2019 (7) TMI 1339 - HC - VAT and Sales Tax

Validity of assessment order - Stock discrepancy - suppression of facts - levy of penalty - HELD THAT - The authorities have not recovered any slips or anamath records to substantiate that there were actual suppression of turnover liable to tax. Hence, the circumstances of probable suppression that is estimated, is not at all possible if it is not proved that there is annexure. The assessing authority has not pointed out any suppression of either purchase or sales. It is also found that the above discrepancies is only due to mingling up of material goods of the respondent with that of their sister concerns, which is also duly pointed out by the Inspection officer at the time of inspection and at the later point of time, the appellant cannot raise the issue and the respondent have also produced bought notes, stock register etc., for substantiating the same and convincing that the alleged stock discrepancy so arrived at was due to the prescribed stock kept together for certain processes as their sister concerns and the respondent were functioning at the same place of business. The matter was considered by the Tribunal and they were convinced and found that there was no stock discrepancy. Appeal dismissed.

Issues Involved:
1. Stock discrepancy and its explanation.
2. Alleged fabrication of records post-inspection.
3. Subsequent accounting of transactions.
4. Justification of tax levy and penalty.

Issue-wise Detailed Analysis:

1. Stock Discrepancy and Its Explanation:
The Deputy Commercial Tax Officer initially determined a taxable turnover of ?4,82,375/- against the reported ?1,18,525/-. The respondent challenged this, leading the Appellate Assistant Commissioner to modify the order, deleting equal additions for probable omissions and confirming actual stock differences. The Tribunal later allowed the respondent's appeal, accepting the explanation that stock discrepancies were due to mingling of goods with sister concerns. The Tribunal concluded that the discrepancies were duly explained with material records, thus ordering the deletion of estimations based on stock discrepancies and nullifying the penalty.

2. Alleged Fabrication of Records Post-Inspection:
The State argued that bought note vouchers dated 26.12.1995 were prepared after the inspection and were not produced during the inspection, indicating fabrication. However, the Tribunal did not find sufficient evidence to support the claim of fabrication, as the respondent provided explanations and records for the discrepancies. The Tribunal's decision was based on the comprehensive review of the facts and materials presented.

3. Subsequent Accounting of Transactions:
The State contended that subsequent accounting of transactions does not alter the character of suppressions found during the inspection, referencing the Tamil Nadu Taxation Special Tribunal's decision in the case of Suresh Kirtilal Jewellers. Despite this, the Tribunal accepted the respondent's argument that the mingling of stocks with sister concerns explained the discrepancies, and thus, the subsequent accounting was justified. The Tribunal found no evidence of willful non-disclosure of assessable turnover by the respondent.

4. Justification of Tax Levy and Penalty:
The appellant claimed that the levy of tax and penalty was justified due to the suppressions. However, the Tribunal found that the stock discrepancies were explained, and no anamath records or slips were recovered to substantiate actual suppression of turnover. The Tribunal also noted that the assessment contained infirmities and that the discrepancies were due to the mingling of goods. Consequently, the Tribunal set aside the entire order, including the penalty, as there was no suppression by the respondent.

Conclusion:
The High Court upheld the Tribunal's decision, stating that the assessment order had infirmities and that the Tribunal's findings were based on a thorough review of the facts. The High Court dismissed the State's appeal, concluding that no question of law was involved and that the Tribunal's order did not require interference. The Tax Case was dismissed without costs.

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