2019 (7) TMI 322 - HC - VAT and Sales Tax

Addition towards non-existing profits - increase of turnover on ad-hoc basis - assessee was a Society that had made purchase of coal for supply made to its members on service charge basis only - HELD THAT - The assessee are not a regular dealer in coal who may have purchased and sold coal solely for the purposes of deriving profits - Undisputedly, the assessee are the Societies constituted by various brick kilns and they exist for the purpose of ensuring smooth supply of coal to their members at reasonable price. In place of regular profits, the assessee had only charged service charges from its members, that have given rise to their profits. The case of the assessee, in this regard, has been definitely accepted by the Tribunal, inasmuch as in the computation of the taxable turnover, the Tribunal has included the value of goods, loading and unloading charges, railway freight as also the service charges received by the assessee. Once the modus operandi of the assessee's business has been accepted and held to be that Societies were running for the benefit for their members and once service charges had been included in the taxable turnover of the assessee, in that circumstance, there survived no room for making any further addition on presumptive basis. The question of law is answered in the negative i.e. in favor of the assessee and against the revenue - Revision allowed.

Summary

Issues:
Challenging order of Trade Tax Tribunal on second appeals related to sales/trade tax revisions for multiple assessment years.

Analysis:
The revisions were filed against the Trade Tax Tribunal's order, heard together due to similar facts. The applicants, registered Societies, supplied coal to members at service charges. The main question was whether addition to profits could be made on presumptions or ad hoc basis. The assessing authority rejected accounts, treating the assessee as a coal trader, estimating taxable turnover at ?4,19,05,800. First Appellate Authority upheld rejection but reduced turnover to ?3,20,00,000. Both parties appealed to the Tribunal, which estimated turnover at ?3,24,17,552, imposing 4% tax.

The counsel argued that no further addition was warranted once service charges were included in turnover. The Tribunal's addition was based on presumptions, contrary to evidence. The Standing Counsel contended that the assessing authority was authorized to estimate turnover, which the Tribunal did based on imported goods' value. The Court noted the assessee's nature as Societies supplying coal to members for reasonable prices, earning profits from service charges. The Tribunal included loading/unloading charges, railway freight, and service charges in the turnover. As there was no basis for additional additions beyond ?2,94,70,502, the Court found the Tribunal's further addition ad hoc and unsupported by evidence or law. The question of law was answered in favor of the assessee, allowing all revisions.