2022 (9) TMI 558 - HC - VAT and Sales Tax

Rejection of Books of accounts - evidence on record of purchase of wheat from outside the account books or not - sale of Chokar - 48 quintals of chokar were sold out of the stock of 76 quintals - rejection of account books and making best judgment assessment merely on presumption and surmises - HELD THAT - Admittedly, the business premises of the revisionist was surveyed on 8.11.2006 when the flour mill was closed and as no business activity was carrying on, as stated, no responsible person was available on account of which the books of account could not be shown. Nonetheless, subsequently, the books of account was shown in which no discrepancy was pointed out. The adverse inference has been drawn against the revisionist on the basis of two bills, i.e., 759 and 760 dated 26.10.2006 by which certain bags of wheat flour and Chokar were sold and at the time of interception for 46 quintals of Chokar no bill was produced, for which explanation has been submitted that the driver by mistake could not take the bill no. 759. Once, in absence of any material on record to suggest that any purchases have been made except the sale of Chokar in question that too was issued from the stock maintained by the revisionist, no adverse inference can be drawn. The liability of sales tax has been fastened upon the revisionist only on the basis of the aforesaid discrepancy which has been accepted by the First Appellate Authority but the Tribunal without any material and cogent reason has reversed the same and restored the assessment order which is bad. The impugned order passed by the Tribunal is set aside - the revision is allowed.

Summary

Issues:
1. Legality of passing an order of reversal without contradicting the findings of the first appellate authority.
2. Determination of turnover and imposition of tax without evidence of purchase from outside account books.
3. Disbelief of sales made out of books despite findings of the first appellate authority.
4. Rejection of account books for best judgment assessment based on presumption and surmises.

Analysis:

Issue 1:
The revisionist challenged the order of the Commercial Tax Tribunal, questioning the legality of passing a reversal order without contradicting the findings of the first appellate authority. The revisionist, engaged in the manufacture and sale of wheat flour and Chokar, argued that the Tribunal failed to provide reasons for reversing the first appellate authority's findings. The revisionist contended that the assessment order restoration was unjustified.

Issue 2:
Regarding the determination of turnover and imposition of tax without evidence of purchase from outside account books, the revisionist's counsel highlighted that the revisionist purchased wheat from registered dealers with prescribed Form 3-B. During a survey, when no business activity was undertaken, the revisionist's books of account were not available. The revisionist argued that the adverse inference drawn based on intercepted bills lacked justification, as explanations were provided for discrepancies, and the First Appellate Authority had supported the revisionist's position.

Issue 3:
The revisionist contested the Tribunal's disbelief of sales made out of books, despite the first appellate authority's findings supporting the sale of Chokar from existing stock. The revisionist emphasized that all transactions were verifiable from the maintained books of account, and explanations were provided for any perceived discrepancies.

Issue 4:
The revisionist further challenged the rejection of account books for a best judgment assessment based on presumption and surmises. The revisionist argued that without material suggesting purchases beyond the sale of Chokar, no adverse inference should have been drawn. The Court found the Tribunal's decision to reverse the First Appellate Authority's findings without sufficient grounds to be unjustified, leading to the allowance of the revision and setting aside of the Tribunal's order.

In conclusion, the High Court allowed the revision, setting aside the Tribunal's order and restoring the order passed by the First Appellate Authority. The Court emphasized the importance of providing justifiable reasons for reversing lower authorities' findings and ensuring assessments are based on concrete evidence rather than presumption and surmises.