2014 (7) TMI 742 - HC - VAT and Sales Tax

Imposition of sales tax on the undisclosed turnover - inclusion in turnover on the basis of additions made in the Income Tax - Held that - Revisional authority held that the net income of ₹ 8,00,000 offered by the assessee to the income-tax authorities is the result of suppression of food and drinks and it is an undisclosed sale of food and drinks. Therefore, the question of any estimation would not arise. - in the facts of this case, the profit from the unaccounted sales is admitted by the assessee as aforesaid and she had income only from hotel business and therefore that was made the basis for levying tax under the Act. - in view the facts of the case, the decision in the case of P.C. Ittymathew & Sons v. Deputy Commissioner of Sales Tax (Law) 2000 (2) TMI 744 - SUPREME COURT OF INDIA distinguished. In the balance sheet of the assessee, the aforesaid amounts were reflected, which did not find a place in the monthly returns filed by the assessee under the Act. The said entries are not disputed and in the light of the aforesaid admission, it is not a case of estimation of the suppressed turnover. It is a case of calculation of tax payable on the admitted turnover, which the revisional authority could very well do while exercising this power under section 63A of the Act. - when the revisional authority passes an order revising the assessment order, a right of first appeal is taken away. In the absence of any express provision in section 63A prohibiting the revisional authority from passing an order reframing the assessment, it cannot be said that a right of appeal is taken away. In fact against the order passed by the revisional authority statute provides for an appeal before the Karnataka Appellate Tribunal, which the assessee has exercised in the instant case - Decided against assessee.

Summary

Issues:
Challenge to sales tax imposition on undisclosed turnover.

Detailed Analysis:

Issue 1: Challenge to Sales Tax Imposition
The revision petition was filed by the assessee challenging the order passed by the Karnataka Appellate Tribunal, upholding the revisional authority's decision to impose sales tax on the undisclosed turnover of Rs. 1,21,58,055. The assessee, a partnership firm engaged in the hotel business, opted for composition tax and declared a total turnover of Rs. 3,30,56,451 for the assessment year 2006-07. A survey by the Income-tax Department revealed discrepancies in the turnover declared by the assessee. The assessee offered an additional net income of Rs. 8,00,000 for the year 2006-07, which was reflected in the balance sheet but not in the monthly returns filed under the KVAT Act, resulting in non-payment of value-added tax. The Additional Joint Commissioner of Commercial Tax issued a notice proposing to determine the total taxable turnover and levy composition tax at four percent. The revisional authority held that the undisclosed income of Rs. 8,00,000 was from suppressed sales of food and drinks, leading to the imposition of tax on the undisclosed turnover.

Issue 2: Legal Basis for Imposition of Tax
The assessee contended that the addition made by income-tax authorities cannot be the basis for sales tax imposition and that the revisional authority lacked jurisdiction to revise the assessment order without evidence of turnover suppression. The counsel relied on legal precedents to argue that the revisional authority should remand the matter for fresh assessment rather than calculating tax on suppressed turnover. However, the revisional authority justified the tax imposition based on the admitted income of Rs. 8,00,000 from the hotel business, which was not disclosed in the accounts. The revisional authority's actions were supported by legal interpretations emphasizing the authority's power to calculate tax on admitted turnover under the KVAT Act.

Issue 3: Jurisdiction and Right of Appeal
The counsel further argued that the revisional authority's order infringed on the right of appeal, citing legal precedents to support the contention. However, the court dismissed this argument, stating that the revisional authority's power to reframe assessment did not prohibit the right of appeal to the Karnataka Appellate Tribunal. The court upheld the revisional authority's decision to dismiss the revision petition, emphasizing the legality and validity of the tax imposition based on the admitted undisclosed turnover.

In conclusion, the court upheld the imposition of sales tax on the undisclosed turnover, rejecting the challenges raised by the assessee regarding the legal basis for tax imposition and the jurisdiction of the revisional authority. The court's decision was based on the interpretation of relevant legal provisions and precedents supporting the authority's actions in calculating tax on admitted turnover under the KVAT Act.