2016 (6) TMI 988 - HC - VAT and Sales Tax

Best judgement assessment - inclusion of turnover relating to branch office - enhancing the declared turnover of the assessee by 10% inter alia rejecting the other claims made by the assessee - Karnataka Value Added Tax Act 2003 (KVAT) - Held that - In the present case we do not see any such nexus established by the authorities to the estimation made enhancing the declared turnover by 10%. It is the categorical contention of the assessee that all the accounts relating to the branch office were declared in the account books maintained by the main office and there was no suppression of turnover. In such circumstances no attempt is made by any of the authorities or by the Tribunal to address on these arguments/contentions advanced by the assessee. Non-furnishing of the branch certificates would not suffice to enhance the declared turnover unless supported by suppression of turnover. Demand set aside - matter remanded back - Decided in favor of assessee.

Summary

Issues:
Challenge to common judgment by Karnataka Appellate Tribunal on best judgment assessment enhancing declared turnover by 10% due to non-production of branch certificates.

Analysis:
The petitioner, a registered dealer under the Karnataka Value Added Tax Act, challenged the assessment by the assessing authority that enhanced the declared turnover by 10% due to the non-production of branch certificates. The Appellate Authority partly allowed the appeals, but the best judgment assessment enhancing the turnover remained. The Karnataka Appellate Tribunal upheld the enhancement, leading to the revision petitions.

The main legal question before the Court was whether the Tribunal was justified in sustaining the best judgment assessment orders due to the non-furnishing of branch certificates. The petitioner argued that the non-production of branch certificates should not lead to rejecting the books of account for best judgment assessment. The assessing authority was also criticized for levying a penalty without basis. The revenue contended that the absence of branch certificates justified the assessment, citing a relevant Supreme Court case.

After considering both sides, the Court noted that the assessing authority based the best judgment assessment solely on the absence of branch certificates without detecting any suppression. The Court emphasized that authorities must provide a basis for enhancing declared turnover during best judgment assessments. In this case, the authorities failed to establish a nexus between the estimation and facts discovered. The petitioner claimed all branch office accounts were in the main office's books, denying any turnover suppression. As a result, the Court found the Tribunal's decision unsustainable.

Consequently, the Court set aside the Tribunal's order and directed the matter back to the assessing authority for reconsideration. The assessing authority was instructed to pass appropriate orders after providing a hearing to the parties within three months. The revision petitions were allowed to the extent indicated, granting relief to the petitioner.