoption of an unreasonably higher rate of gross profit than what was already conceded by the petitioner towards sales of IMFL and Beer. No doubt, in circumstances where the gross profit estimated by the revenue authorities is significantly higher than what is conceded by the assessee, and it is apparent that the estimation itself was done in an unscientific manner, it may be open to an assessee to challenge the same inter alia based on the decisions mentioned. On the facts of the instant case, however, there are no reason to interfere with the impugned order of the Tribunal. Revision dismissed by answering the questions of law raised therein against the assessee and in favour of the revenue.

Summary

Issues involved:
The issues involved in this case are the re-computation of gross profit by the Intelligence Authorities, imposition of penalty on the petitioner, adoption of the same gross profit by the Assessing Authority for assessment, dismissal of appeal by the First Appellate Authority, reliance on previous judgments by the petitioner, and challenge to the estimation of gross profit.

Re-computation of Gross Profit and Imposition of Penalty:
The petitioner, running a bar attached hotel, had its business place inspected by the Intelligence Squad under the Kerala General Sales Tax Act. The Intelligence Authorities recomputed the gross profit received by the petitioner in respect of IMFL and Beer, resulting in the imposition of a penalty of Rs. 56,512 on the petitioner. The Assessing Authority later found the estimation of gross profit done by the Intelligence Officer to be in order and adopted the same for assessment purposes, raising a demand on the petitioner for balance turnover tax of Rs. 72,588 along with cess and interest.

Dismissal of Appeals and Reliance on Previous Judgments:
The petitioner appealed the assessment order before the First Appellate Authority, who dismissed the appeal. In a further appeal before the Appellate Tribunal, the petitioner relied on previous judgments to challenge the re-computation of gross profit. The Tribunal found that the estimation of gross profit by the Intelligence Authority was only marginally higher than the conceded gross profit of the petitioner, leading to the dismissal of the second appeal.

Challenge to Estimation of Gross Profit:
The petitioner contended that the estimation of gross profit should have considered all brands of IMFL dealt with by the petitioner, not just a few premium brands. However, the court noted that the petitioner did not challenge the estimation done by the Intelligence Officer in the penalty proceedings. The Assessing Authority adopted the same gross profit without dispute from the petitioner. The court found no grounds to interfere with the order of the Tribunal, as the estimation of gross profit was not unreasonably higher than what was conceded by the petitioner. The court dismissed the revision, upholding the findings of the authorities below and answering the questions of law against the assessee in favor of the revenue.