2023 (10) TMI 671 - HC - VAT and Sales Tax

Estimation of taxable turnover - restaurant - unaccounted sale only for one day previous to the date of search - Whether on the facts and circumstances of the case the Commercial Tax Tribunal were legally justified in estimating the taxable turnover at Rs. 35.51 lakh especially when in the previous and in subsequent assessment year accepted sales of the applicant of Rs. 2098,250/- and Rs. 21,42,450/-? HELD THAT - On perusal of the record, it reveals that the revisionist has disclosed turnover at Rs. 20,05,100/- and admitted the tax liability of Rs. 2,83,917/-. The books of account were rejected on various grounds and the Assessing Authority has fixed the same at Rs. 65,05,100/-, against which a first appeal was filed, which was rejected. Still feeling aggrieved, the revisionist preferred second appeal, which was partly allowed fixing taxable turnover to Rs. 4,51,648/-. The only basis of enhanced taxable turnover was the survey dated 25.02.2016, where some bills were found pertaining to the last night, i.e., 24.02.2016. It is categorically argued before the Tribunal that the previous day of survey being a festival day, therefore, the said sale found at the time of survey, which cannot be the only determining factor as held by this Court in the case of M/s Bhagwati. It is also noticed that in the business of restaurant, there is always fluctuation in sale and therefore, the same cannot be on a higher side throughout the year as fixed by the authorities below. The revision is partly allowed.

Summary

Issues involved:
The issues involved in this case are whether the Commercial Tax Tribunal was legally justified in estimating the taxable turnover at Rs. 35.51 lakh and in estimating the average sales at Rs. 12000/- per day for the assessment year 2015-16. Additionally, whether the Tribunal was legally justified in estimating the taxable turnover at Rs. 35.51 lakh, especially when in the previous and subsequent assessment years, accepted sales of the applicant were Rs. 20,98,250/- and Rs. 21,42,450/-.

Estimation of Taxable Turnover:
The revisionist, a registered dealer running a restaurant, challenged the estimation of taxable turnover at Rs. 35.51 lakh by the Commercial Tax Tribunal. The revisionist argued that a single survey on a festival day, where sales were higher, should not be the sole basis for determining the turnover. Citing previous and subsequent years' accepted sales figures, the revisionist contended that fluctuations in restaurant business should be considered. The Assessing Authority initially fixed the turnover at Rs. 65,05,100/-, which was later reduced to Rs. 35.51 lakh by the Tribunal. The High Court modified the turnover, reducing it to Rs. 25 lakh based on the arguments presented and legal precedents.

Legal Justification for Estimation:
The revisionist's counsel emphasized that the turnover estimation based on a single survey day, especially a festival day, was not reflective of the overall business performance. The revisionist referred to legal judgments to support the argument that fluctuation in restaurant sales is common and should be considered while estimating turnover. The ACSC for the State defended the impugned order, stating that in the absence of proper accounting records during the survey, the best judgment assessment was justified. Ultimately, the High Court modified the Tribunal's decision, considering the arguments presented and legal principles.

Court's Decision:
After examining the records and arguments presented, the High Court found merit in the revisionist's contentions regarding the estimation of taxable turnover. The Court noted discrepancies in the turnover estimation process and the lack of consideration for business fluctuations. Relying on legal precedents, the Court modified the Tribunal's order, reducing the taxable turnover to Rs. 25 lakh. The revision was partly allowed, and the question of law was answered accordingly.